Were Hedge Funds Right About The Progressive Corporation (PGR)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards The Progressive Corporation (NYSE:PGR).

Is The Progressive Corporation (NYSE:PGR) a healthy stock for your portfolio? Money managers were becoming less confident. The number of long hedge fund bets decreased by 1 in recent months. The Progressive Corporation (NYSE:PGR) was in 50 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 53. Our calculations also showed that PGR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are many tools investors use to value their holdings. A couple of the less utilized tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform their index-focused peers by a superb amount (see the details here).

Glenn Greenberg of Brave Warrior Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Now we’re going to go over the recent hedge fund action encompassing The Progressive Corporation (NYSE:PGR).

Hedge fund activity in The Progressive Corporation (NYSE:PGR)

At second quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the first quarter of 2020. On the other hand, there were a total of 50 hedge funds with a bullish position in PGR a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the number one position in The Progressive Corporation (NYSE:PGR). Renaissance Technologies has a $203.7 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Brave Warrior Capital, managed by Glenn Greenberg, which holds a $141.8 million position; the fund has 7.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain John Armitage’s Egerton Capital Limited, Cliff Asness’s AQR Capital Management and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Steel Canyon Capital allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 8.61% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, designating 7.56 percent of its 13F equity portfolio to PGR.

Seeing as The Progressive Corporation (NYSE:PGR) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of funds that slashed their full holdings heading into Q3. Intriguingly, Andreas Halvorsen’s Viking Global cut the largest stake of the 750 funds watched by Insider Monkey, worth an estimated $154.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $70.7 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Progressive Corporation (NYSE:PGR) but similarly valued. We will take a look at Square, Inc. (NYSE:SQ), Relx PLC (NYSE:RELX), Analog Devices, Inc. (NASDAQ:ADI), Westpac Banking Corporation (NYSE:WBK), ConocoPhillips (NYSE:COP), Norfolk Southern Corp. (NYSE:NSC), and Waste Management, Inc. (NYSE:WM). This group of stocks’ market caps match PGR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1587 million. That figure was $1148 million in PGR’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. The Progressive Corporation (NYSE:PGR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PGR is 69.4. 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. 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 gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on PGR as the stock returned 18.4% since the end of Q2 (through 10/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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