Were Hedge Funds Right About Piling Into AGCO Corporation (AGCO)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding AGCO Corporation (NYSE:AGCO).

Is AGCO Corporation (NYSE:AGCO) a good investment today? The best stock pickers were in an optimistic mood. The number of bullish hedge fund positions rose by 9 in recent months. AGCO Corporation (NYSE:AGCO) was in 40 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AGCO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Crispin Odey of Odey Asset Management Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 let’s go over the key hedge fund action surrounding AGCO Corporation (NYSE:AGCO).

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

At the end of December, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in AGCO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in AGCO Corporation (NYSE:AGCO), worth close to $106.5 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Renaissance Technologies, with a $60.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Horseman Capital Management allocated the biggest weight to AGCO Corporation (NYSE:AGCO), around 7.98% of its 13F portfolio. Odey Asset Management Group is also relatively very bullish on the stock, designating 7.17 percent of its 13F equity portfolio to AGCO.

Consequently, specific money managers have been driving this bullishness. Odey Asset Management Group, managed by Crispin Odey, assembled the most outsized position in AGCO Corporation (NYSE:AGCO). Odey Asset Management Group had $28 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $21.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Caldwell’s Chiron Investment Management, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AGCO Corporation (NYSE:AGCO) but similarly valued. We will take a look at Acceleron Pharma Inc (NASDAQ:XLRN), Commerce Bancshares, Inc. (NASDAQ:CBSH), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), Churchill Downs Incorporated (NASDAQ:CHDN), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Americold Realty Trust (NYSE:COLD), and Diamondback Energy Inc (NASDAQ:FANG). This group of stocks’ market valuations are closest to AGCO’s market valuation.

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As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $453 million. That figure was $589 million in AGCO’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks AGCO Corporation (NYSE:AGCO) is more popular among hedge funds. Our overall hedge fund sentiment score for AGCO is 90. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on AGCO as the stock returned 41.7% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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