Cassava Sciences, Inc. (SAVA) Fell Out Of Favor With Hedge Funds

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Cassava Sciences, Inc. (NASDAQ:SAVA), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Cassava Sciences, Inc. (NASDAQ:SAVA) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Cassava Sciences, Inc. (NASDAQ:SAVA) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. Our calculations also showed that SAVA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks 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. Keeping this in mind we’re going to review the recent hedge fund action surrounding Cassava Sciences, Inc. (NASDAQ:SAVA).

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

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in SAVA a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Marshall and Ian Wace’s Marshall Wace LLP has the number one position in Cassava Sciences, Inc. (NASDAQ:SAVA), worth close to $12.7 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $12.3 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Marshall Wace LLP allocated the biggest weight to Cassava Sciences, Inc. (NASDAQ:SAVA), around 0.06% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to SAVA.

Since Cassava Sciences, Inc. (NASDAQ:SAVA) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few money managers that slashed their positions entirely heading into Q2. At the top of the heap, Frank Fu’s CaaS Capital dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $4.7 million in stock. Nathan Fischel’s fund, DAFNA Capital Management, also dumped its stock, about $3.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q2.

Let’s go over hedge fund activity in other stocks similar to Cassava Sciences, Inc. (NASDAQ:SAVA). We will take a look at MacroGenics Inc (NASDAQ:MGNX), AppHarvest, Inc. (NASDAQ:APPH), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), Horace Mann Educators Corporation (NYSE:HMN), GMS Inc. (NYSE:GMS), ArcBest Corp (NASDAQ:ARCB), and Virtus Investment Partners Inc (NASDAQ:VRTS). This group of stocks’ market caps resemble SAVA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $36 million in SAVA’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand ArcBest Corp (NASDAQ:ARCB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Cassava Sciences, Inc. (NASDAQ:SAVA) is even less popular than ARCB. Our overall hedge fund sentiment score for SAVA is 21.8. 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. Hedge funds clearly dropped the ball on SAVA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on SAVA as the stock returned 77.2% since Q1 (through June 18th) and outperformed the market by an even larger margin.

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