Do Hedge Funds Love Agrium Inc. (USA) (AGU)?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Agrium Inc. (USA) (NYSE:AGU) during the quarter below.

Agrium Inc. (USA) was in 20 hedge funds’ portfolios at the end of the third quarter of 2015. AGU investors should be aware of a decrease in enthusiasm from smart money lately. There were 29 hedge funds in our database with AGU positions 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 Fidelity National Financial Inc (NYSE:FNF), FleetCor Technologies, Inc. (NYSE:FLT), and AMETEK, Inc. (NYSE:AME) to gather more data points.

In the eyes of most market participants, hedge funds are seen as unimportant, outdated investment vehicles of years past. While there are over 8000 funds with their doors open today, We look at the moguls of this group, around 700 funds. These investment experts command bulk of all hedge funds’ total asset base, and by keeping track of their highest performing picks, Insider Monkey has spotted several investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s take a gander at the new action encompassing Agrium Inc. (USA) (NYSE:AGU).

Hedge fund activity in Agrium Inc. (USA) (NYSE:AGU)

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the most valuable position in Agrium Inc. (USA) (NYSE:AGU), worth close to $895.3 million, corresponding to 5.2% of its total 13F portfolio. The second largest stake is held by D E Shaw, which holds a $170.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism encompass Daniel Bubis’s Tetrem Capital Management, Cliff Asness’s AQR Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.

Due to the fact that Agrium Inc. (USA) (NYSE:AGU) has witnessed bearish sentiment from the smart money, it’s safe to say that there exists a select few fund managers who sold off their entire stakes heading into Q4. At the top of the heap, Jim Simons’s Renaissance Technologies said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $11.6 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt, also dumped its stock, about $10.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 9 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Agrium Inc. (USA) (NYSE:AGU). We will take a look at Fidelity National Financial Inc (NYSE:FNF), FleetCor Technologies, Inc. (NYSE:FLT), AMETEK, Inc. (NYSE:AME), and Alcoa Inc (NYSE:AA). This group of stocks’ market valuations match AGU’s market valuation.

As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $2,279 million. That figure was $1,183 million in AGU’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand AMETEK, Inc. (NYSE:AME) is the least popular one with only 16 bullish hedge fund positions. Agrium Inc. (USA) (NYSE:AGU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FLT might be a better candidate to consider a long position.