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Do Hedge Funds Love Church & Dwight Co., Inc. (CHD)?

·6 min read

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Church & Dwight Co., Inc. (NYSE:CHD).

Church & Dwight Co., Inc. (NYSE:CHD) shareholders have witnessed an increase in support from the world's most elite money managers recently. Church & Dwight Co., Inc. (NYSE:CHD) was in 35 hedge funds' portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that CHD isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

best dividend stocks according to Ray Dalio
best dividend stocks according to Ray Dalio

Ray Dalio of Bridgewater Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. 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. Now let's take a look at the recent 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 third quarter of 2021, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in CHD a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

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

Among these funds, Fundsmith LLP held the most valuable stake in Church & Dwight Co., Inc. (NYSE:CHD), which was worth $786.1 million at the end of the second quarter. On the second spot was Echo Street Capital Management which amassed $123.7 million worth of shares. Arrowstreet Capital, Holocene Advisors, and Bridgewater Associates 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 Kehrs Ridge Capital allocated the biggest weight to Church & Dwight Co., Inc. (NYSE:CHD), around 2.61% of its 13F portfolio. Fundsmith LLP is also relatively very bullish on the stock, earmarking 2.18 percent of its 13F equity portfolio to CHD.

As aggregate interest increased, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Church & Dwight Co., Inc. (NYSE:CHD). Citadel Investment Group had $33.9 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $15.2 million position during the quarter. The other funds with new positions in the stock are Brian Scudieri's Kehrs Ridge Capital, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks similar to Church & Dwight Co., Inc. (NYSE:CHD). These stocks are Gartner Inc (NYSE:IT), Fortis Inc. (NYSE:FTS), StoneCo Ltd. (NASDAQ:STNE), Avantor, Inc. (NYSE:AVTR), Halliburton Company (NYSE:HAL), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), and Steris Plc (NYSE:STE). This group of stocks' market values are closest to CHD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IT,39,1988886,-1 FTS,9,185027,-1 STNE,44,2739991,5 AVTR,44,2178398,-4 HAL,29,1336150,1 TTWO,55,1313646,14 STE,35,1783774,5 Average,36.4,1646553,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1647 million. That figure was $1383 million in CHD's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 9 bullish hedge fund positions. Church & Dwight Co., Inc. (NYSE:CHD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHD is 65.9. 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 negative signal and 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 21.8% in 2021 through October 11th and surpassed the market again by 4.4 percentage points. Unfortunately CHD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CHD investors were disappointed as the stock returned -2.3% since the end of June (through 10/11) 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 most of these stocks already outperformed the market in 2021.

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