Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not The Progressive Corporation (NYSE:PGR) makes for a good investment right now.
The Progressive Corporation (NYSE:PGR) shareholders have witnessed a decrease in hedge fund interest lately. PGR was in 48 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 53 hedge funds in our database with PGR holdings at the end of the previous quarter. Our calculations also showed that PGR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s go over the latest hedge fund action regarding The Progressive Corporation (NYSE:PGR).
What does smart money think about The Progressive Corporation (NYSE:PGR)?
Heading into the first quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PGR over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in The Progressive Corporation (NYSE:PGR), which was worth $388 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $175.2 million worth of shares. Citadel Investment Group, AQR Capital Management, and D E Shaw 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 Steel Canyon Capital allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 9.41% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, dishing out 6.6 percent of its 13F equity portfolio to PGR.
Due to the fact that The Progressive Corporation (NYSE:PGR) has witnessed falling interest from hedge fund managers, logic holds that there is a sect of hedge funds that slashed their positions entirely last quarter. Intriguingly, Andreas Halvorsen’s Viking Global dumped the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $53.6 million in stock, and Jacob Doft’s Highline Capital Management was right behind this move, as the fund dumped about $37.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Progressive Corporation (NYSE:PGR) but similarly valued. These stocks are BCE Inc. (NYSE:BCE), Ross Stores, Inc. (NASDAQ:ROST), Ferrari N.V. (NYSE:RACE), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). This group of stocks’ market values are closest to PGR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCE | 19 | 219572 | 5 |
| ROST | 48 | 1029100 | 4 |
| RACE | 36 | 2003827 | 2 |
| REGN | 37 | 931314 | 2 |
| Average | 35 | 1045953 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1046 million. That figure was $1782 million in PGR’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 19 bullish hedge fund positions. The Progressive Corporation (NYSE:PGR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. Hedge funds were also right about betting on PGR as the stock returned 4.1% during the first quarter (through March 9th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
