Is Schrodinger, Inc. (SDGR) A Good Stock To Buy?

·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Schrodinger, Inc. (NASDAQ:SDGR).

Is SDGR a good stock to buy? Schrodinger, Inc. (NASDAQ:SDGR) has experienced an increase in enthusiasm from smart money recently. Schrodinger, Inc. (NASDAQ:SDGR) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that SDGR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

best dividend stocks according to Ray Dalio
best dividend stocks according to Ray Dalio

Ray Dalio of Bridgewater Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a look at the latest hedge fund action surrounding Schrodinger, Inc. (NASDAQ:SDGR).

Do Hedge Funds Think SDGR Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. By comparison, 15 hedge funds held shares or bullish call options in SDGR a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is SDGR A Good Stock To Buy?
Is SDGR A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the most valuable position in Schrodinger, Inc. (NASDAQ:SDGR). Bill & Melinda Gates Foundation Trust has a $527.9 million position in the stock, comprising 2.2% of its 13F portfolio. The second largest stake is held by Catherine D. Wood of ARK Investment Management, with a $197.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Benjamin A. Smith's Laurion Capital Management, Christopher R. Hansen's Valiant Capital and Panayotis Takis Sparaggis's Alkeon Capital Management. In terms of the portfolio weights assigned to each position Valiant Capital allocated the biggest weight to Schrodinger, Inc. (NASDAQ:SDGR), around 3.75% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, dishing out 2.21 percent of its 13F equity portfolio to SDGR.

As one would reasonably expect, key money managers have been driving this bullishness. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, initiated the most outsized position in Schrodinger, Inc. (NASDAQ:SDGR). Alkeon Capital Management had $26.5 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also initiated a $9.5 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel's Two Sigma Advisors, Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital), and Greg Poole's Echo Street Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Schrodinger, Inc. (NASDAQ:SDGR) but similarly valued. We will take a look at Lancaster Colony Corporation (NASDAQ:LANC), Chart Industries, Inc. (NASDAQ:GTLS), JetBlue Airways Corporation (NASDAQ:JBLU), Inovalon Holdings Inc (NASDAQ:INOV), Ashland Global Holdings Inc.. (NYSE:ASH), Enstar Group Ltd. (NASDAQ:ESGR), and QTS Realty Trust Inc (NYSE:QTS). This group of stocks' market caps are similar to SDGR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LANC,18,294439,-4 GTLS,27,327346,8 JBLU,30,401724,1 INOV,20,145599,3 ASH,28,933462,-8 ESGR,11,495727,0 QTS,39,1285562,17 Average,24.7,554837,2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. That figure was $941 million in SDGR's case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Enstar Group Ltd. (NASDAQ:ESGR) is the least popular one with only 11 bullish hedge fund positions. Schrodinger, Inc. (NASDAQ:SDGR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SDGR is 49.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately SDGR wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SDGR investors were disappointed as the stock returned -30.3% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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