Were Hedge Funds Wrong About Embracing ACADIA Pharmaceuticals Inc. (ACAD)?
Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) changed recently.
Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) a healthy stock for your portfolio? The best stock pickers were in a bullish mood. The number of long hedge fund positions moved up by 16 recently. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was in 44 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ACAD 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are perceived as slow, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, We choose to focus on the masters of this club, about 850 funds. It is estimated that this group of investors have their hands on most of the hedge fund industry's total capital, and by watching their unrivaled stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum 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 .
William Leland Edwards of Palo Alto Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a look at the new hedge fund action surrounding ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
How have hedgies been trading ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)?
At second quarter's end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 57% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ACAD over the last 20 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Baker Bros. Advisors was the largest shareholder of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), with a stake worth $2031.1 million reported as of the end of September. Trailing Baker Bros. Advisors was Citadel Investment Group, which amassed a stake valued at $187.4 million. D E Shaw, Great Point Partners, and Palo Alto Investors 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 Baker Bros. Advisors allocated the biggest weight to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), around 8.96% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, dishing out 6.99 percent of its 13F equity portfolio to ACAD.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Paloma Partners, managed by Donald Sussman, assembled the most outsized position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Paloma Partners had $12.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $9.7 million position during the quarter. The following funds were also among the new ACAD investors: Steve Cohen's Point72 Asset Management, Ken Greenberg and David Kim's Ghost Tree Capital, and Brad Farber's Atika Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) but similarly valued. These stocks are Perrigo Company plc (NYSE:PRGO), GCI Liberty, Inc. (NASDAQ:GLIBA), Snap-on Incorporated (NYSE:SNA), Trex Company, Inc. (NYSE:TREX), Iron Mountain Incorporated (NYSE:IRM), Textron Inc. (NYSE:TXT), and The Scotts Miracle-Gro Company (NYSE:SMG). This group of stocks' market caps are closest to ACAD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRGO,33,446972,5 GLIBA,53,2178205,4 SNA,20,358773,-6 TREX,28,221918,11 IRM,22,64987,3 TXT,24,267696,2 SMG,30,307814,2 Average,30,549481,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $2840 million in ACAD's case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 20 bullish hedge fund positions. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACAD is 76.4. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately ACAD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ACAD were disappointed as the stock returned -10.9% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
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