Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Agilysys, Inc. (NASDAQ:AGYS).
Is Agilysys, Inc. (NASDAQ:AGYS) worth your attention right now? The best stock pickers are getting more optimistic. The number of long hedge fund positions went up by 1 lately. Our calculations also showed that AGYS isn't among the 30 most popular stocks among hedge funds. AGYS was in 14 hedge funds' portfolios at the end of the first quarter of 2019. There were 13 hedge funds in our database with AGYS positions at the end of the previous quarter.
Today there are tons of formulas stock traders put to use to size up publicly traded companies. Two of the less utilized formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top money managers can trounce the market by a healthy amount (see the details here).
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
Let's take a peek at the latest hedge fund action encompassing Agilysys, Inc. (NASDAQ:AGYS).
What does smart money think about Agilysys, Inc. (NASDAQ:AGYS)?
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in AGYS a year ago. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, MAK Capital One was the largest shareholder of Agilysys, Inc. (NASDAQ:AGYS), with a stake worth $43.9 million reported as of the end of March. Trailing MAK Capital One was Archon Capital Management, which amassed a stake valued at $17.9 million. Headlands Capital, Renaissance Technologies, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds were breaking ground themselves. G2 Investment Partners Management, managed by Josh Goldberg, established the most outsized position in Agilysys, Inc. (NASDAQ:AGYS). G2 Investment Partners Management had $6.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $0.2 million position during the quarter.
Let's check out hedge fund activity in other stocks similar to Agilysys, Inc. (NASDAQ:AGYS). We will take a look at Briggs & Stratton Corporation (NYSE:BGG), Ducommun Incorporated (NYSE:DCO), Front Yard Residential Corporation (NYSE:RESI), and Amalgamated Bank (NASDAQ:AMAL). This group of stocks' market valuations are similar to AGYS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BGG,7,8385,-3 DCO,9,57001,-1 RESI,17,25869,4 AMAL,9,54058,3 Average,10.5,36328,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $121 million in AGYS's case. Front Yard Residential Corporation (NYSE:RESI) is the most popular stock in this table. On the other hand Briggs & Stratton Corporation (NYSE:BGG) is the least popular one with only 7 bullish hedge fund positions. Agilysys, Inc. (NASDAQ:AGYS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on AGYS, though not to the same extent, as the stock returned 5.1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.