Why Clifton Robbins and Other Hedge Funds Are Bullish On This Manufacturer of Agricultural Equipment

Clifton S. Robbins is taking advantage of the recent market sell-off to buy AGCO Corporation (NYSE: AGCO) shares at a low. In a newly-amended filing with the Securities and Exchange Commission, Robbins’ fund, Blue Harbour Group, has disclosed an increase in its holding to approximately 6.52 million shares, up from 4.68 million shares reported in its latest 13F filing. As a result, Robbins now has control over 7.5% of the AGCO’s common stock, with the hedge fund industry having mixed sentiments towards the stock.

An avid supporter of activist investing, Clifton Robbins stands out from the likes of Carl Icahn or Bill Ackman with his “friendly” approach to activism. He invests mainly in small- and mid-cap companies, whose management is open to collaboration, and has never engaged in a proxy contest or other aggressive tactics to increase his influence. Blue Harbour Group manages two funds: Blue Harbour Strategic Value Partners, a long/short fund, and the long-only Blue Harbour Active Ownership Partners. At the end of the second quarter, Blue Harbour reported an equity portfolio with a value of $3.42 billion, with 37% of the capital invested in technology stocks, while 25% were pledged to the industrial sector. AGCO Corporation (NYSE:AGCO), the subject of this article, is among the top five holdings of Clifton Robbins, who has increased his stake in the company by 23% during the second quarter. Rackspace Hosting, Inc. (NYSE:RAX) is still his top equity bet, with Blue Harbour holding 10.3 million shares at the end of June. Akamai Technologies, Inc. (NASDAQ:AKAM) is one stock Robbins decided to trim exposure to, cutting his stake by 10% to 4.93 million shares, while his investment in BWX Technologies Inc (NYSE:BWXT) has remained unchanged at 10.5 million shares as of June 30.

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According to our database, 16 hedge funds held long positions in AGCO Corporation at the end of the second quarter, down from 20 funds at the end of March. Their cumulative holding of the stock accounts for roughly 11.5% of the company’s common stock, with the total value of their positions increasing by more than 44% during the second quarter to $591 million. Ken Griffin of Citadel Investment Group shares Robbins’ optimism regarding the prospects of AGCO, having boosted his stake in the company by 72% to 905,772 shares by the end of June. First Pacific Advisors LLC, run by Robert Rodriguez and Steven Romick, has reported a 3% increase in its holding of AGCO stock to 1.12 million shares during the second quarter. Martin Whitman, on the other hand, decided to slightly decrease his stake, leaving his fund, Third Avenue Management, with 1.9 million shares, according to its latest 13F filing.

A manufacturer of agricultural equipment, AGCO Corporation (NYSE:AGCO) stock managed to stage an impressive rally during the first seven months, rising by 28% before the recent market sell-off wiped it all and returned the stock to the $45.5 level. The company has a market cap of approximately $4 billion and pays an annual dividend of $0.47, providing shareholders with a modest 1% yield. The company’s second-quarter revenues came in at $2.07 billion, down by 25% year-over-year, while earnings per share narrowed to $1.25 from the $1.77 reported a year ago. Analysts expect revenues to continue decreasing during the current quarter, eyeing revenues of $1.78 billion and earnings of $0.53 per share. The company’s trailing Price to Earnings (P/E) ratio of 14.xx is in line with the industry average of 14.60, with analysts from Goldman Sachs have a ‘Neutral’ rating on the stock as of July 2015 and a price target of $54.

Disclosure: none.