Is PPG Stock A Buy or Sell?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about PPG Industries, Inc. (NYSE:PPG) in this article.

Is PPG stock a buy? PPG Industries, Inc. (NYSE:PPG) was in 34 hedge funds’ portfolios at the end of December. The all time high for this statistic is 51. PPG shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 36 hedge funds in our database with PPG holdings at the end of September. Our calculations also showed that PPG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

Phillip Gross of Adage Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s take a gander at the key hedge fund action surrounding PPG Industries, Inc. (NYSE:PPG).

Do Hedge Funds Think PPG Is A Good Stock To Buy Now?

At the end of December, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in PPG over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in PPG Industries, Inc. (NYSE:PPG) was held by Millennium Management, which reported holding $43.7 million worth of stock at the end of December. It was followed by Adage Capital Management with a $37.9 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Anomaly Capital Management. In terms of the portfolio weights assigned to each position Anomaly Capital Management allocated the biggest weight to PPG Industries, Inc. (NYSE:PPG), around 3.22% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 1.12 percent of its 13F equity portfolio to PPG.

Judging by the fact that PPG Industries, Inc. (NYSE:PPG) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of money managers who were dropping their positions entirely in the fourth quarter. Interestingly, Andrew Byington’s Appian Way Asset Management said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $11.6 million in stock, and Brian Sheehy’s Iszo Capital was right behind this move, as the fund dropped about $7 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds in the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks similar to PPG Industries, Inc. (NYSE:PPG). These stocks are RingCentral Inc (NYSE:RNG), Verisk Analytics, Inc. (NASDAQ:VRSK), Johnson Controls International plc (NYSE:JCI), TransDigm Group Incorporated (NYSE:TDG), Cummins Inc. (NYSE:CMI), Paychex, Inc. (NASDAQ:PAYX), and STMicroelectronics N.V. (NYSE:STM). This group of stocks’ market values are closest to PPG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $2201 million. That figure was $295 million in PPG’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 17 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 41.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and surpassed the market again by 0.4 percentage points. Unfortunately PPG wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PPG investors were disappointed as the stock returned 5.8% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.