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PPG Industries, Inc. (PPG): Hedge Funds In Wait-and-See Mode

Asma UL Husna

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding PPG Industries, Inc. (NYSE:PPG).

PPG Industries, Inc. (NYSE:PPG) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of September. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Sirius XM Holdings Inc (NASDAQ:SIRI), TransDigm Group Incorporated (NYSE:TDG), and Republic Services, Inc. (NYSE:RSG) to gather more data points. Our calculations also showed that PPG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

According to most shareholders, hedge funds are seen as slow, old investment vehicles of years past. While there are more than 8000 funds in operation at the moment, Our researchers hone in on the bigwigs of this group, around 750 funds. These investment experts administer the lion's share of the hedge fund industry's total capital, and by shadowing their highest performing picks, Insider Monkey has unearthed various investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year 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_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the fresh hedge fund action regarding PPG Industries, Inc. (NYSE:PPG).

What does smart money think about PPG Industries, Inc. (NYSE:PPG)?

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in PPG a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

PPG_dec2019

The largest stake in PPG Industries, Inc. (NYSE:PPG) was held by Citadel Investment Group, which reported holding $211.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $55.5 million position. Other investors bullish on the company included Adage Capital Management, AQR Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Alight Capital allocated the biggest weight to PPG Industries, Inc. (NYSE:PPG), around 2.41% of its portfolio. Unio Capital is also relatively very bullish on the stock, earmarking 0.56 percent of its 13F equity portfolio to PPG.

Since PPG Industries, Inc. (NYSE:PPG) has witnessed falling interest from hedge fund managers, it's easy to see that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Nelson Peltz's Trian Partners dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $493.1 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $6.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to PPG Industries, Inc. (NYSE:PPG). We will take a look at Sirius XM Holdings Inc (NASDAQ:SIRI), TransDigm Group Incorporated (NYSE:TDG), Republic Services, Inc. (NYSE:RSG), and Chunghwa Telecom Co., Ltd (NYSE:CHT). This group of stocks' market caps are similar to PPG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIRI,33,1274312,4 TDG,56,5183262,8 RSG,31,625488,7 CHT,5,117483,2 Average,31.25,1800136,5.25 [/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 $1800 million. That figure was $422 million in PPG's case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 5 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 9.1% during the first two months of the fourth quarter and outperformed the market.

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

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