It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Intellia Therapeutics, Inc. (NASDAQ:NTLA) changed during the first quarter.
Hedge fund interest in Intellia Therapeutics, Inc. (NASDAQ:NTLA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Federal Agricultural Mortgage Corp. (NYSE:AGM), NCI Building Systems, Inc. (NYSE:NCS), and Carolina Financial Corporation (NASDAQ:CARO) to gather more data points.
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’ 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s analyze the new hedge fund action surrounding Intellia Therapeutics, Inc. (NASDAQ:NTLA).
What does smart money think about Intellia Therapeutics, Inc. (NASDAQ:NTLA)?
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in NTLA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the number one position in Intellia Therapeutics, Inc. (NASDAQ:NTLA). OrbiMed Advisors has a $6.4 million position in the stock, comprising 0.1% of its 13F portfolio. On OrbiMed Advisors’s heels is Julian Baker and Felix Baker of Baker Bros. Advisors, with a $2.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that hold long positions contain Kerr Neilson’s Platinum Asset Management, Ken Griffin’s Citadel Investment Group and Gilchrist Berg’s Water Street Capital.
Due to the fact that Intellia Therapeutics, Inc. (NASDAQ:NTLA) has experienced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of fund managers who sold off their full holdings in the third quarter. At the top of the heap, Jim Simons’s Renaissance Technologies cut the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $3.1 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund said goodbye to about $1.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Intellia Therapeutics, Inc. (NASDAQ:NTLA) but similarly valued. These stocks are Federal Agricultural Mortgage Corp. (NYSE:AGM), NCI Building Systems, Inc. (NYSE:NCS), Carolina Financial Corporation (NASDAQ:CARO), and Franklin Street Properties Corp. (NYSEAMEX:FSP). All of these stocks’ market caps are similar to NTLA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $17 million in NTLA’s case. NCI Building Systems, Inc. (NYSE:NCS) is the most popular stock in this table. On the other hand Carolina Financial Corporation (NASDAQ:CARO) is the least popular one with only 7 bullish hedge fund positions. Intellia Therapeutics, Inc. (NASDAQ:NTLA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NTLA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTLA investors were disappointed as the stock returned -13.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.