Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds' moves.
PPG Industries, Inc. (NYSE:PPG) has seen an increase in hedge fund interest lately. Our calculations also showed that PPG isn't among the 30 most popular stocks among hedge funds. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous gauges stock traders have at their disposal to grade publicly traded companies. Some of the less known gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can trounce the market by a very impressive amount (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the recent hedge fund action regarding PPG Industries, Inc. (NYSE:PPG).
What have hedge funds been doing with PPG Industries, Inc. (NYSE:PPG)?
At Q2's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in PPG a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Trian Partners was the largest shareholder of PPG Industries, Inc. (NYSE:PPG), with a stake worth $493.1 million reported as of the end of March. Trailing Trian Partners was Citadel Investment Group, which amassed a stake valued at $312.3 million. Renaissance Technologies, Two Sigma Advisors, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in PPG Industries, Inc. (NYSE:PPG). Point72 Asset Management had $6.1 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also made a $3 million investment in the stock during the quarter. The other funds with brand new PPG positions are David Harding's Winton Capital Management, Matthew Hulsizer's PEAK6 Capital Management, and Javier Velazquez's Albar Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as PPG Industries, Inc. (NYSE:PPG) but similarly valued. These stocks are Twitter Inc (NYSE:TWTR), SunTrust Banks, Inc. (NYSE:STI), Motorola Solutions Inc (NYSE:MSI), and TD Ameritrade Holding Corp. (NASDAQ:AMTD). This group of stocks' market valuations are similar to PPG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TWTR,47,1637777,1 STI,31,912417,9 MSI,25,867800,-4 AMTD,22,485654,-8 Average,31.25,975912,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $976 million. That figure was $930 million in PPG's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand TD Ameritrade Holding Corp. (NASDAQ:AMTD) is the least popular one with only 22 bullish hedge fund positions. PPG Industries, Inc. (NYSE:PPG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PPG, though not to the same extent, as the stock returned 2% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.