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Were Hedge Funds Right About Flocking Into ACADIA Pharmaceuticals Inc. (ACAD)?

Reymerlyn Martin

Is ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has seen an increase in activity from the world's largest hedge funds lately. Our calculations also showed that ACAD isn't among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Felix Baker - Baker Bros.

Let's take a look at the key hedge fund action surrounding ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).

Hedge fund activity in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)

At Q4's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ACAD over the last 14 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.

ACAD_apr2019

The largest stake in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was held by Baker Bros. Advisors, which reported holding $642.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $45.9 million position. Other investors bullish on the company included Great Point Partners, Point72 Asset Management, and Palo Alto Investors.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, created the most valuable position in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Alyeska Investment Group had $2.8 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $2.4 million investment in the stock during the quarter. The other funds with brand new ACAD positions are Cliff Asness's AQR Capital Management, Paul Tudor Jones's Tudor Investment Corp, and John Overdeck and David Siegel's Two Sigma Advisors.

Let's now take a look at hedge fund activity in other stocks similar to ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). These stocks are Globant SA (NYSE:GLOB), Edgewell Personal Care Company (NYSE:EPC), Mimecast Limited (NASDAQ:MIME), and Colony Credit Real Estate, Inc. (NYSE:CLNC). All of these stocks' market caps resemble ACAD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLOB,15,27446,-2 EPC,18,188341,0 MIME,23,427545,-3 CLNC,7,19539,3 Average,15.75,165718,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $846 million in ACAD's case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 7 bullish hedge fund positions. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on ACAD as the stock returned 46.8% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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