Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards PPG Industries, Inc. (NYSE:PPG).
PPG Industries, Inc. (NYSE:PPG) shareholders have witnessed a decrease in hedge fund interest in recent months. PPG Industries, Inc. (NYSE:PPG) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that PPG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To most market participants, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open today, Our researchers look at the crème de la crème of this group, around 850 funds. Most estimates calculate that this group of people watch over the lion’s share of all hedge funds’ total asset base, and by monitoring their finest investments, Insider Monkey has found a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Ray Dalio of Bridgewater Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 let’s analyze the fresh hedge fund action encompassing PPG Industries, Inc. (NYSE:PPG).
Do Hedge Funds Think PPG Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in PPG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Adage Capital Management held the most valuable stake in PPG Industries, Inc. (NYSE:PPG), which was worth $38.7 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $36.7 million worth of shares. Bridgewater Associates, Citadel Investment Group, and Citadel Investment Group 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 Luminus Management allocated the biggest weight to PPG Industries, Inc. (NYSE:PPG), around 1.01% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 0.95 percent of its 13F equity portfolio to PPG.
Since PPG Industries, Inc. (NYSE:PPG) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers that slashed their positions entirely by the end of the first quarter. Intriguingly, Ben Jacobs’s Anomaly Capital Management cut the largest position of the 750 funds monitored by Insider Monkey, totaling close to $26.5 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund cut about $14.1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 9 funds by the end of the first quarter.
Let’s also examine hedge fund activity in other stocks similar to PPG Industries, Inc. (NYSE:PPG). These stocks are Alcon Inc. (NYSE:ALC), O’Reilly Automotive Inc (NASDAQ:ORLY), Paychex, Inc. (NASDAQ:PAYX), Barrick Gold Corporation (NYSE:GOLD), AFLAC Incorporated (NYSE:AFL), Chewy, Inc. (NYSE:CHWY), and Marathon Petroleum Corp (NYSE:MPC). This group of stocks’ market valuations are similar to PPG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALC | 23 | 753974 | -1 |
| ORLY | 45 | 2704943 | -4 |
| PAYX | 25 | 872105 | -7 |
| GOLD | 49 | 1305890 | -4 |
| AFL | 36 | 343937 | 1 |
| CHWY | 32 | 433780 | -6 |
| MPC | 46 | 1966638 | 3 |
| Average | 36.6 | 1197324 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1197 million. That figure was $174 million in PPG’s case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 23 bullish hedge fund positions. PPG Industries, Inc. (NYSE:PPG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PPG is 14.6. 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 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on PPG, though not to the same extent, as the stock returned 14.4% since the end of Q1 (through July 9th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
