In this article we will take a look at whether hedge funds think Colgate-Palmolive Company (NYSE:CL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Colgate-Palmolive Company (NYSE:CL) has seen an increase in hedge fund sentiment lately. CL was in 53 hedge funds' portfolios at the end of March. There were 52 hedge funds in our database with CL positions at the end of the previous quarter. Our calculations also showed that CL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are many formulas market participants use to analyze stocks. A couple of the most innovative formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top money managers can outpace their index-focused peers by a solid amount (see the details here).
[caption id="attachment_30621" align="aligncenter" width="400"] Cliff Asness of AQR Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the latest hedge fund action encompassing Colgate-Palmolive Company (NYSE:CL).
What have hedge funds been doing with Colgate-Palmolive Company (NYSE:CL)?
At the end of the first quarter, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 42 hedge funds with a bullish position in CL a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Colgate-Palmolive Company (NYSE:CL) was held by Renaissance Technologies, which reported holding $466.1 million worth of stock at the end of September. It was followed by D E Shaw with a $288.9 million position. Other investors bullish on the company included AQR Capital Management, GuardCap Asset Management, and Yacktman Asset Management. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to Colgate-Palmolive Company (NYSE:CL), around 8.48% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, earmarking 8.36 percent of its 13F equity portfolio to CL.
As industrywide interest jumped, key money managers have jumped into Colgate-Palmolive Company (NYSE:CL) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Colgate-Palmolive Company (NYSE:CL). Arrowstreet Capital had $52.4 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $28.6 million position during the quarter. The other funds with new positions in the stock are Guy Shahar's DSAM Partners, Steven Boyd's Armistice Capital, and Joseph Samuels's Islet Management.
Let's now take a look at hedge fund activity in other stocks similar to Colgate-Palmolive Company (NYSE:CL). These stocks are Rio Tinto plc (NYSE:RIO), Zoetis Inc (NYSE:ZTS), Canadian National Railway Company (NYSE:CNI), and Booking Holdings Inc. (NASDAQ:BKNG). 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 RIO,20,1108363,-1 ZTS,60,1775801,12 CNI,26,1605797,-3 BKNG,90,4914673,16 Average,49,2351159,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $2351 million. That figure was $1865 million in CL's case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Rio Tinto plc (NYSE:RIO) is the least popular one with only 20 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately CL wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CL were disappointed as the stock returned 7.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.