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Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Acacia Research Corporation (NASDAQ:ACTG) from the perspective of those elite funds.
Is Acacia Research Corporation (NASDAQ:ACTG) the right investment to pursue these days? Prominent investors are getting more bullish. The number of bullish hedge fund bets moved up by 1 lately. Our calculations also showed that ACTG isn't among the 30 most popular stocks among hedge funds. ACTG was in 14 hedge funds' portfolios at the end of the first quarter of 2019. There were 13 hedge funds in our database with ACTG holdings at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a look at the fresh hedge fund action encompassing Acacia Research Corporation (NASDAQ:ACTG).
Hedge fund activity in Acacia Research Corporation (NASDAQ:ACTG)
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ACTG over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Acacia Research Corporation (NASDAQ:ACTG). Renaissance Technologies has a $11.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Ariel Investments, led by John W. Rogers, holding a $8 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism consist of Parsa Kiai's Steamboat Capital Partners, Frederick DiSanto's Ancora Advisors and D. E. Shaw's D E Shaw.
As one would reasonably expect, key hedge funds were breaking ground themselves. Ancora Advisors, managed by Frederick DiSanto, initiated the most outsized position in Acacia Research Corporation (NASDAQ:ACTG). Ancora Advisors had $1.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $0.6 million investment in the stock during the quarter. The only other fund with a brand new ACTG position is Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Acacia Research Corporation (NASDAQ:ACTG) but similarly valued. We will take a look at Community Bankers Trust Corp. (NASDAQ:ESXB), Escalade, Inc. (NASDAQ:ESCA), Hill International Inc (NYSE:HIL), and Turtle Beach Corp (NASDAQ:HEAR). All of these stocks' market caps resemble ACTG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESXB,4,17035,0 ESCA,4,11822,1 HIL,13,39071,0 HEAR,12,21169,-1 Average,8.25,22274,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $26 million in ACTG's case. Hill International Inc (NYSE:HIL) is the most popular stock in this table. On the other hand Community Bankers Trust Corp. (NASDAQ:ESXB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Acacia Research Corporation (NASDAQ:ACTG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 -5.2% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
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