Were Hedge Funds Right About Nektar Therapeutics (NKTR)?

·6 min read

Is Nektar Therapeutics (NASDAQ:NKTR) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Nektar Therapeutics (NASDAQ:NKTR) a marvelous investment right now? The best stock pickers were turning less bullish. The number of bullish hedge fund bets shrunk by 1 lately. Nektar Therapeutics (NASDAQ:NKTR) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 27. Our calculations also showed that NKTR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 19 hedge funds in our database with NKTR holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

DUQUESNE CAPITAL
DUQUESNE CAPITAL

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now let's check out the key hedge fund action regarding Nektar Therapeutics (NASDAQ:NKTR).

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

At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in NKTR a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is NKTR A Good Stock To Buy?
Is NKTR A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Maverick Capital, managed by Lee Ainslie, holds the largest position in Nektar Therapeutics (NASDAQ:NKTR). Maverick Capital has a $117.2 million position in the stock, comprising 1.1% of its 13F portfolio. On Maverick Capital's heels is Camber Capital Management, led by Stephen DuBois, holding a $40 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass Henrik Rhenman's Rhenman & Partners Asset Management, Stanley Druckenmiller's Duquesne Capital and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Rhenman & Partners Asset Management allocated the biggest weight to Nektar Therapeutics (NASDAQ:NKTR), around 1.82% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, designating 1.37 percent of its 13F equity portfolio to NKTR.

Seeing as Nektar Therapeutics (NASDAQ:NKTR) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that slashed their positions entirely heading into Q2. Interestingly, Efrem Kamen's Pura Vida Investments dropped the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $1.3 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also dumped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds heading into Q2.

Let's now take a look at hedge fund activity in other stocks similar to Nektar Therapeutics (NASDAQ:NKTR). These stocks are Desktop Metal, Inc. (NYSE:DM), Sleep Number Corporation (NASDAQ:SNBR), Urban Outfitters, Inc. (NASDAQ:URBN), Investors Bancorp, Inc. (NASDAQ:ISBC), Beacon Roofing Supply, Inc. (NASDAQ:BECN), Cannae Holdings, Inc. (NYSE:CNNE), and BRF SA (NYSE:BRFS). All of these stocks' market caps resemble NKTR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DM,20,216231,-4 SNBR,21,256554,5 URBN,23,140764,-1 ISBC,12,78620,-12 BECN,21,411376,-2 CNNE,36,672726,2 BRFS,8,47746,-3 Average,20.1,260574,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $235 million in NKTR's case. Cannae Holdings, Inc. (NYSE:CNNE) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 8 bullish hedge fund positions. Nektar Therapeutics (NASDAQ:NKTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NKTR is 41.9. 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 negative signal and 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately NKTR wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NKTR investors were disappointed as the stock returned -17.5% since the end of March (through 7/23) 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 in 2021.

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

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