Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
SAGE Therapeutics Inc (NASDAQ:SAGE) was in 17 hedge funds’ portfolios at the end of the third quarter of 2015. SAGE shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 21 hedge funds in our database with SAGE positions at the end of the previous quarter. At the end of this article we will also compare SAGE to other stocks including Itron, Inc. (NASDAQ:ITRI), ExlService Holdings, Inc. (NASDAQ:EXLS), and Oasis Petroleum Inc. (NYSE:OAS) to get a better sense of its popularity.
In the eyes of most shareholders, hedge funds are viewed as unimportant, outdated financial tools of years past. While there are more than 8000 funds trading at the moment, Our researchers choose to focus on the aristocrats of this club, approximately 700 funds. These investment experts watch over bulk of the smart money’s total capital, and by keeping an eye on their matchless equity investments, Insider Monkey has unearthed a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, let’s take a look at the latest action regarding SAGE Therapeutics Inc (NASDAQ:SAGE).
How are hedge funds trading SAGE Therapeutics Inc (NASDAQ:SAGE)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 19% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeremy Green’s Redmile Group has the biggest position in SAGE Therapeutics Inc (NASDAQ:SAGE), worth close to $626 million, amounting to 14.4% of its total 13F portfolio. The second largest stake is held by Visium Asset Management, led by Jacob Gottlieb, holding a $38.2 million position; 0.5% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass James E. Flynn’s Deerfield Management, Sanford J. Colen’s Apex Capital and Bihua Chen’s Cormorant Asset Management.
Due to the fact that SAGE Therapeutics Inc (NASDAQ:SAGE) has faced falling interest from hedge fund managers, logic holds that there were a few hedgies who sold off their full holdings heading into Q4. Interestingly, Richard Driehaus’s Driehaus Capital dropped the biggest stake of all the hedgies followed by Insider Monkey, worth about $5.8 million in stock. Mark Wolfson and Jamie Alexander’s fund, Jasper Ridge Partners, also sold off its stock, about $2.6 million worth of SAGE shares. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds heading into Q4.
Let’s now review 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 Itron, Inc. (NASDAQ:ITRI), ExlService Holdings, Inc. (NASDAQ:EXLS), Oasis Petroleum Inc. (NYSE:OAS), and Marketo Inc (NASDAQ:MKTO). 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|
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $744 million in SAGE’s case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand ExlService Holdings, Inc. (NASDAQ:EXLS) is the least popular one with only 13 bullish hedge fund positions. SAGE Therapeutics Inc (NASDAQ:SAGE) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OAS might be a better candidate to consider a long position.