American Vanguard Corp. (AVD): Are Hedge Funds Right About This Stock?

Is American Vanguard Corp. (NYSE:AVD) a superb stock to buy now? Prominent investors are getting less bullish. The number of long hedge fund positions decreased by 4 in recent months.

In the eyes of most investors, hedge funds are seen as slow, outdated financial vehicles of years past. While there are more than 8000 funds trading at the moment, we at Insider Monkey choose to focus on the elite of this group, around 450 funds. It is widely believed that this group oversees most of all hedge funds’ total capital, and by monitoring their best equity investments, we have deciphered a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as key, positive insider trading sentiment is a second way to break down the investments you’re interested in. As the old adage goes: there are a number of stimuli for an executive to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the valuable potential of this tactic if you understand what to do (learn more here).

Consequently, it’s important to take a glance at the latest action regarding American Vanguard Corp. (NYSE:AVD).

How are hedge funds trading American Vanguard Corp. (NYSE:AVD)?

Heading into 2013, a total of 9 of the hedge funds we track were bullish in this stock, a change of -31% from the third quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully.

Of the funds we track, Jim Simons’s Renaissance Technologies had the biggest position in American Vanguard Corp. (NYSE:AVD), worth close to $15.7 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Richard Driehaus of Driehaus Capital, with a $4.7 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedgies that are bullish include Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Due to the fact that American Vanguard Corp. (NYSE:AVD) has faced declining sentiment from the smart money, it’s easy to see that there is a sect of funds who sold off their entire stakes last quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors dropped the largest stake of the “upper crust” of funds we track, valued at close to $1.3 million in stock.. Israel Englander’s fund, Millennium Management, also dumped its stock, about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds last quarter.

What have insiders been doing with American Vanguard Corp. (NYSE:AVD)?

Bullish insider trading is most useful when the primary stock in question has experienced transactions within the past six months. Over the latest half-year time frame, American Vanguard Corp. (NYSE:AVD) has seen 1 unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to American Vanguard Corp. (NYSE:AVD). These stocks are Terra Nitrogen Company, L.P. (NYSE:TNH), Scotts Miracle-Gro Co (NYSE:SMG), CVR Partners LP (NYSE:UAN), Intrepid Potash, Inc. (NYSE:IPI), and Rentech Nitrogen Partners LP (NYSE:RNF). This group of stocks are the members of the agricultural chemicals industry and their market caps are similar to AVD’s market cap.