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Hedge Funds Are Selling Acadia Healthcare Company Inc (ACHC)

In this article we will take a look at whether hedge funds think Acadia Healthcare Company Inc (NASDAQ:ACHC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Acadia Healthcare Company Inc (NASDAQ:ACHC) was in 24 hedge funds’ portfolios at the end of March. ACHC investors should pay attention to a decrease in enthusiasm from smart money recently. There were 28 hedge funds in our database with ACHC positions at the end of the previous quarter. Our calculations also showed that ACHC 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.

In the financial world there are plenty of signals stock market investors have at their disposal to grade publicly traded companies. A couple of the most useful signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best investment managers can outperform the market by a very impressive amount (see the details here).

Didric Cederholm Lion Point Capital

Didric Cederholm of Lion Point Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the key hedge fund action encompassing Acadia Healthcare Company Inc (NASDAQ:ACHC).

What have hedge funds been doing with Acadia Healthcare Company Inc (NASDAQ:ACHC)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in ACHC a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Among these funds, P2 Capital Partners held the most valuable stake in Acadia Healthcare Company Inc (NASDAQ:ACHC), which was worth $102.3 million at the end of the third quarter. On the second spot was Abrams Bison Investments which amassed $42.2 million worth of shares. Lion Point, OrbiMed Advisors, and Blue Harbour Group 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 Abrams Bison Investments allocated the biggest weight to Acadia Healthcare Company Inc (NASDAQ:ACHC), around 12.32% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, designating 12.23 percent of its 13F equity portfolio to ACHC.

Judging by the fact that Acadia Healthcare Company Inc (NASDAQ:ACHC) has faced declining sentiment from the smart money, we can see that there was a specific group of funds who sold off their positions entirely last quarter. At the top of the heap, Paul Singer’s Elliott Management dropped the biggest position of all the hedgies tracked by Insider Monkey, worth close to $144.5 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $31.3 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds last quarter.

Let’s also examine 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 Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Ambarella Inc (NASDAQ:AMBA), Sabre Corporation (NASDAQ:SABR), and ABM Industries, Inc. (NYSE:ABM). This group of stocks’ market valuations are closest to ACHC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUPH 28 482900 7
AMBA 21 161557 -5
SABR 30 134131 6
ABM 18 46833 6
Average 24.25 206355 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $273 million in ACHC’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand ABM Industries, Inc. (NYSE:ABM) is the least popular one with only 18 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 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on ACHC as the stock returned 53.7% during the second quarter and outperformed the market by an even larger margin.

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