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Colgate-Palmolive Company (CL) Fell Out Of Favor With Hedge Funds

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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Colgate-Palmolive Company (NYSE:CL)? The smart money sentiment can provide an answer to this question.

Colgate-Palmolive Company (NYSE:CL) has seen a decrease in support from the world's most elite money managers recently. Colgate-Palmolive Company (NYSE:CL) was in 54 hedge funds' portfolios at the end of September. The all time high for this statistic is 58. There were 58 hedge funds in our database with CL positions at the end of the second quarter. Our calculations also showed that CL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we're going to go over the fresh hedge fund action surrounding Colgate-Palmolive Company (NYSE:CL).

Ken Griffin of Citadel Investment Group

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

At third quarter's end, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 47 hedge funds with a bullish position in CL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, GuardCap Asset Management held the most valuable stake in Colgate-Palmolive Company (NYSE:CL), which was worth $486.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $303.7 million worth of shares. Renaissance Technologies, Citadel Investment Group, and D E Shaw 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 6.7% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, dishing out 4.39 percent of its 13F equity portfolio to CL.

Judging by the fact that Colgate-Palmolive Company (NYSE:CL) has experienced declining sentiment from the smart money, logic holds that there was a specific group of hedge funds that decided to sell off their full holdings by the end of the third quarter. It's worth mentioning that Alexander Mitchell's Scopus Asset Management dropped the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $56.9 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund sold off about $24.4 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks similar to Colgate-Palmolive Company (NYSE:CL). These stocks are Illumina, Inc. (NASDAQ:ILMN), Waste Management, Inc. (NYSE:WM), Autodesk, Inc. (NASDAQ:ADSK), Banco Santander, S.A. (NYSE:SAN), VMware, Inc. (NYSE:VMW), Workday Inc (NASDAQ:WDAY), and Boston Scientific Corporation (NYSE:BSX). All of these stocks' market caps resemble CL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ILMN,55,2801228,4 WM,36,3629155,-3 ADSK,54,2356939,-10 SAN,14,543799,-3 VMW,31,618586,3 WDAY,72,6389641,0 BSX,47,3051321,-4 Average,44.1,2770096,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.1 hedge funds with bullish positions and the average amount invested in these stocks was $2770 million. That figure was $2578 million in CL's case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 14 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 63.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately CL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CL were disappointed as the stock returned -0.1% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.