Hedge Funds Own Over 25% Of Fate Therapeutics Inc (FATE)

Hedge funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One such stock is Fate Therapeutics Inc (NASDAQ:FATE), so let’s take a closer look at the sentiment that surrounded it heading into the current quarter.

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Is Fate Therapeutics Inc (NASDAQ:FATE) a buy, sell, or hold? Investors who are in the know are taking a bullish view. The number of bullish hedge fund bets increased by two in recent months. FATE was in nine hedge funds’ portfolios at the end of the third quarter of 2015. There were seven hedge funds in our database with FATE holdings at the end of the previous quarter. At the end of this article we will also compare FATE to other stocks including Vishay Precision Group Inc (NYSE:VPG), FBR & Co (NASDAQ:FBRC), and Sientra Inc (NASDAQ:SIEN) to get a better sense of its popularity.

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To most stock holders, hedge funds are perceived as underperforming, old investment vehicles of the past. While there are greater than 8,000 funds in operation at present, Hedge fund experts at Insider Monkey hone in on the leaders of this club, around 700 funds. These investment experts shepherd the lion’s share of all hedge funds’ total capital, and by tracking their highest performing equity investments, Insider Monkey has identified various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in its back tests.

Keeping this in mind, let’s take a look at the new action surrounding Fate Therapeutics Inc (NASDAQ:FATE).

What does the smart money think about Fate Therapeutics Inc (NASDAQ:FATE)?

At the end of the third quarter, a total of nine of the hedge funds tracked by Insider Monkey were long in this stock, a 29% increase from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably.

When looking at the hedgies followed by Insider Monkey, Kingdon Capital, managed by Mark Kingdon, holds the most valuable position in Fate Therapeutics Inc (NASDAQ:FATE). Kingdon Capital has a $12.8 million position in the stock, comprising 0.6% of its 13F portfolio. The second-most bullish hedge fund manager is Jeremy Green of Redmile Group, with an $11.1 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Kevin Kotler’s Broadfin Capital, Samuel Isaly’s OrbiMed Advisors, and James Dondero’s Highland Capital Management.

As aggregate interest increased, specific money managers have been driving this bullishness. Ghost Tree Capital, managed by Ken Greenberg and David Kim, created the biggest position in Fate Therapeutics Inc (NASDAQ:FATE). Ghost Tree Capital had $0.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.1 million position during the quarter.

Let’s also review hedge fund activity in other stocks similar to Fate Therapeutics Inc (NASDAQ:FATE). We will take a look at Vishay Precision Group Inc (NYSE:VPG), FBR & Co (NASDAQ:FBRC), Sientra Inc (NASDAQ:SIEN), and GSV Capital Corp (NASDAQ:GSVC). This group of stocks’ market valuations are similar to FATE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VPG 12 46714 1
FBRC 6 11008 -2
SIEN 10 58110 4
GSVC 6 3085 -1

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $30 million, less than the $39 million held in Fate Therapeutics. Vishay Precision Group Inc (NYSE:VPG) is the most popular stock in this table. On the other hand FBR & Co (NASDAQ:FBRC) is the least popular one with only six bullish hedge fund positions. Fate Therapeutics Inc (NASDAQ:FATE) is not the most popular stock in this group but hedge fund interest is still above average compared to its market cap peers. This is a slightly positive signal, and as they own over 25% of the company’s shares, we believe more research into the stock is justified and a possible place made in one’s portfolio for it.