The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded The Clorox Company (NYSE:CLX) and determine whether the smart money was really smart about this stock.
The Clorox Company (NYSE:CLX) has seen a decrease in hedge fund sentiment in recent months. The Clorox Company (NYSE:CLX) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistics is 41 (March 2020). Our calculations also showed that CLX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Richard Chilton of Chilton Investment Company
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the key hedge fund action regarding The Clorox Company (NYSE:CLX).
What have hedge funds been doing with The Clorox Company (NYSE:CLX)?
Heading into the third quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in CLX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Cedar Rock Capital, managed by Andy Brown, holds the biggest position in The Clorox Company (NYSE:CLX). Cedar Rock Capital has a $478.1 million position in the stock, comprising 11.6% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, with a $416.3 million position; 0.4% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to The Clorox Company (NYSE:CLX), around 11.63% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, designating 11.48 percent of its 13F equity portfolio to CLX.
Due to the fact that The Clorox Company (NYSE:CLX) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that decided to sell off their full holdings last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $13 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dropped its stock, about $3.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to The Clorox Company (NYSE:CLX). We will take a look at Verisk Analytics, Inc. (NASDAQ:VRSK), IAC/InterActiveCorp (NASDAQ:IAC), Agilent Technologies Inc. (NYSE:A), Paychex, Inc. (NASDAQ:PAYX), IQVIA Holdings, Inc. (NYSE:IQV), The Hershey Company (NYSE:HSY), and CRH PLC (NYSE:CRH). All of these stocks’ market caps are similar to CLX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRSK | 36 | 981827 | 5 |
| IAC | 60 | 4955863 | 3 |
| A | 38 | 2815048 | 3 |
| PAYX | 36 | 877442 | -5 |
| IQV | 66 | 3022562 | 6 |
| HSY | 39 | 1028323 | 6 |
| CRH | 7 | 76935 | -3 |
| Average | 40.3 | 1965429 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $1965 million. That figure was $1489 million in CLX’s case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. The Clorox Company (NYSE:CLX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CLX is 50.9. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and surpassed the market by 23.2 percentage points. Unfortunately CLX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CLX investors were disappointed as the stock returned 2.4% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
