We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) the right pick for your portfolio? The smart money is betting on the stock. The number of bullish hedge fund bets rose by 7 lately. Our calculations also showed that ACAD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ACAD was in 34 hedge funds’ portfolios at the end of December. There were 27 hedge funds in our database with ACAD holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Felix Baker of Baker Bros.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the key hedge fund action encompassing ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
How have hedgies been trading ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)?
Heading into the first quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in ACAD a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was held by Baker Bros. Advisors, which reported holding $1747.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $112.3 million position. Other investors bullish on the company included Palo Alto Investors, D E Shaw, and Great Point Partners. In terms of the portfolio weights assigned to each position Baker Bros. Advisors allocated the biggest weight to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), around 9.29% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, designating 4.66 percent of its 13F equity portfolio to ACAD.
As industrywide interest jumped, key hedge funds have jumped into ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the largest position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Polar Capital had $33.1 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $28.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Oleg Nodelman’s EcoR1 Capital, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) but similarly valued. These stocks are SYNNEX Corporation (NYSE:SNX), Enel Chile S.A. (NYSE:ENIC), First American Financial Corp (NYSE:FAF), and HD Supply Holdings Inc (NASDAQ:HDS). This group of stocks’ market values resemble ACAD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNX | 22 | 389913 | -2 |
| ENIC | 6 | 39114 | -2 |
| FAF | 42 | 895235 | 4 |
| HDS | 38 | 950035 | 3 |
| Average | 27 | 568574 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $569 million. That figure was $2321 million in ACAD’s case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 6 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately ACAD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACAD were disappointed as the stock returned -26% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
