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Are Hedge Funds Still Crazy About Armstrong Flooring, Inc. (AFI)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Armstrong Flooring, Inc. (NYSE:AFI) based on that data and determine whether they were really smart about the stock.

Armstrong Flooring, Inc. (NYSE:AFI) was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. AFI investors should be aware of a decrease in hedge fund interest lately. There were 15 hedge funds in our database with AFI positions at the end of the previous quarter. Our calculations also showed that AFI 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 21st century investor’s toolkit there are numerous indicators market participants employ to size up their holdings. A duo of the less known indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace the S&P 500 by a healthy margin (see the details here).

Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben of ValueAct Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 9 states that banned plastic bags to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action encompassing Armstrong Flooring, Inc. (NYSE:AFI).

How have hedgies been trading Armstrong Flooring, Inc. (NYSE:AFI)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AFI over the last 18 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 Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the biggest position in Armstrong Flooring, Inc. (NYSE:AFI), worth close to $2.5 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, which holds a $2.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include Jeffrey Ubben’s ValueAct Capital, Andrew Rechtschaffen’s AREX Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position AREX Capital Management allocated the biggest weight to Armstrong Flooring, Inc. (NYSE:AFI), around 1.64% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, setting aside 0.1 percent of its 13F equity portfolio to AFI.

Due to the fact that Armstrong Flooring, Inc. (NYSE:AFI) has experienced a decline in interest from hedge fund managers, it’s easy to see that there were a few hedgies that decided to sell off their full holdings last quarter. Interestingly, Frederick DiSanto’s Ancora Advisors cut the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $0.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $0.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Armstrong Flooring, Inc. (NYSE:AFI). These stocks are WidePoint Corporation (NYSE:WYY), CSI Compressco LP (NASDAQ:CCLP), Zosano Pharma Corp (NASDAQ:ZSAN), and OpGen, Inc. (NASDAQ:OPGN). This group of stocks’ market caps are similar to AFI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WYY 3 5246 -2
CCLP 2 386 0
ZSAN 4 892 1
OPGN 1 183 -2
Average 2.5 1677 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $10 million in AFI’s case. Zosano Pharma Corp (NASDAQ:ZSAN) is the most popular stock in this table. On the other hand OpGen, Inc. (NASDAQ:OPGN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Armstrong Flooring, Inc. (NYSE:AFI) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on AFI as the stock returned 72.7% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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