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In this article you are going to find out whether hedge funds think ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) a cheap stock to buy now? Hedge funds were becoming less hopeful. The number of bullish hedge fund positions went down by 5 lately. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was in 33 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that ACAD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 38 hedge funds in our database with ACAD holdings at the end of December.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Kamran Moghtaderi of Eversept Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a gander at the key hedge fund action encompassing ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
Do Hedge Funds Think ACAD Is A Good Stock To Buy Now?
At Q1's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ACAD over the last 23 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Julian Baker and Felix Baker's Baker Bros. Advisors has the biggest position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), worth close to $1.0813 billion, comprising 4.7% of its total 13F portfolio. Coming in second is Behzad Aghazadeh of Avoro Capital Advisors (venBio Select Advisor), with a $64.5 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions encompass D. E. Shaw's D E Shaw, Palo Alto Investors and Joseph Edelman's Perceptive Advisors. In terms of the portfolio weights assigned to each position Baker Bros. Advisors allocated the biggest weight to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), around 4.69% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, designating 3.44 percent of its 13F equity portfolio to ACAD.
Due to the fact that ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies that decided to sell off their positions entirely heading into Q2. At the top of the heap, Jerome Pfund and Michael Sjostrom's Sectoral Asset Management dropped the largest position of the 750 funds followed by Insider Monkey, comprising close to $35 million in stock. OrbiMed Advisors, also cut its stock, about $14.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q2.
Let's now review hedge fund activity in other stocks similar to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). We will take a look at Avnet, Inc. (NASDAQ:AVT), HUTCHMED (China) Limited (NASDAQ:HCM), Qualys Inc (NASDAQ:QLYS), Alignment Healthcare, Inc. (NASDAQ:ALHC), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), The Goodyear Tire & Rubber Company (NASDAQ:GT), and Pacific Premier Bancorp, Inc. (NASDAQ:PPBI). This group of stocks' market valuations resemble ACAD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVT,27,850445,2 HCM,8,27401,2 QLYS,12,213773,-10 ALHC,17,93639,17 CBRL,16,163644,-10 GT,23,429776,-4 PPBI,10,139882,0 Average,16.1,274080,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $1482 million in ACAD's case. Avnet, Inc. (NASDAQ:AVT) is the most popular stock in this table. On the other hand HUTCHMED (China) Limited (NASDAQ:HCM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is more popular among hedge funds. Our overall hedge fund sentiment score for ACAD is 72.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Unfortunately ACAD wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ACAD were disappointed as the stock returned -5.8% since the end of the first quarter (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.