How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Acadia Healthcare Company Inc (NASDAQ:ACHC).
Acadia Healthcare Company Inc (NASDAQ:ACHC) investors should pay attention to an increase in enthusiasm from smart money recently. 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 Carter’s, Inc. (NYSE:CRI), Liberty Property Trust (NYSE:LPT), and Allison Transmission Holdings Inc (NYSE:ALSN) to gather more data points.
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With all of this in mind, let’s analyze the key action encompassing Acadia Healthcare Company Inc (NASDAQ:ACHC).
How have hedgies been trading Acadia Healthcare Company Inc (NASDAQ:ACHC)?
Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management has the biggest position in Acadia Healthcare Company Inc (NASDAQ:ACHC), worth close to $53.8 million, accounting for 4.4% of its total 13F portfolio. On Rock Springs Capital Management’s heels is Millennium Management, led by Israel Englander, holding an $49.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism comprise Brian Ashford-Russell and Tim Woolley’s Polar Capital, James Dondero’s Highland Capital Management and Drew Cupps’s Cupps Capital Management.
Now, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Acadia Healthcare Company Inc (NASDAQ:ACHC). Adage Capital Management had $10.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated an $9.5 million position during the quarter. The other funds with brand new ACHC positions are Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Ben Gambill’s Tiger Eye Capital, and George Hall’s Clinton Group.
On the next page, we analyze hedge fund activity of similarly priced stocks to get a better feel on what the elite funds think of ACHC.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Acadia Healthcare Company Inc (NASDAQ:ACHC) but similarly valued. We will take a look at Carter’s, Inc. (NYSE:CRI), Liberty Property Trust (NYSE:LPT), Allison Transmission Holdings Inc (NYSE:ALSN), and Embraer SA (ADR) (NYSE:ERJ). This group of stocks’ market values match ACHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRI | 46 | 1060432 | 0 |
| LPT | 19 | 119291 | 6 |
| ALSN | 40 | 1610982 | 0 |
| ERJ | 4 | 100735 | -5 |
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $226 million in ACHC’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Embraer SA (ADR) (NYSE:ERJ) is the least popular one with only 4 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CRI might be a better candidate to consider a long position.
