With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was American Vanguard Corp. (NYSE:AVD).
Is AVD a good stock to buy now? American Vanguard Corp. (NYSE:AVD) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. AVD has seen a decrease in support from the world’s most elite money managers in recent months. There were 10 hedge funds in our database with AVD holdings at the end of June. Our calculations also showed that AVD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a look at the key hedge fund action encompassing American Vanguard Corp. (NYSE:AVD).
Do Hedge Funds Think AVD Is A Good Stock To Buy Now?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVD over the last 21 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of American Vanguard Corp. (NYSE:AVD), with a stake worth $3.7 million reported as of the end of September. Trailing Royce & Associates was Arrowstreet Capital, which amassed a stake valued at $1.8 million. Citadel Investment Group, Renaissance Technologies, and Marshall Wace LLP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to American Vanguard Corp. (NYSE:AVD), around 0.04% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.0031 percent of its 13F equity portfolio to AVD.
Seeing as American Vanguard Corp. (NYSE:AVD) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers who sold off their entire stakes in the third quarter. It’s worth mentioning that David Harding’s Winton Capital Management sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth about $1.9 million in stock. Jeffrey Bronchick’s fund, Cove Street Capital, also cut its stock, about $1.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to American Vanguard Corp. (NYSE:AVD). These stocks are NexTier Oilfield Solutions Inc. (NYSE:NEX), Select Energy Services, Inc. (NYSE:WTTR), Kosmos Energy Ltd (NYSE:KOS), Tristate Capital Holdings Inc (NASDAQ:TSC), SeaSpine Holdings Corp (NASDAQ:SPNE), Haverty Furniture Companies, Inc. (NYSE:HVT), and Bank of Marin Bancorp (NASDAQ:BMRC). All of these stocks’ market caps resemble AVD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $7 million in AVD’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand Bank of Marin Bancorp (NASDAQ:BMRC) is the least popular one with only 7 bullish hedge fund positions. American Vanguard Corp. (NYSE:AVD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AVD is 33.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on AVD as the stock returned 20.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.