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In this article we will take a look at whether hedge funds think Mirati Therapeutics, Inc. (NASDAQ:MRTX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is MRTX a good stock to buy? Mirati Therapeutics, Inc. (NASDAQ:MRTX) was in 38 hedge funds' portfolios at the end of September. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MRTX shareholders have witnessed an increase in enthusiasm from smart money recently. There were 36 hedge funds in our database with MRTX positions at the end of the second quarter. Our calculations also showed that MRTX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Harding of Winton Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's check out the new hedge fund action surrounding Mirati Therapeutics, Inc. (NASDAQ:MRTX).
Do Hedge Funds Think MRTX Is A Good Stock To Buy Now?
At third quarter's end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in MRTX over the last 21 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Avoro Capital Advisors (venBio Select Advisor) held the most valuable stake in Mirati Therapeutics, Inc. (NASDAQ:MRTX), which was worth $721.2 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $570.5 million worth of shares. Baker Bros. Advisors, OrbiMed Advisors, and Farallon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to Mirati Therapeutics, Inc. (NASDAQ:MRTX), around 10.25% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, dishing out 8.33 percent of its 13F equity portfolio to MRTX.
As one would reasonably expect, specific money managers were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Mirati Therapeutics, Inc. (NASDAQ:MRTX). Marshall Wace LLP had $71.1 million invested in the company at the end of the quarter. Christopher James's Partner Fund Management also made a $41.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Neil Shahrestani's Ikarian Capital, D. E. Shaw's D E Shaw, and David Harding's Winton Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Mirati Therapeutics, Inc. (NASDAQ:MRTX) but similarly valued. We will take a look at Teck Resources Ltd (NYSE:TECK), Quanta Services Inc (NYSE:PWR), AptarGroup, Inc. (NYSE:ATR), Howmet Aerospace Inc. (NYSE:HWM), Newell Brands Inc. (NYSE:NWL), Americold Realty Trust (NYSE:COLD), and Molson Coors Beverage Company (NYSE:TAP). This group of stocks' market caps resemble MRTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TECK,27,565206,2 PWR,32,824167,1 ATR,28,241807,2 HWM,35,2448447,5 NWL,27,1266887,-6 COLD,30,273605,1 TAP,33,316589,-3 Average,30.3,848101,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $848 million. That figure was $2390 million in MRTX's case. Howmet Aerospace Inc. (NYSE:HWM) is the most popular stock in this table. On the other hand Teck Resources Ltd (NYSE:TECK) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Mirati Therapeutics, Inc. (NASDAQ:MRTX) is more popular among hedge funds. Our overall hedge fund sentiment score for MRTX is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on MRTX as the stock returned 41.1% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.