It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Colgate-Palmolive Company (NYSE:CL).
Is Colgate-Palmolive Company (NYSE:CL) a buy, sell, or hold? The smart money is getting more bullish. The number of bullish hedge fund bets inched up by 2 in recent months. CL was in 38 hedge funds’ portfolios at the end of September. There were 36 hedge funds in our database with CL positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Texas Instruments Incorporated (NASDAQ:TXN), Canon Inc. (ADR) (NYSE:CAJ), and Priceline.com Inc (NASDAQ:PCLN) to gather more data points.
Follow Colgate Palmolive Co (NYSE:CL)
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
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Now, let’s analyze the new action regarding Colgate-Palmolive Company (NYSE:CL).
What does the smart money think about Colgate-Palmolive Company (NYSE:CL)?
At Q3’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 6% from the second quarter of 2016. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jim Simons’s Renaissance Technologies has the number one position in Colgate-Palmolive Company (NYSE:CL), worth close to $507.7 million, accounting for 0.9% of its total 13F portfolio. On Renaissance Technologies’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $230.2 million position; 0.8% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish contain Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Donald Yacktman’s Yacktman Asset Management.
Now, key hedge funds were breaking ground themselves. Hutchin Hill Capital, managed by Neil Chriss, created the most valuable call position in Colgate-Palmolive Company (NYSE:CL). The fund had $44.5 million invested in call options at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $42.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Bruce Kovner’s Caxton Associates LP, and George Hall’s Clinton Group.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Colgate-Palmolive Company (NYSE:CL) but similarly valued. These stocks are Texas Instruments Incorporated (NASDAQ:TXN), Canon Inc. (ADR) (NYSE:CAJ), Priceline.com Inc (NASDAQ:PCLN), and Goldman Sachs Group, Inc. (NYSE:GS). This group of stocks’ market values match CL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TXN | 37 | 943996 | 6 |
| CAJ | 5 | 36687 | -1 |
| PCLN | 98 | 8188039 | 13 |
| GS | 63 | 4772004 | -5 |
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $3.48 billion. That figure was roughly $1.88 billion in CL’s case. Priceline.com Inc (NASDAQ:PCLN) is the most popular stock in this table. On the other hand Canon Inc. (ADR) (NYSE:CAJ) is the least popular one with only 5 bullish hedge fund positions. Colgate-Palmolive Company (NYSE:CL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PCLN might be a better candidate to consider a long position.
