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Were Hedge Funds Right About Avoiding The Procter & Gamble Company (PG)?

Reymerlyn Martin
·6 min read

In this article we will take a look at whether hedge funds think The Procter & Gamble Company (NYSE:PG) 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.

Is The Procter & Gamble Company (NYSE:PG) a buy, sell, or hold? The best stock pickers were cutting their exposure. The number of bullish hedge fund bets decreased by 4 in recent months. The Procter & Gamble Company (NYSE:PG) was in 73 hedge funds' portfolios at the end of June. The all time high for this statistics is 79. Our calculations also showed that PG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 77 hedge funds in our database with PG positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are tons of tools investors employ to assess stocks. A duo of the most under-the-radar tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top money managers can outperform the market by a healthy amount (see the details here).

AQR CAPITAL MANAGEMENT
AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a look at the new hedge fund action regarding The Procter & Gamble Company (NYSE:PG).

Hedge fund activity in The Procter & Gamble Company (NYSE:PG)

At the end of June, a total of 73 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in PG over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Procter & Gamble Company (NYSE:PG) was held by Cedar Rock Capital, which reported holding $1329 million worth of stock at the end of September. It was followed by Trian Partners with a $1294.4 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Arrowstreet Capital. 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 32.33% of its 13F portfolio. Trian Partners is also relatively very bullish on the stock, setting aside 26.83 percent of its 13F equity portfolio to PG.

Judging by the fact that The Procter & Gamble Company (NYSE:PG) has experienced falling interest from the smart money, it's safe to say that there is a sect of money managers that slashed their positions entirely last quarter. It's worth mentioning that Sander Gerber's Hudson Bay Capital Management dumped the biggest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $6.3 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund said goodbye to about $5.1 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

Let's go over hedge fund activity in other stocks similar to The Procter & Gamble Company (NYSE:PG). These stocks are Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), JPMorgan Chase & Co. (NYSE:JPM), UnitedHealth Group Inc. (NYSE:UNH), The Home Depot, Inc. (NYSE:HD), Intel Corporation (NASDAQ:INTC), NVIDIA Corporation (NASDAQ:NVDA), and Verizon Communications Inc. (NYSE:VZ). This group of stocks' market caps match PG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSM,58,5209772,4 JPM,123,8732467,11 UNH,96,8326373,-8 HD,85,4642557,-2 INTC,78,6480425,5 NVDA,92,5548398,-3 VZ,68,2973925,0 Average,85.7,5987702,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 85.7 hedge funds with bullish positions and the average amount invested in these stocks was $5988 million. That figure was $9244 million in PG's case. JPMorgan Chase & Co. (NYSE:JPM) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 58 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 40.3. 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. 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 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. A small number of hedge funds were also right about betting on PG as the stock returned 21.5% since the end of the second quarter (through 10/16) and outperformed the market by an even larger margin.

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

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