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Is Armstrong Flooring, Inc. (AFI) A Good Stock To Buy?

Nina Todic

We at Insider Monkey have gone over 738 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Armstrong Flooring, Inc. (NYSE:AFI) based on that data.

Armstrong Flooring, Inc. (NYSE:AFI) has experienced a decrease in hedge fund interest lately. AFI was in 12 hedge funds' portfolios at the end of March. There were 13 hedge funds in our database with AFI positions at the end of the previous quarter. Our calculations also showed that afi isn't among the 30 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeff Ubben VALUEACT CAPITAL

We're going to review the new hedge fund action encompassing Armstrong Flooring, Inc. (NYSE:AFI).

Hedge fund activity in Armstrong Flooring, Inc. (NYSE:AFI)

At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards AFI over the last 15 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.

No of Hedge Funds with AFI Positions

The largest stake in Armstrong Flooring, Inc. (NYSE:AFI) was held by ValueAct Capital, which reported holding $62.8 million worth of stock at the end of March. It was followed by Nantahala Capital Management with a $27.6 million position. Other investors bullish on the company included GAMCO Investors, Ancora Advisors, and D E Shaw.

Judging by the fact that Armstrong Flooring, Inc. (NYSE:AFI) has experienced a decline in interest from hedge fund managers, logic holds that there were a few money managers that decided to sell off their full holdings last quarter. It's worth mentioning that Noam Gottesman's GLG Partners said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising close to $2.6 million in stock, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors was right behind this move, as the fund cut about $1.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Armstrong Flooring, Inc. (NYSE:AFI). We will take a look at Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), Carriage Services, Inc. (NYSE:CSV), Civeo Corporation (NYSE:CVEO), and MediciNova, Inc. (NASDAQ:MNOV). This group of stocks' market values match AFI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNST,8,60492,0 CSV,8,33703,-1 CVEO,14,146012,1 MNOV,3,3585,1 Average,8.25,60948,0.25 [/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 $61 million. That figure was $142 million in AFI's case. Civeo Corporation (NYSE:CVEO) is the most popular stock in this table. On the other hand MediciNova, Inc. (NASDAQ:MNOV) is the least popular one with only 3 bullish hedge fund positions. Armstrong Flooring, Inc. (NYSE:AFI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AFI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AFI were disappointed as the stock returned -21.3% during the same 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 13 of these stocks already outperformed the market so far in Q2.

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

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