Is AGRO A Good Stock To Buy Now?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Adecoagro SA (NYSE:AGRO).

Is AGRO a good stock to buy now? Adecoagro SA (NYSE:AGRO) investors should be aware of a decrease in enthusiasm from smart money recently. Adecoagro SA (NYSE:AGRO) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 29. Our calculations also showed that AGRO isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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 stocks that are in our short portfolio.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to analyze the key hedge fund action regarding Adecoagro SA (NYSE:AGRO).

Do Hedge Funds Think AGRO Is A Good Stock To Buy Now?

At third quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AGRO over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is AGRO A Good Stock To Buy?

The largest stake in Adecoagro SA (NYSE:AGRO) was held by Route One Investment Company, which reported holding $67.5 million worth of stock at the end of September. It was followed by EMS Capital with a $56.8 million position. Other investors bullish on the company included Moon Capital, D E Shaw, and Almitas Capital. In terms of the portfolio weights assigned to each position EMS Capital allocated the biggest weight to Adecoagro SA (NYSE:AGRO), around 5.28% of its 13F portfolio. Almitas Capital is also relatively very bullish on the stock, dishing out 4.31 percent of its 13F equity portfolio to AGRO.

Because Adecoagro SA (NYSE:AGRO) has witnessed bearish sentiment from hedge fund managers, logic holds that there were a few money managers who sold off their positions entirely last quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.6 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund cut about $0.1 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Adecoagro SA (NYSE:AGRO) but similarly valued. These stocks are The Chefs Warehouse, Inc (NASDAQ:CHEF), Fluidigm Corporation (NASDAQ:FLDM), Poseida Therapeutics, Inc. (NASDAQ:PSTX), trivago N.V. (NASDAQ:TRVG), ACCO Brands Corporation (NYSE:ACCO), Summit Hotel Properties Inc (NYSE:INN), and Aerie Pharmaceuticals Inc (NASDAQ:AERI). This group of stocks’ market caps are closest to AGRO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHEF 19 86707 5
FLDM 27 152829 7
PSTX 12 69861 12
TRVG 8 48998 1
ACCO 14 25385 2
INN 9 8195 1
AERI 15 96347 -8
Average 14.9 69760 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $142 million in AGRO’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand trivago N.V. (NASDAQ:TRVG) is the least popular one with only 8 bullish hedge fund positions. Adecoagro SA (NYSE:AGRO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AGRO is 17.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on AGRO as the stock returned 36% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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