Should You Buy Argan, Inc. (AGX)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Argan, Inc. (NYSE:AGX) to find out whether it was one of their high conviction long-term ideas.

Argan, Inc. (NYSE:AGX) was in 17 hedge funds’ portfolios at the end of September. AGX shareholders have witnessed an increase in hedge fund sentiment of late. There were 15 hedge funds in our database with AGX holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Harmonic Inc (NASDAQ:HLIT), GasLog Partners LP (NYSE:GLOP), and Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) to gather more data points.

To the average investor there are a lot of gauges stock market investors use to grade publicly traded companies. Two of the best gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite investment managers can outperform the S&P 500 by a significant margin (see the details here).

Keeping this in mind, we’re going to take a look at the new action surrounding Argan, Inc. (NYSE:AGX).

How have hedgies been trading Argan, Inc. (NYSE:AGX)?

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 13% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in Argan, Inc. (NYSE:AGX), worth close to $27.3 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Huber Capital Management, led by Joe Huber, holding a $16.4 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Cliff Asness’s AQR Capital Management, David Brown’s Hawk Ridge Management and Richard Driehaus’s Driehaus Capital.