Monday, November 14, 2016

Sowing the Seeds of Success

American Vanguard Corporation     [AVD]



I was flipping through some articles this past weekend and came across one written about American Vanguard and I thought I'd look into it. The first thing I noticed about the chart was the hammer,

hanging man?
[daily]
hammer 
[weekly]
obviously. But this time there will be more to it than just the candlestick pattern. Before I get into that some more...the candlestick pattern. Last trading week the company ended the week +5.61%. The week before that was the hammer pattern I have come to love so very, very much. Based on that there is still some room for growth. I'm not as bullish in the short run on this one as other based on the daily chart. It isn't very strong, but one could argue that a hanging man pattern happened and this next week will be in the red. This wouldn't be a weekly stock pick of mine, more of a long term buy-and-hold mentality. With this flawless transition, let's move into why I like this bad boy over the long term. 



     President elect Trump won't impact the result of the stock in the long term. Apparently we have had 3 years in a row where corn and soybeans are a bumper crop (unusually high harvest) and prices have been moved lower (Credit: David Englander in "Planting a Comeback" writing for Barron's). The inevitable will be that the crops will produce normal amounts of crop and therefore the prices of each will begin to rise. Also, looking at Finviz and what they have regarding their EPS is a sight for sore eyes. In the next year analysts have predicted a +52% gain. Over the next 5 years, +20%. That bodes very well for the company as a whole and ultimately their shareholders. 


     It is currently 81.20% institutionally owned. Meaning, of ALL the shares outstanding for AVD, roughly 80% are held by ETFs, mutual funds, investment firms and all other larger banking corporations. That's a good thing. The big institutions believe in the company and the stock moving forward as a place for safe growth.


     They had their Q3 earnings call on the 2nd and it went very well. The next day the stock saw a significant increase in its price from the positivity of the call. I will be honest in that I haven't done a whole lot of research into what was said. It could have been a great third quarter and/or it could be them looking positive in the future. More than likely they are positioned well for future growth and people believe what they said and drove the price up. Another possibility is what was said about the future outlook of corn and corn prices for the rest of this year and into 2017. 

     Looking at the stockchart, there are a couple of things to note as well. Since the earnings were reported there has been a favorable rise in the price. On Thursday it hopped above the 50 day moving average. In a lot of situations, that is a good thing. Continued growth for the stock for the foreseeable future.


The RSI is starting to trend upward. It's sitting right in the middle of oversold and overbought so the trend up is a good sign for the next weeks to months. Also, the MACD is clearly starting to turn up towards the red line. Whether it crosses it remains to be seen. Looking below that at the stochastic is a bullish sign. The black line crossed the red line probably early last week at a very low number indicating an uptrend with some great upside. 


     Like I said earlier. I like this stock to go along with the buy and hold mentality because of the possible long term upside. It's a stock that is directly linked to agriculture. When the prices start to go up, people still buy food. It's a necessity and then this guy might see some daylight. I'm not recommending it to anyone because I have no grounds to do so, I just like it for myself and am letting anyone know why. 

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