At Insider Monkey, we track more than 700 of the best hedge funds in the world and have developed various market-beating strategies over the years using the wealth of data we collect from their 13F filings. Our latest successful system is to select the 100 best-performing funds from the previous quarter and then identify their top 30 mid-cap stock picks. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs (see the details).
In this article, we’ll share a few stock picks chosen in a similar fashion in the hopes of sharing some potential breakout stocks with our readers. We’ve focused on the top-15 performing funds in our database during the fourth quarter, some of which rank among the 140 Biggest and Most Famous Activist Hedge Funds in the world. We then pinpointed five stocks that at least two of those funds were buying during the same quarter.
This list should prove especially interesting to investors seeking out ideas in the healthcare space, as four of the stocks come courtesy that sector. Without further ado, let’s begin the list of five stocks that the absolute best performing hedge funds were piling into during the fourth quarter of 2016.
SAGE Therapeutics Inc (NASDAQ:SAGE) kicks off the list, with shares of the stock having been bought by Jeffrey Jay and David Kroin’s Great Point Partners (120,790 shares for a total of 385,683 shares) and James A. Silverman’s Opaleye Management (new position of 35,000 shares). Overall, 20 hedge funds in our database owned 11.30% of Sage Therapeutic’s shares at the end of 2016, up from 18 funds long the stock a quarter earlier.
SAGE Therapeutics Inc (NASDAQ:SAGE) has had an impressive start to 2017, gaining over 35%. That run has also pushed the stock’s 1-year returns to an eye-popping 110%. Some of the gains were enjoyed thanks to CEO Jeff Jonas stating that the company has received buyout interest. William Blair analyst Tim Lugo crunched some numbers from comparable takeovers and believes a potential deal could be worth $102 per share, though he doesn’t predict any deal going down until at least the second-half of this year. SAGE-547, the company’s lead compound, is currently in phase III trials for two indications: postpartum depression and super-refractory status epilepticus. The results from those trials will likely have a huge impact on any potential acquisition. SAGE Therapeutics Inc (NASDAQ:SAGE) also has a promising major depressive disorder treatment, SAGE-217, in phase II trials.
On the next pages of this article we’ll check out the other four stocks that the best performing hedge funds had their eyes on in the fourth quarter.