Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of American Vanguard Corp. (NYSE:AVD) based on that data.
American Vanguard Corp. (NYSE:AVD) was in 8 hedge funds’ portfolios at the end of September. AVD investors should be aware of a decrease in hedge fund interest of late. There were 11 hedge funds in our database with AVD holdings at the end of the previous quarter. 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 below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Jeffrey Bronchick of Cove Street Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the new hedge fund action regarding American Vanguard Corp. (NYSE:AVD).
How are hedge funds trading American Vanguard Corp. (NYSE:AVD)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in AVD a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in American Vanguard Corp. (NYSE:AVD) was held by Cove Street Capital, which reported holding $14 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $7.7 million position. Other investors bullish on the company included Royce & Associates, Luminus Management, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to American Vanguard Corp. (NYSE:AVD), around 1.96% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to AVD.
Because American Vanguard Corp. (NYSE:AVD) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who were dropping their entire stakes heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $1.5 million in stock. David Harding’s fund, Winton Capital Management, also dumped its stock, about $0.4 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to American Vanguard Corp. (NYSE:AVD). These stocks are NRC Group Holdings Corp. (NYSE:NRCG), Napco Security Technologies Inc (NASDAQ:NSSC), Waterstone Financial, Inc. (NASDAQ:WSBF), and American Software, Inc. (NASDAQ:AMSWA). This group of stocks’ market values are closest to AVD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NRCG | 13 | 17546 | 5 |
| NSSC | 11 | 22143 | 6 |
| WSBF | 17 | 79862 | 2 |
| AMSWA | 12 | 56641 | 6 |
| Average | 13.25 | 44048 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $28 million in AVD’s case. Waterstone Financial, Inc. (NASDAQ:WSBF) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks American Vanguard Corp. (NYSE:AVD) is even less popular than NSSC. Hedge funds dodged a bullet by taking a bearish stance towards AVD. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AVD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AVD investors were disappointed as the stock returned 2.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
