Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Acacia Communications, Inc. (NASDAQ:ACIA) from the perspective of those successful funds.
Is Acacia Communications, Inc. (NASDAQ:ACIA) the right pick for your portfolio? The best stock pickers are surely buying. The number of long hedge fund investments strengthened by 2 in recent months. ACIA was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 6 hedge funds in our database with ACIA holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Trinity Industries, Inc. (NYSE:TRN), The Hain Celestial Group, Inc. (NASDAQ:HAIN), and Crane Co. (NYSE:CR) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
lassedesignen/Shutterstock.com
Hedge fund activity in Acacia Communications, Inc. (NASDAQ:ACIA)
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, up by 33% from the second quarter of 2016. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Richard Driehaus of Driehaus Capital holds the biggest position in Acacia Communications, Inc. (NASDAQ:ACIA). Driehaus Capital has a $34.6 million position in the stock, comprising 1.2% of its 13F portfolio. On Driehaus Capital’s heels is Philippe Laffont of Coatue Management holding a $6.4 million position. Some other hedge funds and institutional investors with similar optimism encompass Solomon Kumin’s Folger Hill Asset Management, and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, specific money managers were breaking ground themselves. Coatue Management created the most valuable position in Acacia Communications, Inc. (NASDAQ:ACIA) at the end of the quarter. Folger Hill Asset Management also made a $4.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Neil Chriss’ Hutchin Hill Capital.
Let’s now review hedge fund activity in other stocks similar to Acacia Communications, Inc. (NASDAQ:ACIA). We will take a look at Trinity Industries, Inc. (NYSE:TRN), The Hain Celestial Group, Inc. (NASDAQ:HAIN), Crane Co. (NYSE:CR), and ViaSat, Inc. (NASDAQ:VSAT). This group of stocks’ market values are closest to ACIA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRN | 24 | 553896 | 2 |
| HAIN | 32 | 388383 | 9 |
| CR | 24 | 296832 | 4 |
| VSAT | 21 | 1875704 | 6 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $779 million. That figure was $50 million in ACIA’s case. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is the most popular stock in this table. On the other hand ViaSat, Inc. (NASDAQ:VSAT) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Acacia Communications, Inc. (NASDAQ:ACIA) is even less popular than VSAT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
