Is ACHC Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Acadia Healthcare Company Inc (NASDAQ:ACHC).

Is ACHC stock a buy? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets rose by 5 recently. Acadia Healthcare Company Inc (NASDAQ:ACHC) was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ACHC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 24 hedge funds in our database with ACHC holdings at the end of September.

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 124 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Didric Cederholm of Lion Point Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to check out the fresh hedge fund action encompassing Acadia Healthcare Company Inc (NASDAQ:ACHC).

Do Hedge Funds Think ACHC Is A Good Stock To Buy Now?

At the end of December, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the third quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in ACHC 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.

More specifically, P2 Capital Partners was the largest shareholder of Acadia Healthcare Company Inc (NASDAQ:ACHC), with a stake worth $164.6 million reported as of the end of December. Trailing P2 Capital Partners was Lion Point, which amassed a stake valued at $62.3 million. Abrams Bison Investments, OrbiMed Advisors, and Rock Springs Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lion Point allocated the biggest weight to Acadia Healthcare Company Inc (NASDAQ:ACHC), around 12% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, dishing out 11.17 percent of its 13F equity portfolio to ACHC.

As aggregate interest increased, some big names have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, assembled the most outsized position in Acadia Healthcare Company Inc (NASDAQ:ACHC). Viking Global had $17.2 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $11 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Michael Rockefeller and Karl Kroeker’s Woodline Partners, and Michael Gelband’s ExodusPoint Capital.

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 Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Acuity Brands, Inc. (NYSE:AYI), Evercore Inc. (NYSE:EVR), Lazard Ltd (NYSE:LAZ), Envestnet Inc (NYSE:ENV), and Madison Square Garden Sports Corp. (NYSE:MSGS). This group of stocks’ market caps match ACHC’s market cap.

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As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $594 million. That figure was $518 million in ACHC’s case. Madison Square Garden Sports Corp. (NYSE:MSGS) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 20 bullish hedge fund positions. Acadia Healthcare Company Inc (NASDAQ:ACHC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ACHC is 58.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on ACHC as the stock returned 18.2% since the end of the fourth quarter (through 4/12) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.