Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Cassava Sciences, Inc. (NASDAQ:SAVA)? The smart money sentiment can provide an answer to this question.
Is SAVA a good stock to buy now? The smart money was becoming hopeful. The number of long hedge fund bets improved by 6 recently. Cassava Sciences, Inc. (NASDAQ:SAVA) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SAVA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 2 hedge funds in our database with SAVA holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the elite of this club, around 850 funds. These investment experts handle the majority of all hedge funds’ total capital, and by watching their finest stock picks, Insider Monkey has unearthed many investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. With all of this in mind we’re going to take a gander at the key hedge fund action surrounding Cassava Sciences, Inc. (NASDAQ:SAVA).
How are hedge funds trading Cassava Sciences, Inc. (NASDAQ:SAVA)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 300% from the previous quarter. On the other hand, there were a total of 1 hedge funds with a bullish position in SAVA a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, ExodusPoint Capital held the most valuable stake in Cassava Sciences, Inc. (NASDAQ:SAVA), which was worth $3.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $2.5 million worth of shares. Point72 Asset Management, Renaissance Technologies, and AQR Capital Management 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 ExodusPoint Capital allocated the biggest weight to Cassava Sciences, Inc. (NASDAQ:SAVA), around 0.07% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to SAVA.
As aggregate interest increased, some big names were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, initiated the biggest position in Cassava Sciences, Inc. (NASDAQ:SAVA). ExodusPoint Capital had $3.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $1.4 million position during the quarter. The following funds were also among the new SAVA investors: Renaissance Technologies, Cliff Asness’s AQR Capital Management, and Daniel S. Och’s OZ Management.
Let’s now take a look at hedge fund activity in other stocks similar to Cassava Sciences, Inc. (NASDAQ:SAVA). We will take a look at DXP Enterprises Inc (NASDAQ:DXPE), Funko, Inc. (NASDAQ:FNKO), Peapack-Gladstone Financial Corp (NASDAQ:PGC), Affimed NV (NASDAQ:AFMD), Aldeyra Therapeutics Inc (NASDAQ:ALDX), Orphazyme A/S (NASDAQ:ORPH), and Sunlands Technology Group (NYSE:STG). This group of stocks’ market values are similar to SAVA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $8 million in SAVA’s case. Aldeyra Therapeutics Inc (NASDAQ:ALDX) is the most popular stock in this table. On the other hand Sunlands Technology Group (NYSE:STG) is the least popular one with only 1 bullish hedge fund positions. Cassava Sciences, Inc. (NASDAQ:SAVA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SAVA is 61.9. 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 negative signal and 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 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately SAVA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SAVA investors were disappointed as the stock returned -36.5% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.