Is SDGR Stock A Buy or Sell?

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 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. What do these smart investors think about Schrodinger, Inc. (NASDAQ:SDGR)?

Is SDGR stock a buy? Schrodinger, Inc. (NASDAQ:SDGR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of December. Our calculations also showed that SDGR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare SDGR to other stocks including Starwood Property Trust, Inc. (NYSE:STWD), People’s United Financial, Inc. (NASDAQ:PBCT), and Cullen/Frost Bankers, Inc. (NYSE:CFR) to get a better sense of its popularity.

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Cathie Wood of ARK Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. 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 we’re going to check out the key hedge fund action encompassing Schrodinger, Inc. (NASDAQ:SDGR).

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

At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SDGR over the last 22 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in Schrodinger, Inc. (NASDAQ:SDGR), which was worth $552.8 million at the end of the fourth quarter. On the second spot was ARK Investment Management which amassed $110.5 million worth of shares. Laurion Capital Management, Valiant Capital, and Driehaus Capital 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 Valiant Capital allocated the biggest weight to Schrodinger, Inc. (NASDAQ:SDGR), around 3.31% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, earmarking 3.17 percent of its 13F equity portfolio to SDGR.

Because Schrodinger, Inc. (NASDAQ:SDGR) has faced declining sentiment from the smart money, we can see that there exists a select few funds that slashed their full holdings in the fourth quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw sold off the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $4 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $3.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Schrodinger, Inc. (NASDAQ:SDGR) but similarly valued. These stocks are Starwood Property Trust, Inc. (NYSE:STWD), People’s United Financial, Inc. (NASDAQ:PBCT), Cullen/Frost Bankers, Inc. (NYSE:CFR), Integra Lifesciences Holdings Corp (NASDAQ:IART), Eastgroup Properties Inc (NYSE:EGP), Yamana Gold Inc. (NYSE:AUY), and First Industrial Realty Trust, Inc. (NYSE:FR). This group of stocks’ market valuations are closest to SDGR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $950 million in SDGR’s case. People’s United Financial, Inc. (NASDAQ:PBCT) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 13 bullish hedge fund positions. Schrodinger, Inc. (NASDAQ:SDGR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SDGR is 69.4. 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 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately SDGR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on SDGR were disappointed as the stock returned -8.4% since the end of December (through 4/19) 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.