Should I Avoid Natera Inc (NTRA)?

·5 min read

In this article we will check out the progression of hedge fund sentiment towards Natera Inc (NASDAQ:NTRA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Natera Inc (NASDAQ:NTRA) was in 50 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 52. NTRA shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 52 hedge funds in our database with NTRA holdings at the end of June. Our calculations also showed that NTRA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind let's take a look at the fresh hedge fund action surrounding Natera Inc (NASDAQ:NTRA).

James Dondero Highland Capital Management
James Dondero Highland Capital Management

James Dondero of Highland Capital Management

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

Heading into the fourth quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in NTRA a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors has the biggest position in Natera Inc (NASDAQ:NTRA), worth close to $175.3 million, corresponding to 1.9% of its total 13F portfolio. Coming in second is Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $151.5 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions include Farallon Capital, Israel Englander's Millennium Management and Jimmy Levin's Sculptor Capital. In terms of the portfolio weights assigned to each position Bridger Management allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 5.13% of its 13F portfolio. Hudson Executive Capital is also relatively very bullish on the stock, dishing out 4.62 percent of its 13F equity portfolio to NTRA.

Judging by the fact that Natera Inc (NASDAQ:NTRA) has experienced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Ken Griffin's Citadel Investment Group said goodbye to the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $27.3 million in stock. Jim Tananbaum's fund, Foresite Capital, also sold off its stock, about $14.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let's now review hedge fund activity in other stocks similar to Natera Inc (NASDAQ:NTRA). We will take a look at The Toro Company (NYSE:TTC), Vereit Inc (NYSE:VER), Carlisle Companies, Inc. (NYSE:CSL), BorgWarner Inc. (NYSE:BWA), Pegasystems Inc. (NASDAQ:PEGA), IAC/InterActiveCorp (NASDAQ:IAC), and Aegon N.V. (NYSE:AEG). This group of stocks' market caps are similar to NTRA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TTC,29,894310,-3 VER,22,946495,0 CSL,14,89365,-3 BWA,21,170260,-6 PEGA,25,1891439,-2 IAC,47,1426626,-3 AEG,5,12525,-1 Average,23.3,775860,-2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $776 million. That figure was $1800 million in NTRA's case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Natera Inc (NASDAQ:NTRA) is more popular among hedge funds. Our overall hedge fund sentiment score for NTRA is 81.8. 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 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately NTRA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NTRA were disappointed as the stock returned -17.9% since the end of the third quarter (through 11/30) 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 most of these stocks already outperformed the market since 2019.

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

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