You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Acadia Healthcare Company Inc (NASDAQ:ACHC) a cheap investment right now? Money managers are getting more optimistic. The number of long hedge fund positions moved up by 2 in recent months. Our calculations also showed that ACHC isn’t among the 30 most popular stocks among hedge funds. ACHC was in 19 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with ACHC 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 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.
We’re going to view the new hedge fund action regarding Acadia Healthcare Company Inc (NASDAQ:ACHC).
What does the smart money think about Acadia Healthcare Company Inc (NASDAQ:ACHC)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ACHC over the last 13 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Acadia Healthcare Company Inc (NASDAQ:ACHC) was held by P2 Capital Partners, which reported holding $73.9 million worth of stock at the end of September. It was followed by Deerfield Management with a $50.1 million position. Other investors bullish on the company included Lion Point, Freshford Capital Management, and Rock Springs Capital Management.
Now, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the biggest call position in Acadia Healthcare Company Inc (NASDAQ:ACHC). Millennium Management had $3.5 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $1.9 million position during the quarter. The following funds were also among the new ACHC investors: Joel Greenblatt’s Gotham Asset Management and Roger Ibbotson’s Zebra Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Acadia Healthcare Company Inc (NASDAQ:ACHC) but similarly valued. These stocks are Black Hills Corporation (NYSE:BKH), Red Rock Resorts, Inc. (NASDAQ:RRR), Focus Financial Partners Inc. (NASDAQ:FOCS), and Graham Holdings Co (NYSE:GHC). This group of stocks’ market valuations resemble ACHC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKH | 19 | 191977 | 5 |
| RRR | 21 | 465749 | -1 |
| FOCS | 12 | 380308 | 12 |
| GHC | 17 | 587023 | -5 |
| Average | 17.25 | 406264 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $290 million in ACHC’s case. Red Rock Resorts, Inc. (NASDAQ:RRR) is the most popular stock in this table. On the other hand 0 is the least popular one with only 12 bullish hedge fund positions. Acadia Healthcare Company Inc (NASDAQ:ACHC) 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 RRR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
