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Were Hedge Funds Right About Flocking Into Atara Biotherapeutics Inc (ATRA) ?

Nina Todic

Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Atara Biotherapeutics Inc (NASDAQ:ATRA).

Is Atara Biotherapeutics Inc (NASDAQ:ATRA) a buy, sell, or hold? Money managers are getting more optimistic. The number of long hedge fund positions increased by 4 recently. Our calculations also showed that atra isn't among the 30 most popular stocks among hedge funds. ATRA was in 15 hedge funds' portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with ATRA positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman

We're going to take a look at the fresh hedge fund action surrounding Atara Biotherapeutics Inc (NASDAQ:ATRA).

What have hedge funds been doing with Atara Biotherapeutics Inc (NASDAQ:ATRA)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in ATRA a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

No of Hedge Funds with ATRA Positions

More specifically, Baupost Group was the largest shareholder of Atara Biotherapeutics Inc (NASDAQ:ATRA), with a stake worth $253.6 million reported as of the end of March. Trailing Baupost Group was Redmile Group, which amassed a stake valued at $178.3 million. Camber Capital Management, Bridger Management, and Maverick Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key hedge funds have jumped into Atara Biotherapeutics Inc (NASDAQ:ATRA) headfirst. Maverick Capital, managed by Lee Ainslie, established the largest position in Atara Biotherapeutics Inc (NASDAQ:ATRA). Maverick Capital had $34.6 million invested in the company at the end of the quarter. Bihua Chen's Cormorant Asset Management also made a $21.9 million investment in the stock during the quarter. The other funds with brand new ATRA positions are Ken Griffin's Citadel Investment Group, Noam Gottesman's GLG Partners, and Ken Griffin's Citadel Investment Group.

Let's now review hedge fund activity in other stocks similar to Atara Biotherapeutics Inc (NASDAQ:ATRA). We will take a look at Redfin Corporation (NASDAQ:RDFN), Alexander & Baldwin Inc (NYSE:ALEX), iRhythm Technologies, Inc. (NASDAQ:IRTC), and Universal Forest Products, Inc. (NASDAQ:UFPI). This group of stocks' market valuations resemble ATRA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDFN,8,177016,1 ALEX,5,8561,-5 IRTC,24,320352,1 UFPI,20,39002,4 Average,14.25,136233,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $672 million in ATRA's case. iRhythm Technologies, Inc. (NASDAQ:IRTC) is the most popular stock in this table. On the other hand Alexander & Baldwin Inc (NYSE:ALEX) is the least popular one with only 5 bullish hedge fund positions. Atara Biotherapeutics Inc (NASDAQ:ATRA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately ATRA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ATRA were disappointed as the stock returned -45.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.

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