Should You Avoid Acacia Communications, Inc. (ACIA)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Acacia Communications, Inc. (NASDAQ:ACIA).

Acacia Communications, Inc. (NASDAQ:ACIA) was in 22 hedge funds’ portfolios at the end of March. ACIA investors should pay attention to a decrease in hedge fund interest recently. There were 31 hedge funds in our database with ACIA holdings at the end of the previous quarter. Our calculations also showed that ACIA 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 eyes of most shareholders, hedge funds are seen as unimportant, old investment vehicles of years past. While there are over 8000 funds in operation today, We hone in on the crème de la crème of this club, around 850 funds. These investment experts control most of the hedge fund industry’s total asset base, and by following their first-class investments, Insider Monkey has found various investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 let’s go over the latest hedge fund action surrounding Acacia Communications, Inc. (NASDAQ:ACIA).

What have hedge funds been doing with Acacia Communications, Inc. (NASDAQ:ACIA)?

At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the fourth quarter of 2019. On the other hand, there were a total of 31 hedge funds with a bullish position in ACIA a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is ACIA A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Magnetar Capital, managed by Alec Litowitz and Ross Laser, holds the biggest position in Acacia Communications, Inc. (NASDAQ:ACIA). Magnetar Capital has a $120 million position in the stock, comprising 2.9% of its 13F portfolio. The second largest stake is held by Alpine Associates, managed by Robert Emil Zoellner, which holds a $115.1 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Ken Griffin’s Citadel Investment Group and Matthew Halbower’s Pentwater Capital Management. In terms of the portfolio weights assigned to each position Alpine Associates allocated the biggest weight to Acacia Communications, Inc. (NASDAQ:ACIA), around 4.58% of its 13F portfolio. TIG Advisors is also relatively very bullish on the stock, earmarking 3.98 percent of its 13F equity portfolio to ACIA.

Because Acacia Communications, Inc. (NASDAQ:ACIA) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers who were dropping their full holdings heading into Q4. Intriguingly, Simon Sadler’s Segantii Capital dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $15.1 million in stock, and Matthew Mark’s Jet Capital Investors was right behind this move, as the fund dumped about $7.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 9 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Acacia Communications, Inc. (NASDAQ:ACIA). These stocks are Omnicell, Inc. (NASDAQ:OMCL), El Paso Electric Company (NYSE:EE), Rexnord Corp (NYSE:RXN), and Simpson Manufacturing Co, Inc. (NYSE:SSD). All of these stocks’ market caps are similar to ACIA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMCL 17 54589 4
EE 23 398088 8
RXN 19 213250 -6
SSD 26 197022 2
Average 21.25 215737 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $694 million in ACIA’s case. Simpson Manufacturing Co, Inc. (NYSE:SSD) is the most popular stock in this table. On the other hand Omnicell, Inc. (NASDAQ:OMCL) is the least popular one with only 17 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. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately ACIA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ACIA were disappointed as the stock returned 0.4% 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.

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