Why One Fund Just Bet $64 Million on a Healthcare Stock Down 63% This Past Year

On November 14, New York City-based Engine Capital Management disclosed a new position in Acadia Healthcare (NASDAQ:ACHC), acquiring 2.6 million shares valued at $64 million.

What Happened

According to a Securities and Exchange Commission (SEC) filing dated November 14, Engine Capital Management initiated a new position in Acadia Healthcare, acquiring nearly 2.6 million shares. The stake was valued at $64 million at the end of the third quarter. This transaction brought the fund’s total reported U.S. equity positions to 27.

What Else to Know

Engine Capital’s new position in ACHC represents 7.6% of its reportable assets under management as of September 30.

Top holdings after the filing:

• NYSE: AVTR: $246.1 million (29.2% of AUM)
• NYSE: NATL: $94.7 million (11.2% of AUM)
• NASDAQ: LNW: $80.9 million (9.6% of AUM)
• NASDAQ: ACHC: $64.0 million (7.6% of AUM)
• NASDAQ: OFIX: $62.3 million (7.4% of AUM)

As of Friday, shares of Acadia Healthcare were priced at $15.47, down 63% over the past year and far underperforming the S&P 500, which is up 13% in the same period.

Company Overview

Company Snapshot

• Acadia Healthcare operates hundreds of behavioral healthcare facilities across the United States and Puerto Rico.
• The company focuses on inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers, and outpatient clinics.
• It serves a diverse patient base seeking mental health and addiction treatment services.

Acadia Healthcare is a leading provider of behavioral healthcare services, leveraging its broad network to address a wide range of mental health and addiction needs. Its scale and specialized care offerings position it as a key player in the behavioral health sector.

Foolish Take

A sharp move into Acadia Healthcare matters because it shows a fund leaning into a sector facing short-term turbulence but long-term demand tailwinds. Behavioral health remains one of the few healthcare categories with structurally rising need, and Acadia’s recent results hint at stabilization even as near-term profitability is under pressure. For long-term investors, this kind of contrarian build-up can signal that current valuation weakness may not reflect the company’s full earnings power once volumes recover and expansion projects mature.

Engine Capital’s new $64 million position comes as Acadia reported 4.4% year-over-year revenue growth to $851.6 million and continued momentum in same-facility admissions, up 3.3%. But the company also lowered full-year revenue, EBITDA, and EPS guidance amid payor scrutiny, Medicaid softness, and higher liability costs. Adjusted EBITDA fell to $173 million from $194 million a year earlier.

Still, management is cutting 2026 capex by at least $300 million and pushing toward positive free cash flow—moves that could materially improve returns once bed additions start contributing. So what might be worth taking away? Demand is durable, margins are fixable, and the stock’s 63% drop over 12 months may have already priced in much of the pain.

Glossary

Assets under management (AUM): The total market value of investments managed by a fund or investment firm.

Reportable U.S. equity assets: U.S. stock holdings that an investment manager must disclose in regulatory filings.

Position: The amount of a particular security or asset held by an investor or fund.

Stake: The ownership interest or share held in a company by an investor or fund.

Holding: A security or asset owned within an investment portfolio.

Initiated a new position: When an investor or fund buys shares of a company for the first time.

Behavioral healthcare services: Medical services focused on treating mental health and substance use disorders.

Inpatient psychiatric hospitals: Facilities where patients stay overnight for intensive mental health treatment.

Residential treatment centers: Live-in healthcare facilities providing therapy and support for behavioral or addiction issues.

Outpatient clinics: Healthcare centers where patients receive treatment without staying overnight.

Market capitalization: The total value of a company's outstanding shares, calculated as share price times shares outstanding.

TTM: The 12-month period ending with the most recent quarterly report.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Light & Wonder Inc. The Motley Fool has a disclosure policy.