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Hedge Funds Are Betting On Avon Products, Inc. (AVP)

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small-cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think of small-cap stocks. In this article, we take a closer look at Avon Products, Inc. (NYSE:AVP) from the perspective of these elite funds.

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Is Avon Products, Inc. (NYSE:AVP) going to take off soon? The best stock pickers are turning bullish. The number of long hedge fund positions rose by four recently. AVP was in 30 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with AVP holdings at the end of the previous quarter.

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To most investors, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are more than 8,000 funds trading at present, experts at Insider Monkey, a website specializing in hedge funds, hone in on the top tier of this group, around 700 funds. These investment experts oversee the bulk of all hedge funds’ total asset base, and by following their finest equity investments, Insider Monkey has brought to light a few investment strategies that have historically defeated the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in its back tests.

With all of this in mind, let’s take a look at the key action surrounding Avon Products, Inc. (NYSE:AVP).

How are hedge funds trading Avon Products, Inc. (NYSE:AVP)?

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long in this stock, a rise of 15% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly.

When looking at the hedgies followed by Insider Monkey, Yacktman Asset Management, managed by Donald Yacktman, holds the number one position in Avon Products, Inc. (NYSE:AVP). Yacktman Asset Management has a $123.8 million position in the stock, comprising 0.8% of its 13F portfolio. The second-most bullish hedge fund manager is Gotham Asset Management, led by Joel Greenblatt, holding a $34.2 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Wallace Weitz’s Wallace R. Weitz & Co., Israel Englander’s Millennium Management, and Thomas Ellis and Todd Hammer’s North Run Capital.

As industrywide interest jumped, key hedge funds were breaking ground themselves. North Run Capital created the most valuable position in Avon Products, Inc. (NYSE:AVP), as it had $11.5 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $6.7 million position during the quarter. The other funds with brand new AVP positions include David Costen Haley’s HBK Investments, and Nick Niell’s Arrowgrass Capital Partners.

Let’s check out hedge fund activity in other stocks similar to Avon Products, Inc. (NYSE:AVP). These stocks are Flow International Corporation (NASDAQ:FLOW), Ophthotech Corp (NASDAQ:OPHT), Mpg Office Trust Inc (NYSE:MPG), and Gamco Investors Inc. (NYSE:GBL). All of these stocks’ market caps are similar to AVP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLOW 24 172307 24
OPHT 18 270288 -1
MPG 11 100640 3
GBL 11 27425 2

AVP is more popular than all other comparable stocks and investors tracked by Insider Monkey are also are overweight its shares, owning 17.50% of them worth over $246 million. With interest in the stock at high levels and rising, it appears smart money is quite optimistic about the beauty products direct sales company, which has a price-to-sales ratio of just 0.13 and pays out a dividend with an 8.82% yield.

With the results exhibited by our research, everyday investors must always watch hedge fund activity, and Avon Products, Inc. (NYSE:AVP) applies perfectly to this mantra.

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