Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Acacia Research Corporation (NASDAQ:ACTG).
Is ACTG a good stock to buy now? Prominent investors were becoming less hopeful. The number of bullish hedge fund bets were cut by 2 recently. Acacia Research Corporation (NASDAQ:ACTG) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 14. Our calculations also showed that ACTG 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). There were 14 hedge funds in our database with ACTG positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we’re going to take a peek at the new hedge fund action encompassing Acacia Research Corporation (NASDAQ:ACTG).
Do Hedge Funds Think ACTG Is A Good Stock To Buy Now?
At third quarter’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ACTG over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Acacia Research Corporation (NASDAQ:ACTG), with a stake worth $10.4 million reported as of the end of September. Trailing Renaissance Technologies was Ariel Investments, which amassed a stake valued at $5.5 million. Becker Drapkin Management, Arrowstreet Capital, and Ancora Advisors 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 Becker Drapkin Management allocated the biggest weight to Acacia Research Corporation (NASDAQ:ACTG), around 1.4% of its 13F portfolio. Elkhorn Partners is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to ACTG.
Judging by the fact that Acacia Research Corporation (NASDAQ:ACTG) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that James Morrow’s Callodine Capital Management dropped the largest investment of the 750 funds followed by Insider Monkey, comprising about $1.2 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Acacia Research Corporation (NASDAQ:ACTG). These stocks are Castlight Health Inc (NYSE:CSLT), PICO Holdings Inc (NASDAQ:PICO), Stellus Capital Investment Corporation (NYSE:SCM), Telenav Inc (NASDAQ:TNAV), New Age Beverages Corporation (NASDAQ:NBEV), Ampio Pharmaceuticals, Inc. (NASDAQ:AMPE), and Kindred Biosciences Inc (NASDAQ:KIN). This group of stocks’ market valuations are similar to ACTG’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 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $24 million in ACTG’s case. Castlight Health Inc (NYSE:CSLT) is the most popular stock in this table. On the other hand Ampio Pharmaceuticals, Inc. (NASDAQ:AMPE) is the least popular one with only 2 bullish hedge fund positions. Acacia Research Corporation (NASDAQ:ACTG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACTG is 70.4. 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 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 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately ACTG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACTG were disappointed as the stock returned 1.7% since the end of September (through 12/8) 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.