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Hedge Funds Never Been This Bullish On Natera Inc (NTRA)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Natera Inc (NASDAQ:NTRA) and determine whether hedge funds skillfully traded this stock.

Is Natera Inc (NASDAQ:NTRA) a buy here? The smart money was betting on the stock. The number of bullish hedge fund bets increased by 3 in recent months. Natera Inc (NASDAQ:NTRA) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NTRA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Samuel Isaly Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

At Insider Monkey we scour multiple sources to uncover 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 and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a look at the fresh hedge fund action surrounding Natera Inc (NASDAQ:NTRA).

What does smart money think about Natera Inc (NASDAQ:NTRA)?

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NTRA over the last 20 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Samuel Isaly’s OrbiMed Advisors has the most valuable position in Natera Inc (NASDAQ:NTRA), worth close to $161.6 million, comprising 2.3% of its total 13F portfolio. The second largest stake is held by Roberto Mignone of Bridger Management, with a $72.5 million position; the fund has 6.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Steve Cohen’s Point72 Asset Management, Israel Englander’s Millennium Management and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 9.26% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, earmarking 6.71 percent of its 13F equity portfolio to NTRA.

Consequently, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the largest position in Natera Inc (NASDAQ:NTRA). Adage Capital Management had $18.7 million invested in the company at the end of the quarter. Zachary Miller’s Parian Global Management also initiated a $10.7 million position during the quarter. The following funds were also among the new NTRA investors: Justin John Ferayorni’s Tamarack Capital Management, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Let’s now take a look at hedge fund activity in other stocks similar to Natera Inc (NASDAQ:NTRA). We will take a look at Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Janus Henderson Group plc (NYSE:JHG), Equity Commonwealth (NYSE:EQC), ICL Group Ltd. (NYSE:ICL), Graphic Packaging Holding Company (NYSE:GPK), ChemoCentryx Inc (NASDAQ:CCXI), and Amicus Therapeutics, Inc. (NASDAQ:FOLD). This group of stocks’ market values match NTRA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MNTA 42 733308 6
JHG 30 215555 7
EQC 23 215349 3
ICL 5 6303 2
GPK 32 274367 -1
CCXI 31 701760 1
FOLD 32 1316185 4
Average 27.9 494690 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $495 million. That figure was $634 million in NTRA’s case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Natera Inc (NASDAQ:NTRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NTRA is 78.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on NTRA as the stock returned 27.8% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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