In this article we will take a look at whether hedge funds think InVitae Corporation (NYSE:NVTA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is InVitae Corporation (NYSE:NVTA) an attractive investment now? Prominent investors were in a pessimistic mood. The number of long hedge fund positions shrunk by 3 lately. InVitae Corporation (NYSE:NVTA) was in 31 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that NVTA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. With all of this in mind let's go over the new hedge fund action encompassing InVitae Corporation (NYSE:NVTA).
Do Hedge Funds Think NVTA Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NVTA over the last 24 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, ARK Investment Management was the largest shareholder of InVitae Corporation (NYSE:NVTA), with a stake worth $721.8 million reported as of the end of June. Trailing ARK Investment Management was Casdin Capital, which amassed a stake valued at $411.6 million. Baker Bros. Advisors, Perceptive Advisors, and Redmile Group 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 Casdin Capital allocated the biggest weight to InVitae Corporation (NYSE:NVTA), around 10.45% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, earmarking 2.64 percent of its 13F equity portfolio to NVTA.
Because InVitae Corporation (NYSE:NVTA) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of fund managers who sold off their full holdings in the second quarter. At the top of the heap, James Crichton's Hitchwood Capital Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, worth close to $15.3 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dumped about $10.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to InVitae Corporation (NYSE:NVTA). These stocks are OGE Energy Corp. (NYSE:OGE), Sonoco Products Company (NYSE:SON), Emcor Group Inc (NYSE:EME), Lemonade, Inc. (NYSE:LMND), Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), Healthequity Inc (NASDAQ:HQY), and Texas Roadhouse Inc (NASDAQ:TXRH). This group of stocks' market caps resemble NVTA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OGE,17,276770,-6 SON,15,139239,-10 EME,21,147705,1 LMND,15,182362,-1 PNFP,13,69655,-1 HQY,20,286344,2 TXRH,37,806751,15 Average,19.7,272689,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $2151 million in NVTA's case. Texas Roadhouse Inc (NASDAQ:TXRH) is the most popular stock in this table. On the other hand Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) is the least popular one with only 13 bullish hedge fund positions. InVitae Corporation (NYSE:NVTA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVTA is 66.1. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately NVTA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NVTA were disappointed as the stock returned -18.5% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.
Get real-time email alerts: Follow Invitae Corp (NYSE:NVTA)
Disclosure: None. This article was originally published at Insider Monkey.