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SAGE Therapeutics Inc (SAGE): Hedge Funds In Wait-and-See Mode

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought SAGE Therapeutics Inc (NASDAQ:SAGE) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in SAGE Therapeutics Inc (NASDAQ:SAGE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SAGE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare SAGE to other stocks including Apple Hospitality REIT Inc (NYSE:APLE), Alliance Data Systems Corporation (NYSE:ADS), and Coca-Cola Consolidated Inc. (NASDAQ:COKE) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are assumed to be slow, old investment tools of years past. While there are over 8000 funds in operation at the moment, Our experts choose to focus on the upper echelon of this club, approximately 850 funds. It is estimated that this group of investors watch over the majority of the hedge fund industry’s total asset base, and by tracking their finest investments, Insider Monkey has deciphered many investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the new hedge fund action regarding SAGE Therapeutics Inc (NASDAQ:SAGE).

What have hedge funds been doing with SAGE Therapeutics Inc (NASDAQ:SAGE)?

At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in SAGE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D E Shaw was the largest shareholder of SAGE Therapeutics Inc (NASDAQ:SAGE), with a stake worth $88.2 million reported as of the end of September. Trailing D E Shaw was Great Point Partners, which amassed a stake valued at $87.4 million. Citadel Investment Group, Farallon Capital, and Two Sigma Advisors 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 Great Point Partners allocated the biggest weight to SAGE Therapeutics Inc (NASDAQ:SAGE), around 6.99% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, earmarking 2.43 percent of its 13F equity portfolio to SAGE.

Because SAGE Therapeutics Inc (NASDAQ:SAGE) has faced falling interest from the aggregate hedge fund industry, we can see that there exists a select few funds who were dropping their positions entirely in the second quarter. Interestingly, Behzad Aghazadeh’s Avoro Capital Advisors (venBio Select Advisor) cut the largest stake of the 750 funds watched by Insider Monkey, comprising close to $28.7 million in stock, and Christopher James’s Partner Fund Management was right behind this move, as the fund sold off about $12.5 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 SAGE Therapeutics Inc (NASDAQ:SAGE) but similarly valued. These stocks are Apple Hospitality REIT Inc (NYSE:APLE), Alliance Data Systems Corporation (NYSE:ADS), Coca-Cola Consolidated Inc. (NASDAQ:COKE), Copa Holdings, S.A. (NYSE:CPA), GrafTech International Ltd. (NYSE:EAF), Macy’s, Inc. (NYSE:M), and GATX Corporation (NYSE:GATX). This group of stocks’ market values match SAGE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APLE 14 56454 3
ADS 29 345419 -1
COKE 13 18558 4
CPA 24 213886 9
EAF 24 125189 1
M 36 412417 6
GATX 17 152806 4
Average 22.4 189247 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $464 million in SAGE’s case. Macy’s, Inc. (NYSE:M) is the most popular stock in this table. On the other hand Coca-Cola Consolidated Inc. (NASDAQ:COKE) is the least popular one with only 13 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. Our overall hedge fund sentiment score for SAGE is 65.6. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on SAGE as the stock returned 37.8% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.