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Hedge Funds Are Betting On Argo Group International Holdings, Ltd. (ARGO)

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Argo Group International Holdings, Ltd. (NYSE:ARGO) investors should be aware of an increase in hedge fund sentiment lately. ARGO was in 13 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with ARGO holdings at the end of the previous quarter. Our calculations also showed that ARGO isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most stock holders, hedge funds are seen as worthless, outdated financial tools of yesteryear. While there are over 8,000 funds trading at present, Our experts choose to focus on the moguls of this club, approximately 700 funds. These hedge fund managers direct bulk of all hedge funds’ total asset base, and by tracking their matchless investments, Insider Monkey has found various investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by 6 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

Let’s go over the new hedge fund action regarding Argo Group International Holdings, Ltd. (NYSE:ARGO).

What have hedge funds been doing with Argo Group International Holdings, Ltd. (NYSE:ARGO)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ARGO over the last 13 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

No of Hedge Funds With ARGO Positions

More specifically, Pzena Investment Management was the largest shareholder of Argo Group International Holdings, Ltd. (NYSE:ARGO), with a stake worth $36.9 million reported as of the end of September. Trailing Pzena Investment Management was AQR Capital Management, which amassed a stake valued at $11.6 million. Millennium Management, D E Shaw, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Argo Group International Holdings, Ltd. (NYSE:ARGO). Citadel Investment Group had $1.4 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $0.2 million position during the quarter. The other funds with brand new ARGO positions are Matthew Tewksbury’s Stevens Capital Management and Paul Hondros’s AlphaOne Capital Partners.

Let’s check out hedge fund activity in other stocks similar to Argo Group International Holdings, Ltd. (NYSE:ARGO). We will take a look at Cooper-Standard Holdings Inc (NYSE:CPS), Groupon Inc (NASDAQ:GRPN), Tesaro Inc (NASDAQ:TSRO), and Varonis Systems Inc (NASDAQ:VRNS). This group of stocks’ market caps are closest to ARGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CPS 25 134187 7
GRPN 32 280171 -1
TSRO 20 375053 -4
VRNS 22 153158 -4
Average 24.75 235642 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $75 million in ARGO’s case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Tesaro Inc (NASDAQ:TSRO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Argo Group International Holdings, Ltd. (NYSE:ARGO) is even less popular than TSRO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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