How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Protara Therapeutics, Inc. (NASDAQ:TARA).
Is TARA a good stock to buy now? Protara Therapeutics, Inc. (NASDAQ:TARA) shareholders have witnessed an increase in hedge fund interest of late. Protara Therapeutics, Inc. (NASDAQ:TARA) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TARA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
To most market participants, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are more than 8000 funds in operation today, Our researchers choose to focus on the top tier of this club, around 850 funds. Most estimates calculate that this group of people oversee bulk of the smart money’s total capital, and by monitoring their inimitable stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to analyze the key hedge fund action encompassing Protara Therapeutics, Inc. (NASDAQ:TARA).
Do Hedge Funds Think TARA Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 88% from the second quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in TARA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Opaleye Management held the most valuable stake in Protara Therapeutics, Inc. (NASDAQ:TARA), which was worth $43.1 million at the end of the third quarter. On the second spot was Deerfield Management which amassed $13.2 million worth of shares. Ikarian Capital, Rock Springs Capital Management, and Perceptive Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Opaleye Management allocated the biggest weight to Protara Therapeutics, Inc. (NASDAQ:TARA), around 8.42% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, setting aside 0.89 percent of its 13F equity portfolio to TARA.
As one would reasonably expect, some big names have jumped into Protara Therapeutics, Inc. (NASDAQ:TARA) headfirst. Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, established the most valuable position in Protara Therapeutics, Inc. (NASDAQ:TARA). Rock Springs Capital Management had $10.8 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also initiated a $10.2 million position during the quarter. The other funds with new positions in the stock are OrbiMed Advisors, Bihua Chen’s Cormorant Asset Management, and Farallon Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Protara Therapeutics, Inc. (NASDAQ:TARA) but similarly valued. These stocks are Daktronics, Inc. (NASDAQ:DAKT), Titan International Inc (NYSE:TWI), NeuBase Therapeutics, Inc. (NASDAQ:NBSE), Precision Drilling Corp (NYSE:PDS), Carter Bankshares, Inc. (NASDAQ:CARE), Scorpio Bulkers Inc (NYSE:SALT), and TD Holdings, Inc. (NASDAQ:GLG). This group of stocks’ market caps match TARA’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 8 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $122 million in TARA’s case. Daktronics, Inc. (NASDAQ:DAKT) is the most popular stock in this table. On the other hand Scorpio Bulkers Inc (NYSE:SALT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Protara Therapeutics, Inc. (NASDAQ:TARA) is more popular among hedge funds. Our overall hedge fund sentiment score for TARA is 90. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on TARA as the stock returned 31.7% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.