Hedge Fund Favorites vs. SAGE Therapeutics Inc (SAGE) In 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like SAGE Therapeutics Inc (NASDAQ:SAGE).

Is SAGE Therapeutics Inc (NASDAQ:SAGE) a great stock to buy now? Investors who are in the know are getting more bullish. The number of bullish hedge fund positions rose by 4 lately. Our calculations also showed that SAGE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Today there are a multitude of metrics investors employ to appraise their holdings. A pair of the best metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform their index-focused peers by a superb amount (see the details here).

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding SAGE Therapeutics Inc (NASDAQ:SAGE).

Hedge fund activity in SAGE Therapeutics Inc (NASDAQ:SAGE)

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SAGE over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, William Leland Edwards’s Palo Alto Investors has the number one position in SAGE Therapeutics Inc (NASDAQ:SAGE), worth close to $95.5 million, accounting for 6.4% of its total 13F portfolio. The second largest stake is held by Casdin Capital, led by Eli Casdin, holding a $73.2 million position; the fund has 7.3% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Christopher James’s Partner Fund Management, Farallon Capital and Andreas Halvorsen’s Viking Global. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to SAGE Therapeutics Inc (NASDAQ:SAGE), around 7.33% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, dishing out 6.58 percent of its 13F equity portfolio to SAGE.

Now, specific money managers have jumped into SAGE Therapeutics Inc (NASDAQ:SAGE) headfirst. Partner Fund Management, managed by Christopher James, created the most outsized position in SAGE Therapeutics Inc (NASDAQ:SAGE). Partner Fund Management had $52.4 million invested in the company at the end of the quarter. Andreas Halvorsen’s Viking Global also made a $37 million investment in the stock during the quarter. The following funds were also among the new SAGE investors: David E. Shaw’s D E Shaw, Israel Englander’s Millennium Management, and Israel Englander’s Millennium Management.

Let’s now review hedge fund activity in other stocks similar to SAGE Therapeutics Inc (NASDAQ:SAGE). These stocks are Proofpoint Inc (NASDAQ:PFPT), Gildan Activewear Inc (NYSE:GIL), IPG Photonics Corporation (NASDAQ:IPGP), and Lear Corporation (NYSE:LEA). All of these stocks’ market caps match SAGE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFPT 42 636538 6
GIL 19 348320 -5
IPGP 14 103750 -2
LEA 33 817858 2
Average 27 476617 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $430 million in SAGE’s case. Proofpoint Inc (NASDAQ:PFPT) is the most popular stock in this table. On the other hand IPG Photonics Corporation (NASDAQ:IPGP) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 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 -24.6% in 2019 and trailed 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.
5 Most Popular Stocks Among Hedge Funds
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.