Is AGFS Stock A Buy Here?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards AgroFresh Solutions Inc (NASDAQ:AGFS).

Is AGFS stock a buy? AgroFresh Solutions Inc (NASDAQ:AGFS) has seen an increase in hedge fund interest lately. AgroFresh Solutions Inc (NASDAQ:AGFS) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 23. Our calculations also showed that AGFS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Charles Davidson of Wexford Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to check out the latest hedge fund action surrounding AgroFresh Solutions Inc (NASDAQ:AGFS).

Do Hedge Funds Think AGFS Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 400% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in AGFS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in AgroFresh Solutions Inc (NASDAQ:AGFS), worth close to $1.5 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Invenomic Capital Management, managed by Ali Motamed, which holds a $0.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass Israel Englander’s Millennium Management, Charles Davidson and Joseph Jacobs’s Wexford Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to AgroFresh Solutions Inc (NASDAQ:AGFS), around 0.08% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to AGFS.

As industrywide interest jumped, specific money managers have been driving this bullishness. Invenomic Capital Management, managed by Ali Motamed, created the most valuable position in AgroFresh Solutions Inc (NASDAQ:AGFS). Invenomic Capital Management had $0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.1 million position during the quarter. The following funds were also among the new AGFS investors: Charles Davidson and Joseph Jacobs’s Wexford Capital, Ken Griffin’s Citadel Investment Group, and John A. Levin’s Levin Capital Strategies.

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. We will take a look at RYB Education, Inc. (NYSE:RYB), Forum Energy Technologies Inc (NYSE:FET), Magal Security Systems Ltd. (NASDAQ:MAGS), Frequency Electronics, Inc. (NASDAQ:FEIM), Actinium Pharmaceuticals Inc (NYSE:ATNM), Pro-Dex, Inc. (NASDAQ:PDEX), and Celsion Corporation (NASDAQ:CLSN). This group of stocks’ market caps are closest to AGFS’s market cap.

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As you can see these stocks had an average of 2.1 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $2 million in AGFS’s case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Actinium Pharmaceuticals Inc (NYSE:ATNM) is the least popular one with only 1 bullish hedge fund positions. AgroFresh Solutions Inc (NASDAQ:AGFS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AGFS is 65.5. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately AGFS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AGFS were disappointed as the stock returned 3.5% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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