We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of SAGE Therapeutics Inc (NASDAQ:SAGE) based on that data.
SAGE Therapeutics Inc (NASDAQ:SAGE) was in 35 hedge funds’ portfolios at the end of December. SAGE investors should be aware of an increase in enthusiasm from smart money lately. There were 32 hedge funds in our database with SAGE holdings at the end of the previous quarter. Our calculations also showed that SAGE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most investors, hedge funds are viewed as worthless, old investment tools of years past. While there are more than 8000 funds trading at present, Our experts choose to focus on the crème de la crème of this club, around 850 funds. Most estimates calculate that this group of people orchestrate the majority of the hedge fund industry’s total asset base, and by keeping an eye on their finest stock picks, Insider Monkey has determined various investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
William Leland Edwards of Palo Alto Investors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the recent hedge fund action regarding SAGE Therapeutics Inc (NASDAQ:SAGE).
How have hedgies been trading SAGE Therapeutics Inc (NASDAQ:SAGE)?
Heading into the first quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SAGE over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in SAGE Therapeutics Inc (NASDAQ:SAGE) was held by Great Point Partners, which reported holding $57.5 million worth of stock at the end of September. It was followed by Palo Alto Investors with a $47.2 million position. Other investors bullish on the company included Farallon Capital, Citadel Investment Group, and Holocene Advisors. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to SAGE Therapeutics Inc (NASDAQ:SAGE), around 5% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, designating 4.26 percent of its 13F equity portfolio to SAGE.
Now, specific money managers have been driving this bullishness. Great Point Partners, managed by Jeffrey Jay and David Kroin, assembled the most outsized position in SAGE Therapeutics Inc (NASDAQ:SAGE). Great Point Partners had $57.5 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $24.1 million position during the quarter. The following funds were also among the new SAGE investors: Arsani William’s Logos Capital, Oleg Nodelman’s EcoR1 Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to SAGE Therapeutics Inc (NASDAQ:SAGE). We will take a look at FibroGen Inc (NASDAQ:FGEN), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Macquarie Infrastructure Corporation (NYSE:MIC), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks’ market caps resemble SAGE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FGEN | 21 | 359960 | -4 |
| ADPT | 22 | 2003392 | 0 |
| MIC | 34 | 275388 | 7 |
| VRNT | 15 | 285514 | -7 |
| Average | 23 | 731064 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $731 million. That figure was $340 million in SAGE’s case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand Verint Systems Inc. (NASDAQ:VRNT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks SAGE Therapeutics Inc (NASDAQ:SAGE) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately SAGE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SAGE were disappointed as the stock returned -58% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
