Michigan-based investment advisor Cedar Grove Capital Management recently released its third-quarter 2026 investor letter. The letter can be downloaded here . In Q3 2026, Cedar Grove Capital Management's Multi-Strategy Composite returned -12.7%, trailing the Russell 2000 (-7.2%), Russell Microcap (-7.4%), and S&P 500 (+2.4%). Since its January 14, 2026, inception, the composite has returned -26.2%, compared to index gains of 7.9%, 10.6%, and 12.4%, respectively. This market disconnect occurred despite solid business fundamentals, as share prices fell even after holdings beat expectations amid a broader market sell-off and a surge in the 10-year U.S. Treasury yield above 5%. To navigate market volatility, the firm targets recession-durable holdings with strong tailwinds and solid balance sheets, gaining a clear edge as borrowing costs rise. Also, check the fund's top five holdings to see its best picks in 2026.
In its Q3 2026 investor letter, Cedar Grove Capital Management highlighted Nektar Therapeutics (NASDAQ: NKTR ). Nektar Therapeutics (NASDAQ:NKTR) is a US-based biopharmaceutical company that focuses on developing medicines in the field of immunotherapy. On October 06, 2026, Nektar Therapeutics (NASDAQ:NKTR) closed at $39.91, with a $1.36 billion market capitalization. Nektar Therapeutics (NASDAQ:NKTR) posted a 6.40% YTD pullback, trading within a 52-week range of $33.40 to $109.00.
Cedar Grove Capital Management stated the following regarding Nektar Therapeutics (NASDAQ:NKTR) in its Q3 2026 investor letter:
"Similar to ABVX, Nektar Therapeutics (NASDAQ:NKTR) also experienced its own drawdown during the quarter. However, semi-positive highlight came from the eventual conclusion of its lawsuit against Eli Lilly (LLY), where it sought damages in their handling of the drug when it held co-development and commercialization rights dating back to 2017, came in favor for NKTR. LLY was found in breach of contract and NKTR was awarded $90 million in damages. Including simple interest, the gross amount would be ~$115 million, or ~5% of its market cap.
However, before the verdict came, the market was spooked when a jury note to the judge asked to explain the difference between 'no breach' and 'breach with a $1 damage award.' This led to an >$200 million loss in market cap for the company which did not recover once the verdict came in favor of NKTR and damages were awarded and was only exacerbated by the rise in yields. While we were hoping for more in damages — NKTR was asking for as much as $1 billion, which frankly, we were not underwriting anywhere close to — we believe that his is a net positive for the stock and removes an overhang that has been in the works for years..." ( Click here to read the full text )
Nektar Therapeutics (NASDAQ:NKTR) is not on our list of the 40 Most Popular Stocks Among Hedge Funds . According to our database, 50 hedge fund portfolios held Nektar Therapeutics (NASDAQ:NKTR) at the end of the second quarter, down from 56 in the previous quarter. While we acknowledge the potential of Nektar Therapeutics (NASDAQ:NKTR) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock .
In another article covering Nektar Therapeutics (NASDAQ:NKTR), we noted that while its $1 billion in cash funds its core pipeline through 2028–2029, mounting losses and extended timelines continue to weigh on sentiment. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.
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This article is originally published at Insider Monkey .
