Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze The Clorox Company (NYSE:CLX) from the perspective of those elite funds.
Is The Clorox Company (NYSE:CLX) the right investment to pursue these days? Investors who are in the know are buying. The number of long hedge fund bets inched up by 12 recently. Our calculations also showed that CLX isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the recent hedge fund action regarding The Clorox Company (NYSE:CLX).
Hedge fund activity in The Clorox Company (NYSE:CLX)
Heading into the fourth quarter of 2018, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 120% from the second quarter of 2018. On the other hand, there were a total of 22 hedge funds with a bullish position in CLX at the beginning of this year. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Cedar Rock Capital, managed by Andy Brown, holds the largest position in The Clorox Company (NYSE:CLX). Cedar Rock Capital has a $433.7 million position in the stock, comprising 10.7% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $350.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers that hold long positions include Cliff Asness’s AQR Capital Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Samlyn Capital, managed by Robert Pohly, initiated the largest call position in The Clorox Company (NYSE:CLX). Samlyn Capital had $30.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $23.9 million position during the quarter. The following funds were also among the new CLX investors: Jeffrey Talpins’s Element Capital Management, Joel Greenblatt’s Gotham Asset Management, and Anna Nikolayevsky’s Axel Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Clorox Company (NYSE:CLX) but similarly valued. We will take a look at iQIYI, Inc. (NASDAQ:IQ), KB Financial Group, Inc. (NYSE:KB), Cheniere Energy Partners LP (NYSEAMEX:CQP), and American Airlines Group Inc (NASDAQ:AAL). This group of stocks’ market valuations match CLX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IQ | 17 | 300499 | 0 |
| KB | 4 | 27227 | -3 |
| CQP | 4 | 14815 | 0 |
| AAL | 39 | 2800672 | 7 |
| Average | 16 | 785803 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $786 million. That figure was $1.00 billion in CLX’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 4 bullish hedge fund positions. The Clorox Company (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 AAL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
