Baron Funds: “Natera (NTRA) has a Long Runway for Growth with Expanding Margins and Profitability”

Baron Funds, an asset management firm, published its “Baron Health Care Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A return of 1.18% was delivered by the fund’s institutional shares for the third quarter of 2021, outperforming both its S&P 500 and Russell 3000 Health Care benchmarks that delivered 0.58% and 0.17% returns respectively for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Baron Funds, in its Q3 2021 investor letter, mentioned Natera, Inc. (NASDAQ: NTRA) and discussed its stance on the firm. Natera, Inc. is a San Carlos, California-based clinical genetic testing company with a $10.8 billion market capitalization. NTRA delivered a 16.53% return since the beginning of the year, while its 12-month returns are up by 41.29%. The stock closed at $115.97 per share on November 5, 2021.

Here is what Baron Funds has to say about Natera, Inc. in its Q3 2021 investor letter:

“We initiated a position in Natera, Inc., a diagnostics company with a cellfree DNA platform that enables it to detect tiny amounts of DNA in a blood sample. Natera first applied its technology platform to women’s health, where the company markets a blood test that can detect fetal DNA in the blood of pregnant women, enabling early detection of chromosomal abnormalities with a non-invasive test. Through the strength of its technology platform, clinical data, and customer service, Natera has established itself as a market leader in non-invasive prenatal testing. Natera is seeing tailwinds in its women’s health business from recently expanded insurance coverage for average risk pregnancies. Natera is now applying its technology platform to other markets, including the oncology market and the organ transplant market. In the oncology market, Natera offers a personalized blood-based DNA test called Signatera, which detects and quantifies how much residual cancer DNA remains in the body after surgery. Signatera helps physicians determine whether chemotherapy is necessary after surgery and monitor for cancer recurrence before the cancer is detectable with standard imaging. We think Signatera will change the standard of care and is in the early innings of adoption in a market we estimate to be over $15 billion. We think Natera has a long runway for growth with expanding margins and profitability.”

Easiest Md/PhD Programs to Get Into


Based on our calculations, Natera, Inc. (NASDAQ: NTRA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NTRA was in 52 hedge fund portfolios at the end of the first half of 2021, compared to 41 funds in the previous quarter. Natera, Inc. (NASDAQ: NTRA) delivered a -1.13% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage.

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