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Were Hedge Funds Right About Buying NanoString Technologies Inc (NSTG)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtNanoString Technologies Inc (NASDAQ:NSTG) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

NanoString Technologies Inc (NASDAQ:NSTG) has experienced an increase in hedge fund sentiment in recent months. NSTG was in 18 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with NSTG holdings at the end of the previous quarter. Our calculations also showed that NSTG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a gander at the latest hedge fund action regarding NanoString Technologies Inc (NASDAQ:NSTG).

Hedge fund activity in NanoString Technologies Inc (NASDAQ:NSTG)

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in NSTG over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NSTG A Good Stock To Buy?

Among these funds, OrbiMed Advisors held the most valuable stake in NanoString Technologies Inc (NASDAQ:NSTG), which was worth $28.7 million at the end of the third quarter. On the second spot was Polar Capital which amassed $23.3 million worth of shares. Pura Vida Investments, D E Shaw, and Balyasny Asset Management 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 Pura Vida Investments allocated the biggest weight to NanoString Technologies Inc (NASDAQ:NSTG), around 5.58% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, dishing out 0.87 percent of its 13F equity portfolio to NSTG.

As one would reasonably expect, key money managers have jumped into NanoString Technologies Inc (NASDAQ:NSTG) headfirst. OrbiMed Advisors, managed by Samuel Isaly, initiated the most outsized position in NanoString Technologies Inc (NASDAQ:NSTG). OrbiMed Advisors had $28.7 million invested in the company at the end of the quarter. Andrew Sandler’s Sandler Capital Management also initiated a $6.3 million position during the quarter. The other funds with brand new NSTG positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Constantinos J. Christofilis’s Archon Capital Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now review hedge fund activity in other stocks similar to NanoString Technologies Inc (NASDAQ:NSTG). We will take a look at Skyline Champion Corporation (NYSE:SKY), Sturm, Ruger & Company (NYSE:RGR), Service Properties Trust (NASDAQ:SVC), and Odonate Therapeutics, Inc. (NASDAQ:ODT). This group of stocks’ market values are closest to NSTG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SKY 23 143480 -3
RGR 14 102980 2
SVC 23 30778 6
ODT 13 471188 -2
Average 18.25 187107 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $119 million in NSTG’s case. Skyline Champion Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand Odonate Therapeutics, Inc. (NASDAQ:ODT) is the least popular one with only 13 bullish hedge fund positions. NanoString Technologies Inc (NASDAQ:NSTG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on NSTG as the stock returned 52.4% since the end of March and outperformed the market by an even larger margin.

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