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Is CHD Stock A Buy or Sell?

·6 min read

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Church & Dwight Co., Inc. (NYSE:CHD).

Is CHD stock a buy or sell? Church & Dwight Co., Inc. (NYSE:CHD) was in 38 hedge funds' portfolios at the end of December. The all time high for this statistic is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CHD investors should be aware of an increase in hedge fund sentiment lately. There were 36 hedge funds in our database with CHD holdings at the end of September. Our calculations also showed that CHD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Billionaire Paul Tudor Jones' top 10 stock picks
Billionaire Paul Tudor Jones' top 10 stock picks

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to analyze the key hedge fund action surrounding Church & Dwight Co., Inc. (NYSE:CHD).

Do Hedge Funds Think CHD Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHD over the last 22 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CHD A Good Stock To Buy?
Is CHD A Good Stock To Buy?

More specifically, Fundsmith LLP was the largest shareholder of Church & Dwight Co., Inc. (NYSE:CHD), with a stake worth $491.2 million reported as of the end of December. Trailing Fundsmith LLP was Echo Street Capital Management, which amassed a stake valued at $117.1 million. Arrowstreet Capital, Renaissance Technologies, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fundsmith LLP allocated the biggest weight to Church & Dwight Co., Inc. (NYSE:CHD), around 1.63% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 1.63 percent of its 13F equity portfolio to CHD.

Now, some big names were breaking ground themselves. Fundsmith LLP, managed by Terry Smith, assembled the biggest position in Church & Dwight Co., Inc. (NYSE:CHD). Fundsmith LLP had $491.2 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $20.5 million position during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Paul Tudor Jones's Tudor Investment Corp, and Jonathan Soros's JS Capital.

Let's now take a look at hedge fund activity in other stocks similar to Church & Dwight Co., Inc. (NYSE:CHD). These stocks are MarketAxess Holdings Inc. (NASDAQ:MKTX), MongoDB, Inc. (NASDAQ:MDB), Baker Hughes Company (NYSE:BKR), Kellogg Company (NYSE:K), Telefonica S.A. (NYSE:TEF), Magna International Inc. (NYSE:MGA), and Altice USA, Inc. (NYSE:ATUS). All of these stocks' market caps are similar to CHD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKTX,34,945720,0 MDB,36,2105361,-6 BKR,35,694644,7 K,37,567314,2 TEF,5,9555,0 MGA,38,662388,17 ATUS,56,4475588,-6 Average,34.4,1351510,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $1352 million. That figure was $1131 million in CHD's case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. Church & Dwight Co., Inc. (NYSE:CHD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHD is 69.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately CHD wasn't nearly as popular as these 30 stocks and hedge funds that were betting on CHD were disappointed as the stock returned -4.5% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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