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Was The Smart Money Right About Piling Into P&G?

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·5 min read
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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is The Procter & Gamble Company (NYSE:PG), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

The Procter & Gamble Company (NYSE:PG) was in 83 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 79. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PG has experienced an increase in activity from the world's largest hedge funds lately. There were 75 hedge funds in our database with PG positions at the end of the third quarter. Our calculations also showed that PG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).


Nelson Peltz of Trian Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now we're going to take a glance at the fresh hedge fund action surrounding The Procter & Gamble Company (NYSE:PG).

Do Hedge Funds Think PG Is A Good Stock To Buy Now?

At the end of December, a total of 83 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PG over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PG A Good Stock To Buy?
Is PG A Good Stock To Buy?

Among these funds, Cedar Rock Capital held the most valuable stake in The Procter & Gamble Company (NYSE:PG), which was worth $1372.5 million at the end of the fourth quarter. On the second spot was Trian Partners which amassed $1366.9 million worth of shares. Arrowstreet Capital, GQG Partners, and AQR Capital 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 Cedar Rock Capital allocated the biggest weight to The Procter & Gamble Company (NYSE:PG), around 29.68% of its 13F portfolio. Trian Partners is also relatively very bullish on the stock, earmarking 20.23 percent of its 13F equity portfolio to PG.

Now, key money managers were breaking ground themselves. Voleon Capital, managed by Michael Kharitonov and Jon David McAuliffe, initiated the biggest position in The Procter & Gamble Company (NYSE:PG). Voleon Capital had $29.1 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also initiated a $16.9 million position during the quarter. The following funds were also among the new PG investors: Paul Tudor Jones's Tudor Investment Corp, Steven Boyd's Armistice Capital, and Nicholas Bagnall's Te Ahumairangi Investment Management.

Let's now review hedge fund activity in other stocks similar to The Procter & Gamble Company (NYSE:PG). We will take a look at UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), Bank of America Corporation (NYSE:BAC), and Verizon Communications Inc. (NYSE:VZ). This group of stocks' market valuations resemble PG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNH,91,10778450,2 DIS,144,16417240,32 NVDA,88,8692203,6 HD,79,4924208,6 PYPL,147,15961182,-3 BAC,99,35340008,11 VZ,67,10502830,2 Average,102.1,14659446,8 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 102.1 hedge funds with bullish positions and the average amount invested in these stocks was $14659 million. That figure was $10422 million in PG's case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 67 bullish hedge fund positions. The Procter & Gamble Company (NYSE:PG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PG is 50. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately PG wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PG investors were disappointed as the stock returned -1.2% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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