Is American Vanguard Corp. (AVD) Worthy of Your Portfolio?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze American Vanguard Corp. (NYSE:AVD) from the perspective of those successful funds.

American Vanguard Corp. (NYSE:AVD) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare AVD to other stocks including State National Companies Inc (NASDAQ:SNC), Westwood Holdings Group, Inc. (NYSE:WHG), and Dorchester Minerals LP (NASDAQ:DMLP) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Keeping this in mind, we’re going to take a look at the key action regarding American Vanguard Corp. (NYSE:AVD).

Hedge fund activity in American Vanguard Corp. (NYSE:AVD)

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat from the second quarter of 2016. On the other hand, there were a total of 5 hedge funds with a bullish position in AVD at the beginning of this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jeffrey Bronchick’s Cove Street Capital has the largest position in American Vanguard Corp. (NYSE:AVD), worth close to $17.8 million, comprising 1.9% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, holding a $5.3 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’ AQR Capital Management and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that American Vanguard Corp. (NYSE:AVD) has faced a falling interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Robert B. Gillam’s McKinley Capital Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $2.2 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund cut about $0.4 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as American Vanguard Corp. (NYSE:AVD) but similarly valued. These stocks are State National Companies Inc (NASDAQ:SNC), Westwood Holdings Group, Inc. (NYSE:WHG), Dorchester Minerals LP (NASDAQ:DMLP), and Chuy’s Holdings Inc (NASDAQ:CHUY). This group of stocks’ market values are similar to AVD’s market value.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $31 million in AVD’s case. State National Companies Inc (NASDAQ:SNC) is the most popular stock in this table. On the other hand Dorchester Minerals LP (NASDAQ:DMLP) is the least popular one with only 4 bullish hedge fund positions. American Vanguard Corp. (NYSE:AVD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SNC might be a better candidate to consider taking a long position in.

Disclosure: None