Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Nektar Therapeutics (NASDAQ:NKTR).
Is Nektar Therapeutics (NASDAQ:NKTR) going to take off soon? Hedge funds are getting less bullish. The number of bullish hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that NKTR isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the new hedge fund action surrounding Nektar Therapeutics (NASDAQ:NKTR).
Hedge fund activity in Nektar Therapeutics (NASDAQ:NKTR)
Heading into the second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in NKTR a year ago. With hedgies' capital changing hands, there exists a few notable 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 $67.2 million worth of stock at the end of March. It was followed by Bridger Management with a $41.6 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Cormorant Asset Management.
Judging by the fact that Nektar Therapeutics (NASDAQ:NKTR) has witnessed bearish sentiment from the smart money, it's easy to see that there was a specific group of fund managers who were dropping their entire stakes last quarter. Intriguingly, Oleg Nodelman's EcoR1 Capital said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, comprising close to $10.4 million in call options. Bihua Chen's fund, Cormorant Asset Management, also said goodbye to its call options, about $8.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds last 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. We will take a look at BOK Financial Corporation (NASDAQ:BOKF), Caesars Entertainment Corp (NASDAQ:CZR), Ciena Corporation (NYSE:CIEN), and Monolithic Power Systems, Inc. (NASDAQ:MPWR). This group of 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 BOKF,16,215649,-3 CZR,57,3150352,-1 CIEN,30,510894,1 MPWR,20,172987,-5 Average,30.75,1012471,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $1012 million. That figure was $252 million in NKTR's case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 16 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on NKTR, though not to the same extent, as the stock returned 5.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.