Should I Avoid AGCO Corporation (AGCO)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about AGCO Corporation (NYSE:AGCO).

AGCO Corporation (NYSE:AGCO) was in 24 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 40. AGCO shareholders have witnessed a decrease in hedge fund sentiment of late. There were 38 hedge funds in our database with AGCO positions at the end of the second quarter. Our calculations also showed that AGCO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the key hedge fund action encompassing AGCO Corporation (NYSE:AGCO).

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

At third quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in AGCO a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is AGCO A Good Stock To Buy?

The largest stake in AGCO Corporation (NYSE:AGCO) was held by AQR Capital Management, which reported holding $90.5 million worth of stock at the end of September. It was followed by Shellback Capital with a $43.8 million position. Other investors bullish on the company included Millennium Management, Impax Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Chiron Investment Management allocated the biggest weight to AGCO Corporation (NYSE:AGCO), around 3.38% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, earmarking 2.55 percent of its 13F equity portfolio to AGCO.

Seeing as AGCO Corporation (NYSE:AGCO) has witnessed bearish sentiment from the smart money, it’s easy to see that there exists a select few fund managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Robert Bishop’s Impala Asset Management dumped the largest stake of all the hedgies watched by Insider Monkey, comprising close to $14.5 million in stock, and John Horseman’s Horseman Capital Management was right behind this move, as the fund said goodbye to about $11.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 14 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to AGCO Corporation (NYSE:AGCO). These stocks are Federal Realty Investment Trust (NYSE:FRT), Credit Acceptance Corp. (NASDAQ:CACC), Jefferies Financial Group Inc. (NYSE:JEF), Alcoa Corporation (NYSE:AA), Mirati Therapeutics, Inc. (NASDAQ:MRTX), West Fraser Timber Co. Ltd. (NYSE:WFG), and XPO Logistics Inc (NYSE:XPO). This group of stocks’ market valuations resemble AGCO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FRT 21 165520 5
CACC 25 854969 5
JEF 37 684099 8
AA 44 1746130 0
MRTX 46 2796323 -9
WFG 22 513697 -3
XPO 49 1833910 -8
Average 34.9 1227807 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $1228 million. That figure was $332 million in AGCO’s case. XPO Logistics Inc (NYSE:XPO) 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 21 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 14.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately AGCO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AGCO investors were disappointed as the stock returned -1.8% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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