“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) in order to identify whether reputable and successful top money managers continue to believe in its potential.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has seen an increase in support from the world’s most elite money managers of late. Our calculations also showed that ACAD isn’t among the 30 most popular stocks among hedge funds.
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.
Let’s view the new hedge fund action surrounding ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
What have hedge funds been doing with ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)?
Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ACAD over the last 13 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Baker Bros. Advisors was the largest shareholder of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), with a stake worth $590.4 million reported as of the end of September. Trailing Baker Bros. Advisors was Citadel Investment Group, which amassed a stake valued at $51.5 million. Point72 Asset Management, Palo Alto Investors, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have been driving this bullishness. Nexthera Capital, managed by Ori Hershkovitz, initiated the most valuable call position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Nexthera Capital had $10.4 million invested in the company at the end of the quarter. Ken Greenberg and David Kim’s Ghost Tree Capital also made a $7 million investment in the stock during the quarter. The following funds were also among the new ACAD investors: James A. Silverman’s Opaleye Management, Sander Gerber’s Hudson Bay Capital Management, and Behzad Aghazadeh’s venBio Select Advisor.
Let’s now review hedge fund activity in other stocks similar to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). We will take a look at AMN Healthcare Services Inc (NYSE:AMN), First Trust NASDAQ-100-Tech Sector ETF (NASDAQ:QTEC), Q2 Holdings Inc (NYSE:QTWO), and Cogent Communications Holdings, Inc. (NASDAQ:CCOI). This group of stocks’ market caps resemble ACAD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMN | 15 | 50566 | 5 |
| QTEC | 2 | 761 | 1 |
| QTWO | 13 | 53576 | -3 |
| CCOI | 12 | 238935 | 0 |
| Average | 10.5 | 85960 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $810 million in ACAD’s case. AMN Healthcare Services Inc (NYSE:AMN) is the most popular stock in this table. On the other hand 0 is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
