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Hedge Funds Have Never Been This Bullish On InVitae Corporation (NVTA)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

InVitae Corporation (NYSE:NVTA) investors should be aware of an increase in hedge fund interest in recent months. Our calculations also showed that nvta isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Samuel Isaly Orbimed Advisors

We’re going to check out the latest hedge fund action surrounding InVitae Corporation (NYSE:NVTA).

How have hedgies been trading InVitae Corporation (NYSE:NVTA)?

At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. On the other hand, there were a total of 15 hedge funds with a bullish position in NVTA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NVTA Positions

Among these funds, Baker Bros. Advisors held the most valuable stake in InVitae Corporation (NYSE:NVTA), which was worth $43.2 million at the end of the fourth quarter. On the second spot was Casdin Capital which amassed $26.5 million worth of shares. Moreover, Perceptive Advisors, Rock Springs Capital Management, and OrbiMed Advisors were also bullish on InVitae Corporation (NYSE:NVTA), allocating a large percentage of their portfolios to this stock.

Consequently, key hedge funds have jumped into InVitae Corporation (NYSE:NVTA) headfirst. Renaissance Technologies, managed by Jim Simons, created the most valuable position in InVitae Corporation (NYSE:NVTA). Renaissance Technologies had $5.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Minhua Zhang’s Weld Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as InVitae Corporation (NYSE:NVTA) but similarly valued. We will take a look at California Resources Corporation (NYSE:CRC), Fate Therapeutics Inc (NASDAQ:FATE), Churchill Capital Corp (NYSE:CCC), and NextPoint Residential Trust Inc (NYSE:NXRT). This group of stocks’ market valuations are closest to NVTA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRC 20 138010 -2
FATE 15 285651 -2
CCC 24 316832 -1
NXRT 9 139879 0
Average 17 220093 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $168 million in NVTA’s case. Churchill Capital Corp (NYSE:CCC) is the most popular stock in this table. On the other hand NextPoint Residential Trust Inc (NYSE:NXRT) is the least popular one with only 9 bullish hedge fund positions. InVitae Corporation (NYSE:NVTA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on NVTA as the stock returned 106.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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