The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) worth your attention right now? Investors who are in the know were selling. The number of bullish hedge fund bets decreased by 6 lately. Our calculations also showed that ACAD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the recent hedge fund action regarding ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
Hedge fund activity in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the fourth quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in ACAD a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was held by Baker Bros. Advisors, which reported holding $1770.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $156.4 million position. Other investors bullish on the company included Healthcor Management LP, Great Point Partners, and Palo Alto Investors. In terms of the portfolio weights assigned to each position Baker Bros. Advisors allocated the biggest weight to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), around 10.9% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, dishing out 8.81 percent of its 13F equity portfolio to ACAD.
Judging by the fact that ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedgies that slashed their full holdings in the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management cut the biggest investment of all the hedgies watched by Insider Monkey, worth an estimated $28.7 million in stock. Louis Bacon’s fund, Moore Global Investments, also sold off its stock, about $8.6 million worth. These moves are interesting, as total hedge fund interest dropped by 6 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) but similarly valued. We will take a look at Perrigo Company (NASDAQ:PRGO), ABIOMED, Inc. (NASDAQ:ABMD), Zynga Inc (NASDAQ:ZNGA), and F5 Networks, Inc. (NASDAQ:FFIV). This group of stocks’ market valuations resemble ACAD’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $735 million. That figure was $2404 million in ACAD’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand ABIOMED, Inc. (NASDAQ:ABMD) is the least popular one with only 27 bullish hedge fund positions. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately ACAD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ACAD investors were disappointed as the stock returned 14.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.