The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) and determine whether the smart money was really smart about this stock.
Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) an exceptional investment right now? Prominent investors were in an optimistic mood. The number of long hedge fund positions moved up by 16 in recent months. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was in 44 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ACAD isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Legal marijuana is one of the fastest growing industries right now, which is why we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a peek at the latest hedge fund action regarding ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
How have hedgies been trading ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)?
At Q2’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in ACAD a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Baker Bros. Advisors was the largest shareholder of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), with a stake worth $2031.1 million reported as of the end of September. Trailing Baker Bros. Advisors was Citadel Investment Group, which amassed a stake valued at $187.4 million. D E Shaw, Great Point Partners, and Palo Alto Investors 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 Baker Bros. Advisors allocated the biggest weight to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), around 8.96% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, dishing out 6.99 percent of its 13F equity portfolio to ACAD.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Paloma Partners, managed by Donald Sussman, initiated the most outsized position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Paloma Partners had $12.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $9.7 million investment in the stock during the quarter. The other funds with brand new ACAD positions are Steve Cohen’s Point72 Asset Management, Ken Greenberg and David Kim’s Ghost Tree Capital, and Brad Farber’s Atika Capital.
Let’s now review 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), GCI Liberty, Inc. (NASDAQ:GLIBA), Snap-on Incorporated (NYSE:SNA), Trex Company, Inc. (NYSE:TREX), Iron Mountain Incorporated (NYSE:IRM), Textron Inc. (NYSE:TXT), and The Scotts Miracle-Gro Company (NYSE:SMG). This group of stocks’ market values are similar to ACAD’s market value.
|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 30 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $2840 million in ACAD’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 20 bullish hedge fund positions. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACAD is 76.4. 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. This is a slightly positive signal but 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately ACAD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ACAD were disappointed as the stock returned -18.3% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.