July 21, 2024

Does American Vanguard Corporation (AVD) Offer a Valuable Investment Opportunity?

Investment management company Cove Street Capital recently released its “Small Cap Value Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. In 2023, the fund returned 18.33% compared to 16.93% for the Russell 2000 Index and 15.26% for the Russell 2000 Value Index. The fund returned 8.35% in the fourth quarter compared to 14.03% and 15.26% for the indexes, respectively. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.

In its Q4 2023 investor letter, Cove Street Capital featured stocks such as American Vanguard Corporation (NYSE:AVD). Headquartered in Newport Beach, California, American Vanguard Corporation (NYSE:AVD) develops and markets specialty and agricultural products for crop protection and management. On January 5, 2024, American Vanguard Corporation (NYSE:AVD) stock closed at $10.53 per share. One-month return of American Vanguard Corporation (NYSE:AVD) was 4.67%, and its shares lost 51.90% of their value over the last 52 weeks. American Vanguard Corporation (NYSE:AVD) has a market capitalization of $302.742 million.

Cove Street Capital stated the following regarding American Vanguard Corporation (NYSE:AVD) in its fourth quarter 2023 investor letter:

“We initiated a position in American Vanguard Corporation (NYSE:AVD), a manufacturer, developer, and marketer of crop and plant protection chemicals. American Vanguard is a smaller player in the Agricultural Chemical space that has succeeded in picking off under-loved and sun-setting product lines from the giants of the industry and applying the focus and resources necessary to extract value that was simply “not worth it” for its former owners. We have bought and sold AVD at various points throughout the last decade, but this iteration presents a unique confluence of factors we view as highly favorable.

For starters, the Ag Chem industry is going through the trough of an inventory de-stocking cycle last seen in 2015…except this time around the magnitude is more extreme and the effects are global. The ag value chain includes manufacturers like AVD, who sell to distributors, who then sell to retailers, who then sell to the ultimate growers. During Covid, supply chains were such a mess that the intermediate players in the value chain – distributors and retailers – loaded up on inventory to ensure they could meet grower demand. Once interest rates rose, the cost of carrying all this inventory became a massive drag, and so these intermediate players sold out of the inventory they had but stopped buying from Ag Chem manufacturers like AVD. We are in the part of the cycle where a “new-normal” of inventory levels being established, and at a level far below what we saw in 2020-2022. Ag Chem sales in 2023 got crushed across the board, even as crop-protection end-demand has remained stable…” (Click here to read the full text)


American Vanguard Corporation (NYSE:AVD) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held American Vanguard Corporation (NYSE:AVD) at the end of third quarter which was 13 in the previous quarter.

We discussed American Vanguard Corporation (NYSE:AVD) in another article and shared the list of best small cap agriculture stocks to buy. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.


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Disclosure: None. This article is originally published at Insider Monkey.

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