We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of The Procter & Gamble Company (NYSE:PG) based on that data.
The Procter & Gamble Company (NYSE:PG) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that PG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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’ 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 41 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.
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action encompassing The Procter & Gamble Company (NYSE:PG).
What have hedge funds been doing with The Procter & Gamble Company (NYSE:PG)?
At the end of the fourth quarter, a total of 79 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PG over the last 18 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.
More specifically, Trian Partners was the largest shareholder of The Procter & Gamble Company (NYSE:PG), with a stake worth $4016.1 million reported as of the end of September. Trailing Trian Partners was Cedar Rock Capital, which amassed a stake valued at $1454.4 million. AQR Capital Management, Fisher Asset Management, and Yacktman Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to The Procter & Gamble Company (NYSE:PG), around 42.34% of its 13F portfolio. Cedar Rock Capital is also relatively very bullish on the stock, dishing out 32.92 percent of its 13F equity portfolio to PG.
As aggregate interest increased, some big names have jumped into The Procter & Gamble Company (NYSE:PG) headfirst. Ako Capital, managed by Nicolai Tangen, established the most outsized position in The Procter & Gamble Company (NYSE:PG). Ako Capital had $201 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $44.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Brian Scudieri’s Kehrs Ridge Capital, and Jack Woodruff’s Candlestick Capital Management.
Let’s now review hedge fund activity in other stocks similar to The Procter & Gamble Company (NYSE:PG). These stocks are Mastercard Incorporated (NYSE:MA), Exxon Mobil Corporation (NYSE:XOM), AT&T Inc. (NYSE:T), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market values match PG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MA | 125 | 14560784 | 0 |
| XOM | 63 | 2028251 | 8 |
| T | 50 | 1406918 | -1 |
| UNH | 91 | 7896286 | 3 |
| Average | 82.25 | 6473060 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 82.25 hedge funds with bullish positions and the average amount invested in these stocks was $6473 million. That figure was $10726 million in PG’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 50 bullish hedge fund positions. The Procter & Gamble Company (NYSE:PG) is not the least popular stock in this group but hedge fund interest is still below average. 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 lost 1.0% in 2020 through April 20th but beat the market by 11 percentage points. A small number of hedge funds were also right about betting on PG, though not to the same extent, as the stock returned -2.9% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
