Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Argan, Inc. (NYSE:AGX) was in 17 hedge funds’ portfolios at the end of September. AGX shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. There were 13 hedge funds in our database with AGX positions at the end of the previous quarter. At the end of this article we will also compare AGX to other stocks including FelCor Lodging Trust Incorporated (NYSE:FCH), Cavco Industries, Inc. (NASDAQ:CVCO), and Eros International plc (NYSE:EROS) to get a better sense of its popularity.
Follow Argan Inc (NYSE:AGX)
Follow Argan Inc (NYSE:AGX)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What does the smart money think about Argan, Inc. (NYSE:AGX)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 31% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards AGX over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in Argan, Inc. (NYSE:AGX). Renaissance Technologies has a $55.3 million position in the stock. The second most bullish fund manager is Huber Capital Management, led by Joe Huber, which holds a $11.2 million position. Some other peers that hold long positions contain Joel Greenblatt’s Gotham Asset Management, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were breaking ground themselves. Welch Capital Partners, led by Leighton Welch, established the most valuable position in Argan, Inc. (NYSE:AGX). Welch Capital Partners had $6.8 million invested in the company at the end of the quarter. Richard Driehaus’ Driehaus Capital also initiated a $5.6 million position during the quarter. The other funds with brand new AGX positions are Chuck Royce’s Royce & Associates, George Hall’s Clinton Group, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Argan, Inc. (NYSE:AGX) but similarly valued. We will take a look at FelCor Lodging Trust Incorporated (NYSE:FCH), Cavco Industries, Inc. (NASDAQ:CVCO), Eros International plc (NYSE:EROS), and Noble Midstream Partners LP (NYSE:NBLX). This group of stocks’ market values resemble AGX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCH | 17 | 122725 | -4 |
| CVCO | 13 | 166370 | -3 |
| EROS | 8 | 40946 | 1 |
| NBLX | 4 | 26092 | 4 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $108 million in AGX’s case. FelCor Lodging Trust Incorporated (NYSE:FCH) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NYSE:NBLX) is the least popular one with only 4 bullish hedge fund positions. Argan, Inc. (NYSE:AGX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FCH might be a better candidate to consider taking a long position in.
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