We can judge whether Nektar Therapeutics (NASDAQ:NKTR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Nektar Therapeutics (NASDAQ:NKTR) has seen a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that NKTR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_140292" align="aligncenter" width="424"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the key hedge fund action encompassing Nektar Therapeutics (NASDAQ:NKTR).
What does smart money think about Nektar Therapeutics (NASDAQ:NKTR)?
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NKTR over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Nektar Therapeutics (NASDAQ:NKTR) was held by Camber Capital Management, which reported holding $54.6 million worth of stock at the end of September. It was followed by Great Point Partners with a $38.7 million position. Other investors bullish on the company included Millennium Management, Cormorant Asset Management, and PDT Partners. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to Nektar Therapeutics (NASDAQ:NKTR), around 3.56% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 2.87 percent of its 13F equity portfolio to NKTR.
Seeing as Nektar Therapeutics (NASDAQ:NKTR) has experienced declining sentiment from the smart money, logic holds that there were a few fund managers that decided to sell off their full holdings in the third quarter. It's worth mentioning that Roberto Mignone's Bridger Management dumped the biggest stake of the 750 funds watched by Insider Monkey, totaling an estimated $38.6 million in stock, and Cliff Asness's AQR Capital Management was right behind this move, as the fund sold off about $26 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Nektar Therapeutics (NASDAQ:NKTR) but similarly valued. These stocks are Evercore Inc. (NYSE:EVR), RH (NYSE:RH), Brookfield Business Partners L.P. (NYSE:BBU), and Community Bank System, Inc. (NYSE:CBU). All of these stocks' market caps are similar to NKTR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVR,29,339572,3 RH,32,876978,4 BBU,6,10495,1 CBU,13,23777,1 Average,20,312706,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $155 million in NKTR's case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 6 bullish hedge fund positions. Nektar Therapeutics (NASDAQ:NKTR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on NKTR as the stock returned 11.4% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.