We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards AGCO Corporation (NYSE:AGCO).
Is AGCO a good stock to buy? The smart money was taking a bullish view. The number of long hedge fund bets moved up by 10 recently. AGCO Corporation (NYSE:AGCO) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. Our calculations also showed that AGCO 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.
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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 review the new hedge fund action regarding AGCO Corporation (NYSE:AGCO).
Do Hedge Funds Think AGCO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 48% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in AGCO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of AGCO Corporation (NYSE:AGCO), with a stake worth $85.2 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $51.7 million. Arrowstreet Capital, AQR Capital Management, and Impax 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 Iszo Capital allocated the biggest weight to AGCO Corporation (NYSE:AGCO), around 6.59% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, designating 6.59 percent of its 13F equity portfolio to AGCO.
As aggregate interest increased, some big names were leading the bulls’ herd. Iszo Capital, managed by Brian Sheehy, assembled the most valuable position in AGCO Corporation (NYSE:AGCO). Iszo Capital had $13.2 million invested in the company at the end of the quarter. Javier Velazquez’s Albar Capital also made a $13.2 million investment in the stock during the quarter. The other funds with brand new AGCO positions are Anand Parekh’s Alyeska Investment Group, Noam Gottesman’s GLG Partners, and Louis Bacon’s Moore Global Investments.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AGCO Corporation (NYSE:AGCO) but similarly valued. We will take a look at Hill-Rom Holdings, Inc. (NYSE:HRC), Federal Realty Investment Trust (NYSE:FRT), Syneos Health, Inc. (NASDAQ:SYNH), Bausch Health Companies Inc. (NYSE:BHC), ANGI Homeservices Inc (NASDAQ:ANGI), Hanesbrands Inc. (NYSE:HBI), and Emergent Biosolutions Inc (NYSE:EBS). This group of stocks’ market valuations match AGCO’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $551 million. That figure was $365 million in AGCO’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Federal Realty Investment Trust (NYSE:FRT) is the least popular one with only 14 bullish hedge fund positions. AGCO Corporation (NYSE:AGCO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AGCO is 69.4. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on AGCO as the stock returned 38.8% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.