Is ACIA A Good Stock To Buy According To Hedge Funds?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Acacia Communications, Inc. (NASDAQ:ACIA).

Is ACIA a good stock to buy? Acacia Communications, Inc. (NASDAQ:ACIA) has seen a decrease in hedge fund interest lately. Acacia Communications, Inc. (NASDAQ:ACIA) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 34. Our calculations also showed that ACIA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a gander at the new hedge fund action encompassing Acacia Communications, Inc. (NASDAQ:ACIA).

Do Hedge Funds Think ACIA Is A Good Stock To Buy Now?

At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ACIA over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ACIA A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Alpine Associates, managed by Robert Emil Zoellner, holds the most valuable position in Acacia Communications, Inc. (NASDAQ:ACIA). Alpine Associates has a $152.1 million position in the stock, comprising 8% of its 13F portfolio. The second largest stake is held by Magnetar Capital, managed by Alec Litowitz and Ross Laser, which holds a $117.9 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Matthew Halbower’s Pentwater Capital Management and Carl Tiedemann and Michael Tiedemann’s TIG Advisors. In terms of the portfolio weights assigned to each position One68 Global Capital allocated the biggest weight to Acacia Communications, Inc. (NASDAQ:ACIA), around 21.32% of its 13F portfolio. Melqart Asset Management is also relatively very bullish on the stock, earmarking 8.6 percent of its 13F equity portfolio to ACIA.

Since Acacia Communications, Inc. (NASDAQ:ACIA) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds who were dropping their entire stakes in the third quarter. Interestingly, John W. Rogers’s Ariel Investments dropped the largest stake of the 750 funds monitored by Insider Monkey, valued at close to $17.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $13.5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Acacia Communications, Inc. (NASDAQ:ACIA). We will take a look at Stitch Fix, Inc. (NASDAQ:SFIX), Equinox Gold Corp. (NYSE:EQX), Telecom Argentina S.A. (NYSE:TEO), PotlatchDeltic Corporation (NASDAQ:PCH), Lemonade, Inc. (NYSE:LMND), Hexcel Corporation (NYSE:HXL), and Radian Group Inc (NYSE:RDN). This group of stocks’ market caps resemble ACIA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SFIX 25 235359 -3
EQX 16 94590 2
TEO 5 25352 2
PCH 26 234211 4
LMND 15 109894 15
HXL 20 176457 2
RDN 38 300642 5
Average 20.7 168072 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $1046 million in ACIA’s case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 5 bullish hedge fund positions. Acacia Communications, Inc. (NASDAQ:ACIA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACIA is 72.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately ACIA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACIA were disappointed as the stock returned 5.6% since the end of September (through 12/18) 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 this year.

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