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

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about The Procter & Gamble Company (NYSE:PG).

The Procter & Gamble Company (NYSE:PG) was in 70 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 83. PG investors should pay attention to a decrease in hedge fund interest in recent months. There were 83 hedge funds in our database with PG holdings at the end of December. Our calculations also showed that PG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TRIAN PARTNERS
TRIAN PARTNERS

Nelson Peltz of Trian Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a glance at the latest hedge fund action encompassing The Procter & Gamble Company (NYSE:PG).

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

Heading into the second quarter of 2021, a total of 70 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PG over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

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

Of the funds tracked by Insider Monkey, Nelson Peltz's Trian Partners has the biggest position in The Procter & Gamble Company (NYSE:PG), worth close to $1.2033 billion, amounting to 14.2% of its total 13F portfolio. On Trian Partners's heels is Cedar Rock Capital, led by Andy Brown, holding a $1.1792 billion position; 26.3% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Rajiv Jain's GQG Partners and Cliff Asness's AQR Capital Management. 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 26.35% of its 13F portfolio. Trian Partners is also relatively very bullish on the stock, earmarking 14.23 percent of its 13F equity portfolio to PG.

Since The Procter & Gamble Company (NYSE:PG) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few money managers who sold off their positions entirely last quarter. Intriguingly, Doug Silverman and Alexander Klabin's Senator Investment Group dropped the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $84.2 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund cut about $58.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 13 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Procter & Gamble Company (NYSE:PG) but similarly valued. These stocks are NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), Intel Corporation (NASDAQ:INTC), ASML Holding N.V. (NASDAQ:ASML), Comcast Corporation (NASDAQ:CMCSA), and Verizon Communications Inc. (NYSE:VZ). This group of stocks' market values are closest to PG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVDA,80,6204940,-8 HD,68,4359872,-11 PYPL,143,14717163,-4 INTC,83,7616792,11 ASML,35,3827143,5 CMCSA,88,9762151,4 VZ,69,11383576,2 Average,80.9,8267377,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 80.9 hedge funds with bullish positions and the average amount invested in these stocks was $8267 million. That figure was $8539 million in PG's case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 35 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 33.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and surpassed the market again by 6.7 percentage points. Unfortunately PG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PG investors were disappointed as the stock returned 5.7% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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