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Is AgroFresh Solutions Inc (AGFS) Going to Burn These Hedge Funds?

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2019. What do these smart investors think about AgroFresh Solutions Inc (NASDAQ:AGFS)?

Is AgroFresh Solutions Inc (NASDAQ:AGFS) going to take off soon? Hedge funds are becoming more confident. The number of bullish hedge fund bets inched up by 2 lately. Our calculations also showed that AGFS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AGFS was in 8 hedge funds' portfolios at the end of September. There were 6 hedge funds in our database with AGFS positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_189632" align="aligncenter" width="450"] David Harding of Winton Capital Management[/caption]

David Harding

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to check out the recent hedge fund action surrounding AgroFresh Solutions Inc (NASDAQ:AGFS).

Hedge fund activity in AgroFresh Solutions Inc (NASDAQ:AGFS)

At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGFS over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Millennium Management, managed by Israel Englander, holds the largest position in AgroFresh Solutions Inc (NASDAQ:AGFS). Millennium Management has a $0.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Millennium Management's heels is David Harding of Winton Capital Management, with a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Renaissance Technologies, David E. Shaw's D E Shaw and Donald Sussman's Paloma Partners. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to AgroFresh Solutions Inc (NASDAQ:AGFS), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to AGFS.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the most outsized position in AgroFresh Solutions Inc (NASDAQ:AGFS). Winton Capital Management had $0.4 million invested in the company at the end of the quarter.

Let's now review hedge fund activity in other stocks similar to AgroFresh Solutions Inc (NASDAQ:AGFS). These stocks are Montage Resources Corporation (NYSE:MR), Marchex, Inc. (NASDAQ:MCHX), Capitala Finance Corp (NASDAQ:CPTA), and Atlanticus Holdings Corp (NASDAQ:ATLC). This group of stocks' market valuations resemble AGFS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MR,12,14558,-3 MCHX,17,21360,0 CPTA,2,1591,-1 ATLC,2,3385,0 Average,8.25,10224,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $2 million in AGFS's case. Marchex, Inc. (NASDAQ:MCHX) is the most popular stock in this table. On the other hand Capitala Finance Corp (NASDAQ:CPTA) is the least popular one with only 2 bullish hedge fund positions. AgroFresh Solutions Inc (NASDAQ:AGFS) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AGFS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AGFS investors were disappointed as the stock returned -9.9% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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