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Is SAGE Stock A Buy or Sell?

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Abigail Fisher
·5 min read
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The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards SAGE Therapeutics Inc (NASDAQ:SAGE).

Is SAGE stock a buy? Hedge funds were getting less bullish. The number of long hedge fund positions decreased by 5 lately. SAGE Therapeutics Inc (NASDAQ:SAGE) was in 29 hedge funds' portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings). There were 34 hedge funds in our database with SAGE positions at the end of the third quarter.


Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now let's take a glance at the latest hedge fund action surrounding SAGE Therapeutics Inc (NASDAQ:SAGE).

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

At fourth quarter's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in SAGE a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in SAGE Therapeutics Inc (NASDAQ:SAGE), which was worth $189.9 million at the end of the fourth quarter. On the second spot was Farallon Capital which amassed $90.8 million worth of shares. Palo Alto Investors, Citadel Investment Group, and Great Point Partners 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 Great Point Partners allocated the biggest weight to SAGE Therapeutics Inc (NASDAQ:SAGE), around 6.39% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, dishing out 6.02 percent of its 13F equity portfolio to SAGE.

Because SAGE Therapeutics Inc (NASDAQ:SAGE) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few fund managers that decided to sell off their entire stakes heading into Q1. Intriguingly, Albert Cha and Frank Kung's Vivo Capital cut the largest position of the "upper crust" of funds watched by Insider Monkey, totaling about $21.6 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $18.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds heading into Q1.

Let's now review hedge fund activity in other stocks similar to SAGE Therapeutics Inc (NASDAQ:SAGE). We will take a look at ICU Medical, Inc. (NASDAQ:ICUI), MAXIMUS, Inc. (NYSE:MMS), RBC Bearings Incorporated (NASDAQ:ROLL), ACI Worldwide Inc (NASDAQ:ACIW), Nomad Foods Limited (NYSE:NOMD), Acadia Healthcare Company Inc (NASDAQ:ACHC), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). This group of stocks' market valuations resemble SAGE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICUI,22,359044,-9 MMS,24,144428,2 ROLL,14,48268,-4 ACIW,30,721729,1 NOMD,28,385214,-3 ACHC,29,517678,5 ARNA,39,895131,-4 Average,26.6,438785,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $439 million. That figure was $623 million in SAGE's case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 14 bullish hedge fund positions. SAGE Therapeutics Inc (NASDAQ:SAGE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAGE is 52.9. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately SAGE wasn't nearly as popular as these 30 stocks and hedge funds that were betting on SAGE were disappointed as the stock returned -13.7% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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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