We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article, we look at what those funds think of SAGE Therapeutics Inc (NASDAQ:SAGE) based on that data.
Is SAGE Therapeutics Inc (NASDAQ:SAGE) a superb investment today? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions shrunk by 3 lately. Our calculations also showed that SAGE isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the recent hedge fund action regarding SAGE Therapeutics Inc (NASDAQ:SAGE).
What does smart money think about SAGE Therapeutics Inc (NASDAQ:SAGE)?
At Q2’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in SAGE a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
William Leland Edwards of Palo Alto Investors
Of the funds tracked by Insider Monkey, Palo Alto Investors, managed by William Leland Edwards, holds the largest position in SAGE Therapeutics Inc (NASDAQ:SAGE). Palo Alto Investors has a $145.6 million position in the stock, comprising 7.1% of its 13F portfolio. The second most bullish fund is Farallon Capital, with a $91.5 million position; 0.8% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Eli Casdin’s Casdin Capital, Doug Silverman and Alexander Klabin’s Senator Investment Group and Nathan Fischel’s DAFNA Capital Management.
Since SAGE Therapeutics Inc (NASDAQ:SAGE) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few money managers who sold off their entire stakes last quarter. At the top of the heap, Peter Kolchinsky’s RA Capital Management cut the largest stake of all the hedgies monitored by Insider Monkey, worth an estimated $61.1 million in stock, and Christopher James’s Partner Fund Management was right behind this move, as the fund dropped about $27 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let’s go over 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 West Pharmaceutical Services Inc. (NYSE:WST), Iron Mountain Incorporated (NYSE:IRM), Kirkland Lake Gold Ltd. (NYSE:KL), and Snap-on Incorporated (NYSE:SNA). This group of stocks’ market valuations resemble SAGE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WST | 24 | 318338 | 3 |
| IRM | 14 | 39316 | -4 |
| KL | 21 | 346566 | -4 |
| SNA | 25 | 567704 | 0 |
| Average | 21 | 317981 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $458 million in SAGE’s case. Snap-on Incorporated (NYSE:SNA) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) 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. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -23.4% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
