How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Acacia Research Corporation (NASDAQ:ACTG).
Acacia Research Corporation (NASDAQ:ACTG) shareholders have witnessed an increase in enthusiasm from smart money recently. Acacia Research Corporation (NASDAQ:ACTG) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ACTG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the 21st century investor’s toolkit there are numerous tools shareholders employ to size up stocks. A duo of the most useful tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can outperform the broader indices by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Sahm Adrangi of Kerrisdale Capital
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Do Hedge Funds Think ACTG Is A Good Stock To Buy Now?
At first quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in ACTG a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Acacia Research Corporation (NASDAQ:ACTG) was held by Renaissance Technologies, which reported holding $16.4 million worth of stock at the end of December. It was followed by Skye Global Management with a $3.4 million position. Other investors bullish on the company included AQR Capital Management, Marshall Wace LLP, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Kerrisdale Capital allocated the biggest weight to Acacia Research Corporation (NASDAQ:ACTG), around 0.08% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to ACTG.
As industrywide interest jumped, some big names were leading the bulls’ herd. Skye Global Management, managed by Jaime Sterne, assembled the biggest position in Acacia Research Corporation (NASDAQ:ACTG). Skye Global Management had $3.4 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $2.8 million position during the quarter. The other funds with brand new ACTG positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and Sahm Adrangi’s Kerrisdale Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Acacia Research Corporation (NASDAQ:ACTG) but similarly valued. These stocks are LiveXLive Media, Inc. (NASDAQ:LIVX), Unity Biotechnology, Inc. (NASDAQ:UBX), Northwest Pipe Company (NASDAQ:NWPX), BlueCity Holdings Limited (NASDAQ:BLCT), Talis Biomedical Corporation (NASDAQ:TLIS), SmartFinancial, Inc. (NASDAQ:SMBK), and Waitr Holdings Inc. (NASDAQ:WTRH). This group of stocks’ market values match ACTG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LIVX | 9 | 15556 | 1 |
| UBX | 4 | 1586 | -3 |
| NWPX | 6 | 41730 | -4 |
| BLCT | 2 | 598 | 0 |
| TLIS | 8 | 112309 | 8 |
| SMBK | 9 | 24221 | 3 |
| WTRH | 13 | 53924 | -4 |
| Average | 7.3 | 35703 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $34 million in ACTG’s case. Waitr Holdings Inc. (NASDAQ:WTRH) is the most popular stock in this table. On the other hand BlueCity Holdings Limited (NASDAQ:BLCT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Acacia Research Corporation (NASDAQ:ACTG) is more popular among hedge funds. Our overall hedge fund sentiment score for ACTG is 90. 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 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately ACTG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ACTG were disappointed as the stock returned -16.7% since the end of the first quarter (through 7/16) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
