We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) a buy, sell, or hold? The best stock pickers are getting more optimistic. The number of bullish hedge fund bets increased by 1 recently. Our calculations also showed that ACAD isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the fresh hedge fund action regarding ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
What have hedge funds been doing with ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)?
At Q2’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in ACAD a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
William Leland Edwards of Palo Alto Investors
The largest stake in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was held by Baker Bros. Advisors, which reported holding $1050.3 million worth of stock at the end of March. It was followed by Palo Alto Investors with a $61.7 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Great Point Partners.
As industrywide interest jumped, specific money managers have been driving this bullishness. Palo Alto Investors, managed by William Leland Edwards, initiated the most valuable position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Palo Alto Investors had $61.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $8.3 million position during the quarter. The following funds were also among the new ACAD investors: Arthur B Cohen and Joseph Healey’s Healthcor Management LP, Samuel Isaly’s OrbiMed Advisors, and Krishen Sud’s Sivik Global Healthcare.
Let’s now take a look at hedge fund activity in other stocks similar to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). We will take a look at FibroGen Inc (NASDAQ:FGEN), ACI Worldwide Inc (NASDAQ:ACIW), The Timken Company (NYSE:TKR), and Eagle Materials, Inc. (NYSE:EXP). This group of stocks’ market values are closest to ACAD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FGEN | 16 | 316897 | -5 |
| ACIW | 23 | 356703 | 0 |
| TKR | 26 | 248660 | 0 |
| EXP | 36 | 681764 | 7 |
| Average | 25.25 | 401006 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $401 million. That figure was $1346 million in ACAD’s case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand FibroGen Inc (NASDAQ:FGEN) is the least popular one with only 16 bullish hedge fund positions. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ACAD as the stock returned 34.6% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
