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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2020. What do these smart investors think about SAGE Therapeutics Inc (NASDAQ:SAGE)?
Is SAGE a good stock to buy? SAGE Therapeutics Inc (NASDAQ:SAGE) shareholders have witnessed an increase in hedge fund interest of late. SAGE Therapeutics Inc (NASDAQ:SAGE) was in 34 hedge funds' portfolios at the end of September. The all time high for this statistic is 38. Our calculations also showed that SAGE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Louis Bacon Moore of Moore Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a look at the recent hedge fund action regarding SAGE Therapeutics Inc (NASDAQ:SAGE).
Do Hedge Funds Think SAGE Is A Good Stock To Buy Now?
At Q3's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in SAGE over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, D. E. Shaw's D E Shaw has the most valuable position in SAGE Therapeutics Inc (NASDAQ:SAGE), worth close to $150.5 million, amounting to 0.2% of its total 13F portfolio. The second largest stake is held by Jeffrey Jay and David Kroin of Great Point Partners, with a $120.2 million position; the fund has 10.8% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Ken Griffin's Citadel Investment Group, Thomas Steyer (founder)'s Farallon Capital and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to SAGE Therapeutics Inc (NASDAQ:SAGE), around 10.81% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, earmarking 4.3 percent of its 13F equity portfolio to SAGE.
As industrywide interest jumped, specific money managers were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most outsized position in SAGE Therapeutics Inc (NASDAQ:SAGE). Adage Capital Management had $57.6 million invested in the company at the end of the quarter. Arsani William's Logos Capital also initiated a $15.3 million position during the quarter. The other funds with new positions in the stock are Manfred Yu's Acuta Capital Partners, Louis Bacon's Moore Global Investments, and Dmitry Balyasny's Balyasny Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as SAGE Therapeutics Inc (NASDAQ:SAGE) but similarly valued. We will take a look at Safehold Inc. (NYSE:SAFE), Vivint Smart Home, Inc. (NYSE:VVNT), National Beverage Corp. (NASDAQ:FIZZ), The Howard Hughes Corporation (NYSE:HHC), PTC Therapeutics, Inc. (NASDAQ:PTCT), Balchem Corporation (NASDAQ:BCPC), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks' market valuations are closest to SAGE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAFE,7,7299,0 VVNT,5,8042,0 FIZZ,23,300383,2 HHC,31,858126,3 PTCT,25,209866,-6 BCPC,16,76494,-1 VRNT,27,428732,2 Average,19.1,269849,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $270 million. That figure was $716 million in SAGE's case. The Howard Hughes Corporation (NYSE:HHC) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks SAGE Therapeutics Inc (NASDAQ:SAGE) is more popular among hedge funds. Our overall hedge fund sentiment score for SAGE is 85.8. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on SAGE as the stock returned 33.8% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.