Should You Buy Calavo Growers, Inc. (CVGW)?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Calavo Growers, Inc. (NASDAQ:CVGW) investors should be aware of an increase in hedge fund interest of late. CVGW was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. There were 16 hedge funds in our database with CVGW positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Lindsay Corporation (NYSE:LNN), Mitel Networks Corporation (NASDAQ:MITL), and Glaukos Corp (NYSE:GKOS) to gather more data points.

At the moment there are dozens of methods investors have at their disposal to assess stocks. A pair of the best methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best fund managers can outpace the S&P 500 by a very impressive amount (see the details here).

With all of this in mind, we’re going to check out the new action surrounding Calavo Growers, Inc. (NASDAQ:CVGW).

How have hedgies been trading Calavo Growers, Inc. (NASDAQ:CVGW)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Grossman and Glen Schneider’s SG Capital Management has the number one position in Calavo Growers, Inc. (NASDAQ:CVGW), worth close to $9.1 million, amounting to 2% of its total 13F portfolio. The second largest stake is held by Driehaus Capital, led by Richard Driehaus, holding a $4.5 million position; 0.2% of its 13F portfolio is allocated to the stock. The remaining members of the smart money that are bullish include Steve Cohen’s Point72 Asset Management, Jim Simons’ Renaissance Technologies and Joseph A. Jolson’s Harvest Capital Strategies.

As one would reasonably expect, specific money managers were breaking ground themselves. Bryn Mawr Capital, managed by Ken Gray and Steve Walsh, established the most valuable position in Calavo Growers, Inc. (NASDAQ:CVGW). Bryn Mawr Capital had $0.7 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $0.4 million investment in the stock during the quarter. The other funds with brand new CVGW positions are Joel Greenblatt’s Gotham Asset Management, Paul Tudor Jones’ Tudor Investment Corp, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to Calavo Growers, Inc. (NASDAQ:CVGW). We will take a look at Lindsay Corporation (NYSE:LNN), Mitel Networks Corporation (NASDAQ:MITL), Glaukos Corp (NYSE:GKOS), and GasLog Ltd (NYSE:GLOG). This group of stocks’ market values are similar to CVGW’s market value.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $76 million, compared to $31 million in CVGW’s case. GasLog Ltd (NYSE:GLOG) is the most popular stock in this table, as 16 funds held its shares at the end of the third quarter. On the other hand Glaukos Corp (NYSE:GKOS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks, Calavo Growers, Inc. (NASDAQ:CVGW) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.