Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Acacia Communications, Inc. (NASDAQ:ACIA).
Acacia Communications, Inc. (NASDAQ:ACIA) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that acia isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the key hedge fund action regarding Acacia Communications, Inc. (NASDAQ:ACIA).
What have hedge funds been doing with Acacia Communications, Inc. (NASDAQ:ACIA)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 55% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in ACIA at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Acacia Communications, Inc. (NASDAQ:ACIA), with a stake worth $13.6 million reported as of the end of September. Trailing Citadel Investment Group was Alyeska Investment Group, which amassed a stake valued at $10.7 million. Harvest Capital Strategies, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers have jumped into Acacia Communications, Inc. (NASDAQ:ACIA) headfirst. Alyeska Investment Group, managed by Anand Parekh, assembled the biggest position in Acacia Communications, Inc. (NASDAQ:ACIA). Alyeska Investment Group had $10.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $5.8 million investment in the stock during the quarter. The following funds were also among the new ACIA investors: Peter Muller’s PDT Partners, Josh Goldberg’s G2 Investment Partners Management, and John W. Rogers’s Ariel Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Acacia Communications, Inc. (NASDAQ:ACIA) but similarly valued. These stocks are NBT Bancorp Inc. (NASDAQ:NBTB), Big Lots, Inc. (NYSE:BIG), Bitauto Hldg Ltd (NYSE:BITA), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks’ market values are similar to ACIA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NBTB | 8 | 11663 | -1 |
| BIG | 19 | 196396 | 3 |
| BITA | 7 | 68643 | 2 |
| DIOD | 17 | 71062 | 1 |
| Average | 12.75 | 86941 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $64 million in ACIA’s case. Big Lots, Inc. (NYSE:BIG) is the most popular stock in this table. On the other hand Bitauto Hldg Ltd (NYSE:BITA) is the least popular one with only 7 bullish hedge fund positions. Acacia Communications, Inc. (NASDAQ:ACIA) 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. In this regard BIG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
