Is Church & Dwight Co., Inc. (CHD) A Good Stock To Buy?

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility and underperformance. The time period between the end of June 2015 and the end of June 2016 was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have been underperforming the large-cap indices. However, things have dramatically changed over the last 5 months. Small-cap stocks reversed their misfortune and beat the large cap indices by almost 11 percentage points since the end of June. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Church & Dwight Co., Inc. (NYSE:CHD) .

Church & Dwight Co., Inc. (NYSE:CHD) has seen a decrease in hedge fund interest of late. CHD was in 18 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with CHD positions at the end of the previous quarter. At the end of this article we will also compare CHD to other stocks including Red Hat, Inc. (NYSE:RHT), Kimco Realty Corp (NYSE:KIM), and Newell Rubbermaid Inc. (NYSE:NWL) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 10% from the second quarter of 2016. By comparison, 21 hedge funds held shares or bullish call options in CHD heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’ AQR Capital Management has the number one position in Church & Dwight Co., Inc. (NYSE:CHD), worth close to $92.1 million. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, which holds a $39.3 million position. Some other members of the smart money with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’ Renaissance Technologies and Mario Gabelli’s GAMCO Investors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. Interestingly, Bruce Kovner’s Caxton Associates LP dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $5.1 million in stock. Paul Tudor Jones’ fund, Tudor Investment Corp, also dumped its stock, about $3.5 million worth.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Church & Dwight Co., Inc. (NYSE:CHD) but similarly valued. These stocks are Red Hat, Inc. (NYSE:RHT), Kimco Realty Corp (NYSE:KIM), Newell Rubbermaid Inc. (NYSE:NWL), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market values are similar to CHD’s market value.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1.10 billion. That figure was $270 million in CHD’s case. Newell Rubbermaid Inc. (NYSE:NWL) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 11 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NWL might be a better candidate to consider taking a long position in.

Disclosure: None