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

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  • PG

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 68 hedge funds' portfolios at the end of June. The all time high for this statistic is 83. PG shareholders have witnessed a decrease in support from the world's most elite money managers recently. There were 70 hedge funds in our database with PG holdings at the end of March. Our calculations also showed that PG isn't among the 30 most popular stocks among hedge funds (click for Q2 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 79 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, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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. Now we're going to take a peek at the key 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 June, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 73 hedge funds with a bullish position in PG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Cedar Rock Capital held the most valuable stake in The Procter & Gamble Company (NYSE:PG), which was worth $1016.9 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $1014.7 million worth of shares. Trian Partners, Bridgewater Associates, 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 23.15% of its 13F portfolio. Trian Partners is also relatively very bullish on the stock, setting aside 9.14 percent of its 13F equity portfolio to PG.

Due to the fact that The Procter & Gamble Company (NYSE:PG) has witnessed falling interest from the smart money, we can see that there is a sect of hedgies that decided to sell off their positions entirely last quarter. Interestingly, Rajiv Jain's GQG Partners said goodbye to the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $847.4 million in stock. Brandon Haley's fund, Holocene Advisors, also sold off its stock, about $116.9 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let's go over 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 The Walt Disney Company (NYSE:DIS), ASML Holding N.V. (NASDAQ:ASML), Adobe Inc. (NASDAQ:ADBE), Exxon Mobil Corporation (NYSE:XOM), Comcast Corporation (NASDAQ:CMCSA), Toyota Motor Corporation (NYSE:TM), and NIKE, Inc. (NYSE:NKE). All of these stocks' market caps resemble PG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DIS,112,10830152,-22 ASML,44,4323106,9 ADBE,89,13101408,-18 XOM,68,3698096,3 CMCSA,84,9300743,-4 TM,12,903060,-6 NKE,67,6425093,-11 Average,68,6940237,-7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 68 hedge funds with bullish positions and the average amount invested in these stocks was $6940 million. That figure was $6934 million in PG's case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 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 55.6. 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 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. A small number of hedge funds were also right about betting on PG as the stock returned 7.3% since the end of the second quarter (through 10/29) and outperformed the market by an even larger margin.

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