At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Agilysys, Inc. (NASDAQ:AGYS) makes for a good investment right now.
Is AGYS a good stock to buy now? Hedge funds were turning less bullish. The number of bullish hedge fund positions went down by 2 in recent months. Agilysys, Inc. (NASDAQ:AGYS) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. Our calculations also showed that AGYS 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). There were 19 hedge funds in our database with AGYS positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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’ 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 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.
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 view the fresh hedge fund action regarding Agilysys, Inc. (NASDAQ:AGYS).
Do Hedge Funds Think AGYS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in AGYS over the last 21 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, MAK Capital One was the largest shareholder of Agilysys, Inc. (NASDAQ:AGYS), with a stake worth $99.9 million reported as of the end of September. Trailing MAK Capital One was Nine Ten Partners, which amassed a stake valued at $32.6 million. Renaissance Technologies, Royce & Associates, and ACK Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MAK Capital One allocated the biggest weight to Agilysys, Inc. (NASDAQ:AGYS), around 41.97% of its 13F portfolio. Nine Ten Partners is also relatively very bullish on the stock, designating 6.77 percent of its 13F equity portfolio to AGYS.
Since Agilysys, Inc. (NASDAQ:AGYS) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers that elected to cut their full holdings by the end of the third quarter. Interestingly, Richard Driehaus’s Driehaus Capital sold off the largest position of the “upper crust” of funds watched by Insider Monkey, valued at about $4.6 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also dropped its stock, about $1.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Agilysys, Inc. (NASDAQ:AGYS) but similarly valued. These stocks are Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), Nicolet Bankshares Inc. (NASDAQ:NCBS), Athira Pharma, Inc. (NASDAQ:ATHA), RPC, Inc. (NYSE:RES), Kraton Corporation (NYSE:KRA), Merchants Bancorp (NASDAQ:MBIN), and Loral Space & Communications Inc (NASDAQ:LORL). This group of stocks’ market caps are similar to AGYS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $185 million in AGYS’s case. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is the most popular stock in this table. On the other hand Nicolet Bankshares Inc. (NASDAQ:NCBS) is the least popular one with only 1 bullish hedge fund positions. Agilysys, Inc. (NASDAQ:AGYS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AGYS is 63.2. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on AGYS as the stock returned 58.2% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.