Hedge Fund Sentiment Is Stagnant On Atara Biotherapeutics Inc (ATRA)

·6 min read

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Atara Biotherapeutics Inc (NASDAQ:ATRA).

Hedge fund interest in Atara Biotherapeutics Inc (NASDAQ:ATRA) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ATRA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare ATRA to other stocks including Scholastic Corp (NASDAQ:SCHL), EVO Payments, Inc. (NASDAQ:EVOP), and Azure Power Global Limited (NYSE:AZRE) to get a better sense of its popularity.

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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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 we're going to take a glance at the recent hedge fund action encompassing Atara Biotherapeutics Inc (NASDAQ:ATRA).

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

Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in ATRA a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is ATRA A Good Stock To Buy?
Is ATRA A Good Stock To Buy?

Among these funds, Baupost Group held the most valuable stake in Atara Biotherapeutics Inc (NASDAQ:ATRA), which was worth $131.8 million at the end of the second quarter. On the second spot was Maverick Capital which amassed $119.8 million worth of shares. Redmile Group, Bridger Management, and Antipodean Advisors 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 Copernicus Capital Management allocated the biggest weight to Atara Biotherapeutics Inc (NASDAQ:ATRA), around 12.27% of its 13F portfolio. Antipodean Advisors is also relatively very bullish on the stock, setting aside 4.28 percent of its 13F equity portfolio to ATRA.

Judging by the fact that Atara Biotherapeutics Inc (NASDAQ:ATRA) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that elected to cut their entire stakes by the end of the second quarter. At the top of the heap, Mitchell Blutt's Consonance Capital Management dumped the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $24 million in stock. Mika Toikka's fund, AlphaCrest Capital Management, also sold off its stock, about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to Atara Biotherapeutics Inc (NASDAQ:ATRA). We will take a look at Scholastic Corp (NASDAQ:SCHL), EVO Payments, Inc. (NASDAQ:EVOP), Azure Power Global Limited (NYSE:AZRE), Tivity Health, Inc. (NASDAQ:TVTY), AZZ Incorporated (NYSE:AZZ), National Energy Services Reunited Corp. (NASDAQ:NESR), and SunOpta, Inc. (NASDAQ:STKL). This group of stocks' market valuations resemble ATRA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCHL,13,47456,4 EVOP,9,48079,-1 AZRE,8,50804,-1 TVTY,22,453320,-2 AZZ,15,57433,2 NESR,11,66401,-1 STKL,26,514670,5 Average,14.9,176880,0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $459 million in ATRA's case. SunOpta, Inc. (NASDAQ:STKL) is the most popular stock in this table. On the other hand Azure Power Global Limited (NYSE:AZRE) is the least popular one with only 8 bullish hedge fund positions. Atara Biotherapeutics Inc (NASDAQ:ATRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATRA is 64.4. 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% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately ATRA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ATRA were disappointed as the stock returned 3.1% since the end of June (through 10/22) 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.

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

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