At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Acadia Healthcare Company Inc (NASDAQ:ACHC) makes for a good investment right now.
Acadia Healthcare Company Inc (NASDAQ:ACHC) investors should be aware of a decrease in hedge fund sentiment of late. Our calculations also showed that ACHC isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the fresh hedge fund action surrounding Acadia Healthcare Company Inc (NASDAQ:ACHC).
How have hedgies been trading Acadia Healthcare Company Inc (NASDAQ:ACHC)?
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the first quarter of 2019. On the other hand, there were a total of 17 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.
The largest stake in Acadia Healthcare Company Inc (NASDAQ:ACHC) was held by Elliott Management, which reported holding $152 million worth of stock at the end of March. It was followed by P2 Capital Partners with a $149.5 million position. Other investors bullish on the company included Abrams Bison Investments, Lion Point, and Rock Springs Capital Management.
Seeing as Acadia Healthcare Company Inc (NASDAQ:ACHC) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their full holdings heading into Q3. Intriguingly, William Leland Edwards’s Palo Alto Investors cut the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $60.4 million in stock, and Richard C. Patton’s Courage Capital was right behind this move, as the fund sold off about $5.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s check out 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 Exponent, Inc. (NASDAQ:EXPO), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), CenterState Banks Inc (NASDAQ:CSFL), and WNS (Holdings) Limited (NYSE:WNS). All of these stocks’ market caps are similar to ACHC’s market cap.
|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 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $594 million in ACHC’s case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 15 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ACHC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ACHC investors were disappointed as the stock returned -11.1% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.