Is Natera Inc (NTRA) A Good Stock To Buy?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Natera Inc (NASDAQ:NTRA) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare NTRA to other stocks including Silver Spring Networks Inc (NYSE:SSNI), SPX Corporation (NYSE:SPXC), and Five9 Inc (NASDAQ:FIVN) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How are hedge funds trading Natera Inc (NASDAQ:NTRA)?

Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NTRA over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Samuel Isaly’s OrbiMed Advisors has the biggest position in Natera Inc (NASDAQ:NTRA), worth close to $14.2 million. Coming in second is Richard Driehaus of Driehaus Capital, with a $12.9 million position. Remaining peers that hold long positions consist of George McCabe’s Portolan Capital Management, Julian Baker and Felix Baker’s Baker Bros. Advisors and Arthur B Cohen and Joseph Healey’s Healthcor Management LP. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually cashed in their positions entirely. Interestingly, Michael Murphy and Daniel Donoghue’s Discovery Group cashed in the biggest position of the 700 funds monitored by Insider Monkey, totaling an estimated $20.9 million in stock, and Peter Kolchinsky’s RA Capital Management was right behind this move, as the fund dumped about $9.5 million worth of shares.

Let’s check out hedge fund activity in other stocks similar to Natera Inc (NASDAQ:NTRA). We will take a look at Silver Spring Networks Inc (NYSE:SSNI), SPX Corporation (NYSE:SPXC), Five9 Inc (NASDAQ:FIVN), and Hortonworks Inc (NASDAQ:HDP). This group of stocks’ market valuations are similar to NTRA’s market valuation.

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 $86 million. That figure was $51 million in NTRA’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Silver Spring Networks Inc (NYSE:SSNI) is the least popular one with only 14 bullish hedge fund positions. Natera Inc (NASDAQ:NTRA) 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. In this regard FIVN might be a better candidate to consider taking a long position in.

Disclosure: None