Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Atara Biotherapeutics Inc (NASDAQ:ATRA) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cedar Realty Trust Inc (NYSE:CDR), Materion Corp (NYSE:MTRN), and Tredegar Corporation (NYSE:TG) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Now, we’re going to check out the recent action surrounding Atara Biotherapeutics Inc (NASDAQ:ATRA).
What does the smart money think about Atara Biotherapeutics Inc (NASDAQ:ATRA)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. By comparison, 11 hedge funds held shares or bullish call options in ATRA heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Seth Klarman’s Baupost Group has the most valuable position in Atara Biotherapeutics Inc (NASDAQ:ATRA), worth close to $114.6 million, corresponding to 1.6% of its total 13F portfolio. Sitting at the No. 2 spot is Redmile Group, led by Jeremy Green, holding a $43.2 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Roberto Mignone’s Bridger Management, David Greenspan’s Slate Path Capital and Anand Parekh’s Alyeska Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Perceptive Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Alyeska Investment Group).
Let’s now review hedge fund activity in other stocks similar to Atara Biotherapeutics Inc (NASDAQ:ATRA). These stocks are Cedar Realty Trust Inc (NYSE:CDR), Materion Corp (NYSE:MTRN), Tredegar Corporation (NYSE:TG), and Ciner Resources LP (NYSE:CINR). This group of stocks’ market valuations match ATRA’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $211 million in ATRA’s case. Materion Corp (NYSE:MTRN) is the most popular stock in this table. On the other hand Ciner Resources LP (NYSE:CINR) is the least popular one with only 4 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. In this regard MTRN might be a better candidate to consider taking a long position in.