Do Hedge Funds Love Avon Products, Inc. (AVP)?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Is Avon Products, Inc. (NYSE:AVP) undervalued? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions inched up by 1 in recent months. AVP was in 26 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with AVP 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 South State Corporation (NASDAQ:SSB), Cooper Tire & Rubber Company (NYSE:CTB), and LendingClub Corp (NYSE:LC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s go over the latest action surrounding Avon Products, Inc. (NYSE:AVP).

What does the smart money think about Avon Products, Inc. (NYSE:AVP)?

Heading into the fourth quarter of 2016, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, up 4% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, 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, Yacktman Asset Management, managed by Donald Yacktman, holds the biggest position in Avon Products, Inc. (NYSE:AVP). According to regulatory filings, the fund has a $129.8 million position in the stock, comprising 1.1% of its 13F portfolio. On Yacktman Asset Management’s heels is Jim Simons’ Renaissance Technologies holding a $48.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism include James A. Mitarotonda’s Barington Capital Group, Gabriel Plotkin’s Melvin Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

As aggregate interest increased, specific money managers have jumped into Avon Products, Inc. (NYSE:AVP) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, created the most valuable position in Avon Products, Inc. (NYSE:AVP). According to regulatory filings, the fund had $30.6 million invested in the company at the end of the quarter. Guy Shahar’s DSAM Partners also initiated a $6 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Mike Vranos’s Ellington, and Robert I. Usdan and Wayne K. Goldstein’s Endicott Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Avon Products, Inc. (NYSE:AVP) but similarly valued. These stocks are South State Corporation (NASDAQ:SSB), Cooper Tire & Rubber Company (NYSE:CTB), LendingClub Corp (NYSE:LC), and Government Properties Income Trust (NYSE:GOV). This group of stocks’ market valuations are similar to AVP’s market valuation.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $375 million in AVP’s case. LendingClub Corp (NYSE:LC) is the most popular stock in this table. On the other hand Government Properties Income Trust (NYSE:GOV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Avon Products, Inc. (NYSE:AVP) 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.

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