Did Hedge Funds Make The Right Call On Church & Dwight Co., Inc. (CHD) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Church & Dwight Co., Inc. (NYSE:CHD) based on that data and determine whether they were really smart about the stock.

Is Church & Dwight Co., Inc. (NYSE:CHD) ready to rally soon? Money managers were getting less optimistic. The number of bullish hedge fund bets were trimmed by 1 recently. Our calculations also showed that CHD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CHD was in 36 hedge funds’ portfolios at the end of March. There were 37 hedge funds in our database with CHD holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Crispin Odey of Odey Asset Management Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Church & Dwight Co., Inc. (NYSE:CHD).

What have hedge funds been doing with Church & Dwight Co., Inc. (NYSE:CHD)?

At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in CHD a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Church & Dwight Co., Inc. (NYSE:CHD), which was worth $143.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $65.5 million worth of shares. Arrowstreet Capital, Echo Street Capital Management, and Marshall Wace LLP 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 Prospector Partners allocated the biggest weight to Church & Dwight Co., Inc. (NYSE:CHD), around 2.24% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, earmarking 2.1 percent of its 13F equity portfolio to CHD.

Judging by the fact that Church & Dwight Co., Inc. (NYSE:CHD) has witnessed declining sentiment from the smart money, logic holds that there exists a select few funds who sold off their full holdings in the first quarter. It’s worth mentioning that Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dumped the largest investment of the 750 funds monitored by Insider Monkey, valued at about $3.9 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund dropped about $2.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Church & Dwight Co., Inc. (NYSE:CHD). We will take a look at Smith & Nephew plc (NYSE:SNN), Tiffany & Co. (NYSE:TIF), Keysight Technologies Inc (NYSE:KEYS), and Nasdaq, Inc. (NASDAQ:NDAQ). This group of stocks’ market values are closest to CHD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1027 million. That figure was $507 million in CHD’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 9 bullish hedge fund positions. Church & Dwight Co., Inc. (NYSE:CHD) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CHD, though not to the same extent, as the stock returned 20.8% during the second quarter and outperformed the market.

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