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In this article you are going to find out whether hedge funds think Colgate-Palmolive Company (NYSE:CL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is CL stock a buy or sell? Colgate-Palmolive Company (NYSE:CL) shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. Colgate-Palmolive Company (NYSE:CL) was in 46 hedge funds' portfolios at the end of December. The all time high for this statistic is 53. Our calculations also showed that CL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the 21st century investor’s toolkit there are numerous metrics stock market investors have at their disposal to grade their holdings. Some of the best metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite money managers can outperform the broader indices by a healthy amount (see the details here).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind let's take a gander at the recent hedge fund action regarding Colgate-Palmolive Company (NYSE:CL).
Do Hedge Funds Think CL Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from one quarter earlier. By comparison, 52 hedge funds held shares or bullish call options in CL a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GuardCap Asset Management was the largest shareholder of Colgate-Palmolive Company (NYSE:CL), with a stake worth $369.6 million reported as of the end of December. Trailing GuardCap Asset Management was Renaissance Technologies, which amassed a stake valued at $260.7 million. AQR Capital Management, D E Shaw, and Arrowstreet Capital 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 GuardCap Asset Management allocated the biggest weight to Colgate-Palmolive Company (NYSE:CL), around 7.54% of its 13F portfolio. Ayrshire Capital Management is also relatively very bullish on the stock, dishing out 1.98 percent of its 13F equity portfolio to CL.
Judging by the fact that Colgate-Palmolive Company (NYSE:CL) has faced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers who sold off their positions entirely last quarter. Interestingly, Steven Boyd's Armistice Capital dumped the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising close to $23.1 million in stock. Brian Scudieri's fund, Kehrs Ridge Capital, also sold off its stock, about $5.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Colgate-Palmolive Company (NYSE:CL) but similarly valued. These stocks are Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), Gilead Sciences, Inc. (NASDAQ:GILD), Becton, Dickinson and Company (NYSE:BDX), KE Holdings Inc (NYSE:BEKE), Infosys Limited (NYSE:INFY), Activision Blizzard, Inc. (NASDAQ:ATVI), and China Petroleum & Chemical Corp (NYSE:SNP). This group of stocks' market valuations match CL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PBR,24,1335976,-7 GILD,72,2021867,11 BDX,65,3961016,3 BEKE,30,2038963,2 INFY,23,1755104,1 ATVI,81,3739018,-12 SNP,13,196413,5 Average,44,2149765,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $2150 million. That figure was $1516 million in CL's case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 13 bullish hedge fund positions. Colgate-Palmolive Company (NYSE:CL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CL is 54.3. 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 CL wasn't nearly as popular as these 30 stocks and hedge funds that were betting on CL were disappointed as the stock returned -11.8% 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.