Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Clorox Co (NYSE:CLX).
Clorox Co (NYSE:CLX) investors should pay attention to a decrease in enthusiasm from smart money recently. CLX was in 25 hedge funds’ portfolios at the end of the third quarter of 2016. There were 26 hedge funds in our database with CLX holdings 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 DTE Energy Co (NYSE:DTE), The J.M. Smucker Company (NYSE:SJM), and Sasol Limited (ADR) (NYSE:SSL) to gather more data points.
Follow Clorox Co (NYSE:CLX)
Follow Clorox Co (NYSE:CLX)
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.
Sorbis / Shutterstock.com
With all of this in mind, we’re going to take a gander at the latest action encompassing Clorox Co (NYSE:CLX).
How have hedgies been trading Clorox Co (NYSE:CLX)?
Heading into the fourth quarter of 2016, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 4% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Andy Brown’s Cedar Rock Capital has the most valuable position in Clorox Co (NYSE:CLX), worth close to $319.5 million, accounting for 7.8% of its total 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies, holding a $130.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions consist of Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David Harding’s Winton Capital Management.
Judging by the fact that Clorox Co (NYSE:CLX) has faced falling interest from the smart money, we can see that there is a sect of money managers that slashed their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest stake of all the hedgies tracked by Insider Monkey, valued at about $19.9 million in call options. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options, worth about $8.2 million. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 fund last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Clorox Co (NYSE:CLX) but similarly valued. These stocks are DTE Energy Co (NYSE:DTE), The J.M. Smucker Company (NYSE:SJM), Sasol Limited (ADR) (NYSE:SSL), and Tata Motors Limited (ADR) (NYSE:TTM). This group of stocks’ market valuations are closest to CLX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DTE | 20 | 533875 | 5 |
| SJM | 25 | 411234 | -5 |
| SSL | 9 | 23488 | -2 |
| TTM | 22 | 844281 | 10 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $453 million. That figure was $771 million in CLX’s case. The J.M. Smucker Company (NYSE:SJM) is the most popular stock in this table. On the other hand Sasol Limited (ADR) (NYSE:SSL) is the least popular one with only 9 bullish hedge fund positions.Clorox Co (NYSE:CLX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SJM might be a better candidate to consider a long position.
Disclosure: none.
