Stanley Druckenmiller Put 18% of His $3.4 Billion Portfolio in This One Stock. Is Natera a Buy?

It can pay to track what the big investors on Wall Street are trading in quarterly 13-F filings. This quarter, legendary hedge fund manager Stanley Druckenmiller added to his largest stock position, buying more Natera (NASDAQ: NTRA) for his family office. The innovative genetic testing company now accounts for 18% of Druckenmiller's 13-F portfolio, which includes all his U.S.-listed stocks.

Should you follow Druckenmiller into Natera stock? Let's take a closer look at the numbers and find out.

Duquesne Family Office chairman Stanley Druckenmiller. Image source: Getty Images.

Advances in DNA testing

Modern medicines and treatments have led to a growing demand for advanced patient diagnostics. To tailor medicines for patients in prenatal care or with cancer, you need to understand more about their bodies and specific genetic makeup.

Natera specializes in bridging the gap between doctors and patients, using innovative cell-free DNA testing to help diagnose outcomes. Specifically, it serves the prenatal and cancer testing markets. For pregnant patients, a doctor can use a Natera test to diagnose any problems with the fetus, all with minimal physical intervention. Its cancer testing has a variety of use cases, but an important one is checking for residual disease evidence in patients, which can be invaluable for someone dealing with cancer in remission.

This market is growing like a weed, and Natera is leading the way with its best-in-class testing innovations and patent protections. It has also recently made strides in a new pillar of its business: organ donor testing, which evaluates how well a new organ functions after transplantation.

Total revenue grew 39% year over year last quarter and is up 1,000% over the last 10 years. It is this growth inflection -- and the prospects for continued tailwinds in the sector -- that led Druckenmiller to make Natera his largest stock position.

Is Natera stock a buy?

While Natera has been a nice winner for Druckenmiller over the last few years, the stock is up almost 100% over the last 12 months, driven by solid revenue growth. Is it still a buy today?

Right now, Natera trades at an expensive-looking price-to-sales (P/S) ratio of 15, which is significantly higher than the stock market average in the United States. Investors like Druckenmiller are quite optimistic about this business's growth prospects.

We cannot value the business on earnings, since it has not generated a net profit in the last few years. However, it does have very high gross margins -- 65% last quarter -- that indicate the business will have strong bottom-line margins at greater maturity.

This means investors could earn strong long-term returns by owning Natera stock, but they should only buy if they believe this durable revenue growth will continue in the years ahead.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Natera. The Motley Fool has a disclosure policy.