Was The Smart Money Right About Fate Therapeutics Inc (FATE)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Fate Therapeutics Inc (NASDAQ:FATE) based on that data and determine whether they were really smart about the stock.

Is Fate Therapeutics Inc (NASDAQ:FATE) a bargain? Prominent investors were becoming less hopeful. The number of bullish hedge fund bets were trimmed by 4 recently. Fate Therapeutics Inc (NASDAQ:FATE) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 40. Our calculations also showed that FATE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 40 hedge funds in our database with FATE positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 we’re going to review the latest hedge fund action regarding Fate Therapeutics Inc (NASDAQ:FATE).

Do Hedge Funds Think FATE Is A Good Stock To Buy Now?

At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FATE over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jeremy Green’s Redmile Group has the number one position in Fate Therapeutics Inc (NASDAQ:FATE), worth close to $768 million, comprising 13.4% of its total 13F portfolio. The second largest stake is held by ARK Investment Management, led by Catherine D. Wood, holding a $646.2 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Eli Casdin’s Casdin Capital, Farallon Capital and Lone Pine Capital. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to Fate Therapeutics Inc (NASDAQ:FATE), around 13.39% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, designating 8.6 percent of its 13F equity portfolio to FATE.

Judging by the fact that Fate Therapeutics Inc (NASDAQ:FATE) has witnessed a decline in interest from the smart money, we can see that there exists a select few hedgies that slashed their full holdings heading into Q4. Intriguingly, Vishal Saluja and Pham Quang’s Endurant Capital Management dumped the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $4.4 million in stock. Renaissance Technologies, also said goodbye to its stock, about $3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Fate Therapeutics Inc (NASDAQ:FATE) but similarly valued. We will take a look at Valvoline Inc. (NYSE:VVV), Harley-Davidson, Inc. (NYSE:HOG), Southwestern Energy Company (NYSE:SWN), Colliers International Group Inc (NASDAQ:CIGI), Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), and Paysafe Limited (NYSE:PSFE). This group of stocks’ market values match FATE’s market value.

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As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $611 million. That figure was $2103 million in FATE’s case. Paysafe Limited (NYSE:PSFE) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 2 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. Our overall hedge fund sentiment score for FATE is 70.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, FATE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FATE were disappointed as the stock returned -30% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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