Hedge Funds Aren’t Crazy About Natera Inc (NTRA) Anymore

In this article you are going to find out whether hedge funds think Natera Inc (NASDAQ:NTRA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Natera Inc (NASDAQ:NTRA) has seen a decrease in hedge fund interest recently. Natera Inc (NASDAQ:NTRA) was in 41 hedge funds’ portfolios at the end of March. The all time high for this statistic is 46. There were 46 hedge funds in our database with NTRA holdings at the end of December. Our calculations also showed that NTRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Now we’re going to take a peek at the new hedge fund action regarding Natera Inc (NASDAQ:NTRA).

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

At the end of March, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NTRA over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, OrbiMed Advisors held the most valuable stake in Natera Inc (NASDAQ:NTRA), which was worth $223 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $165.5 million worth of shares. D E Shaw, Holocene Advisors, and Driehaus 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 Foresite Capital allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 11.35% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, designating 3.68 percent of its 13F equity portfolio to NTRA.

Judging by the fact that Natera Inc (NASDAQ:NTRA) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their full holdings heading into Q2. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $90.7 million in stock, and Principal Global Investors’s Columbus Circle Investors was right behind this move, as the fund dumped about $28.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds heading into Q2.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Natera Inc (NASDAQ:NTRA) but similarly valued. These stocks are Churchill Downs Incorporated (NASDAQ:CHDN), Kingsoft Cloud Holdings Limited (NASDAQ:KC), Alleghany Corporation (NYSE:Y), SEI Investments Company (NASDAQ:SEIC), Amedisys Inc (NASDAQ:AMED), Gentex Corporation (NASDAQ:GNTX), and West Fraser Timber Co. Ltd. (NYSE:WFG). This group of stocks’ market valuations resemble NTRA’s market valuation.

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As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $1222 million in NTRA’s case. Gentex Corporation (NASDAQ:GNTX) is the most popular stock in this table. On the other hand Kingsoft Cloud Holdings Limited (NASDAQ:KC) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Natera Inc (NASDAQ:NTRA) is more popular among hedge funds. Our overall hedge fund sentiment score for NTRA is 76.7. 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 gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately NTRA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NTRA were disappointed as the stock returned 1.3% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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