We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on AGCO Corporation (NYSE:AGCO).
Is AGCO Corporation (NYSE:AGCO) a buy here? The best stock pickers are getting more bullish. The number of long hedge fund positions improved by 1 lately. Our calculations also showed that AGCO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the fresh hedge fund action encompassing AGCO Corporation (NYSE:AGCO).
How have hedgies been trading AGCO Corporation (NYSE:AGCO)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in AGCO over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in AGCO Corporation (NYSE:AGCO). AQR Capital Management has a $91.5 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Lee Ainslie of Maverick Capital, with a $60.5 million position; 0.9% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ian Simm’s Impax Asset Management and Clint Murray’s Lodge Hill Capital. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to AGCO Corporation (NYSE:AGCO), around 5.34% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, setting aside 0.88 percent of its 13F equity portfolio to AGCO.
Now, key money managers have been driving this bullishness. Lodge Hill Capital, managed by Clint Murray, initiated the most valuable position in AGCO Corporation (NYSE:AGCO). Lodge Hill Capital had $20 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Qing Li’s Sciencast Management, Peter Muller’s PDT Partners, and Hoon Kim’s Quantinno Capital.
Let’s also examine hedge fund activity in other stocks similar to AGCO Corporation (NYSE:AGCO). We will take a look at Hudson Pacific Properties Inc (NYSE:HPP), Haemonetics Corporation (NYSE:HAE), Stericycle Inc (NASDAQ:SRCL), and Quanta Services Inc (NYSE:PWR). This group of stocks’ market values are closest to AGCO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPP | 19 | 276484 | -8 |
| HAE | 33 | 596381 | 8 |
| SRCL | 24 | 832122 | 4 |
| PWR | 44 | 958990 | 12 |
| Average | 30 | 665994 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $666 million. That figure was $303 million in AGCO’s case. Quanta Services Inc (NYSE:PWR) is the most popular stock in this table. On the other hand Hudson Pacific Properties Inc (NYSE:HPP) is the least popular one with only 19 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. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately AGCO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AGCO investors were disappointed as the stock returned -42.3% during the same time period 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 Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
