Hedge Funds Are Selling Mirati Therapeutics, Inc. (MRTX)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Mirati Therapeutics, Inc. (NASDAQ:MRTX) to find out whether there were any major changes in hedge funds’ views.

Mirati Therapeutics, Inc. (NASDAQ:MRTX) has seen a decrease in support from the world’s most elite money managers of late. Mirati Therapeutics, Inc. (NASDAQ:MRTX) was in 55 hedge funds’ portfolios at the end of June. The all time high for this statistic is 57. There were 57 hedge funds in our database with MRTX holdings at the end of March. Our calculations also showed that MRTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. With all of this in mind let’s check out the new hedge fund action encompassing Mirati Therapeutics, Inc. (NASDAQ:MRTX).

Do Hedge Funds Think MRTX Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in MRTX a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Mirati Therapeutics, Inc. (NASDAQ:MRTX), with a stake worth $807.7 million reported as of the end of June. Trailing Avoro Capital Advisors (venBio Select Advisor) was Perceptive Advisors, which amassed a stake valued at $514.6 million. Baker Bros. Advisors, OrbiMed Advisors, and Farallon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to Mirati Therapeutics, Inc. (NASDAQ:MRTX), around 14.05% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, earmarking 6.68 percent of its 13F equity portfolio to MRTX.

Since Mirati Therapeutics, Inc. (NASDAQ:MRTX) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that decided to sell off their full holdings last quarter. It’s worth mentioning that Mitchell Blutt’s Consonance Capital Management dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $43.7 million in stock, and Frank Fu’s CaaS Capital was right behind this move, as the fund sold off about $19.8 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Mirati Therapeutics, Inc. (NASDAQ:MRTX). We will take a look at TELUS International (Cda) Inc. (NYSE:TIXT), Concentrix Corporation (NASDAQ:CNXC), National Retail Properties, Inc. (NYSE:NNN), Ovintiv Inc. (NYSE:OVV), Plains All American Pipeline, L.P. (NASDAQ:PAA), APA Corporation (NASDAQ:APA), and First Citizens BancShares Inc. (NASDAQ:FCNCA). All of these stocks’ market caps are closest to MRTX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $2791 million in MRTX’s case. Ovintiv Inc. (NYSE:OVV) is the most popular stock in this table. On the other hand TELUS International (Cda) Inc. (NYSE:TIXT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Mirati Therapeutics, Inc. (NASDAQ:MRTX) is more popular among hedge funds. Our overall hedge fund sentiment score for MRTX is 81.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on MRTX as the stock returned 8.2% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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