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How Did Church & Dwight Co., Inc. (CHD) Compare Against Top Hedge Fund Stocks in 2019?

Debasis Saha

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Church & Dwight Co., Inc. (NYSE:CHD) changed recently.

Church & Dwight Co., Inc. (NYSE:CHD) has seen an increase in activity from the world's largest hedge funds of late. Our calculations also showed that CHD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

According to most investors, hedge funds are assumed to be worthless, old investment vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, We choose to focus on the top tier of this club, approximately 750 funds. These hedge fund managers administer most of the smart money's total capital, and by monitoring their first-class equity investments, Insider Monkey has brought to light several investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_30621" align="alignnone" width="600"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT
AQR CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's take a gander at the latest hedge fund action regarding Church & Dwight Co., Inc. (NYSE:CHD).

What does smart money think about Church & Dwight Co., Inc. (NYSE:CHD)?

At Q3's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in CHD 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.

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

More specifically, AQR Capital Management was the largest shareholder of Church & Dwight Co., Inc. (NYSE:CHD), with a stake worth $67.5 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $66.6 million. Echo Street Capital Management, Renaissance Technologies, and Point72 Asset Management 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 Axel Capital Management allocated the biggest weight to Church & Dwight Co., Inc. (NYSE:CHD), around 1.86% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.67 percent of its 13F equity portfolio to CHD.

With a general bullishness amongst the heavyweights, some big names have jumped into Church & Dwight Co., Inc. (NYSE:CHD) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Church & Dwight Co., Inc. (NYSE:CHD). Citadel Investment Group had $66.6 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $45.5 million position during the quarter. The other funds with brand new CHD positions are Thomas Bailard's Bailard Inc, David Andre and Astro Teller's Cerebellum Capital, and Roy Vermus and Shlomi Bracha's Noked Capital.

Let's now review hedge fund activity in other stocks similar to Church & Dwight Co., Inc. (NYSE:CHD). These stocks are Altice USA, Inc. (NYSE:ATUS), Cadence Design Systems Inc (NASDAQ:CDNS), Fortis Inc. (NYSE:FTS), and MSCI Inc (NYSE:MSCI). This group of stocks' market valuations are closest to CHD's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATUS,51,3138068,6 CDNS,33,1579724,5 FTS,13,561241,1 MSCI,37,643687,1 Average,33.5,1480680,3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $1481 million. That figure was $544 million in CHD's case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 13 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. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CHD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CHD were disappointed as the stock returned 8.1% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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

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