Hedge Funds Are Piling Into Accolade, Inc. (ACCD)

In this article we are going to use hedge fund sentiment as a tool and determine whether Accolade, Inc. (NASDAQ:ACCD) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Accolade, Inc. (NASDAQ:ACCD) a buy here? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund positions inched up by 4 recently. Accolade, Inc. (NASDAQ:ACCD) was in 28 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ACCD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s take a look at the fresh hedge fund action encompassing Accolade, Inc. (NASDAQ:ACCD).

Kris Jenner of Rock Springs Capital Management

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

At third quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the second quarter of 2021. By comparison, 11 hedge funds held shares or bullish call options in ACCD a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Accolade, Inc. (NASDAQ:ACCD) was held by ARK Investment Management, which reported holding $220.6 million worth of stock at the end of September. It was followed by Select Equity Group with a $124 million position. Other investors bullish on the company included Rock Springs Capital Management, Rhenman & Partners Asset Management, and Perceptive Advisors. In terms of the portfolio weights assigned to each position Cumberland Associates / Springowl Associates allocated the biggest weight to Accolade, Inc. (NASDAQ:ACCD), around 8.13% of its 13F portfolio. Provenire Capital is also relatively very bullish on the stock, dishing out 4.87 percent of its 13F equity portfolio to ACCD.

As aggregate interest increased, specific money managers were breaking ground themselves. Prosight Capital, managed by Lawrence Hawkins, assembled the biggest position in Accolade, Inc. (NASDAQ:ACCD). Prosight Capital had $4.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $2.8 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks similar to Accolade, Inc. (NASDAQ:ACCD). These stocks are LendingClub Corp (NYSE:LC), Commscope Holding Company Inc (NASDAQ:COMM), Cardlytics, Inc. (NASDAQ:CDLX), ACV Auctions Inc. (NASDAQ:ACVA), Retail Properties of America Inc (NYSE:RPAI), Cannae Holdings, Inc. (NYSE:CNNE), and United States Cellular Corporation (NYSE:USM). This group of stocks’ market caps match ACCD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $482 million in ACCD’s case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand United States Cellular Corporation (NYSE:USM) is the least popular one with only 9 bullish hedge fund positions. Accolade, Inc. (NASDAQ:ACCD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACCD is 72.9. 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 positive signal but 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately ACCD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ACCD were disappointed as the stock returned -41.3% since the end of September (through 12/9) 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 many of these stocks already outperformed the market since 2019.

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