Where Do Hedge Funds Stand On AgroFresh Solutions Inc (AGFS)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of AgroFresh Solutions Inc (NASDAQ:AGFS) based on that data.

Is AgroFresh Solutions Inc (NASDAQ:AGFS) the right pick for your portfolio? Hedge funds were in a pessimistic mood. The number of long hedge fund bets went down by 1 lately. AgroFresh Solutions Inc (NASDAQ:AGFS) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 23. Our calculations also showed that AGFS 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 4 hedge funds in our database with AGFS positions at the end of the second quarter.

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 10 most profitable companies in the world 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. Keeping this in mind we’re going to view the fresh hedge fund action surrounding AgroFresh Solutions Inc (NASDAQ:AGFS).

Hedge fund activity in AgroFresh Solutions Inc (NASDAQ:AGFS)

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in AGFS over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in AgroFresh Solutions Inc (NASDAQ:AGFS), worth close to $1.2 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by David Harding of Winton Capital Management, with a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to AgroFresh Solutions Inc (NASDAQ:AGFS), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0012 percent of its 13F equity portfolio to AGFS.

Because AgroFresh Solutions Inc (NASDAQ:AGFS) has faced declining sentiment from hedge fund managers, logic holds that there is a sect of funds that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest investment of the 750 funds followed by Insider Monkey, valued at an estimated $0.1 million in stock, and Highbridge Capital Management was right behind this move, as the fund cut about $0 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AgroFresh Solutions Inc (NASDAQ:AGFS) but similarly valued. These stocks are MMA Capital Holdings Inc. (NASDAQ:MMAC), Select Bancorp, Inc. (NASDAQ:SLCT), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), Platinum Group Metals Limited (NYSE:PLG), Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), NACCO Industries, Inc. (NYSE:NC), and Evogene Ltd. (NASDAQ:EVGN). All of these stocks’ market caps match AGFS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MMAC 3 4082 0
SLCT 5 10900 0
ACRX 5 6850 2
PLG 3 3394 -1
CVLY 4 14459 0
NC 4 6624 -1
EVGN 2 2543 1
Average 3.7 6979 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.7 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $1 million in AGFS’s case. Select Bancorp, Inc. (NASDAQ:SLCT) is the most popular stock in this table. On the other hand Evogene Ltd. (NASDAQ:EVGN) is the least popular one with only 2 bullish hedge fund positions. AgroFresh Solutions Inc (NASDAQ:AGFS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AGFS is 24.6. 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. 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 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 28.1% in 2020 through November 23rd and surpassed the market again by 15.4 percentage points. Unfortunately AGFS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AGFS investors were disappointed as the stock returned -5.3% since the end of September (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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