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Colgate-Palmolive Company (CL): Are Hedge Funds Right About This Stock?

Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Colgate-Palmolive Company (NYSE:CL) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that CL 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’ 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

D. E. Shaw

We’re going to take a gander at the key hedge fund action regarding Colgate-Palmolive Company (NYSE:CL).

Hedge fund activity in Colgate-Palmolive Company (NYSE:CL)

At the end of the fourth quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CL over the last 14 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

CL_mar2019

Among these funds, D E Shaw held the most valuable stake in Colgate-Palmolive Company (NYSE:CL), which was worth $426.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $332.1 million worth of shares. Moreover, Lansdowne Partners, Two Sigma Advisors, and Alkeon Capital Management were also bullish on Colgate-Palmolive Company (NYSE:CL), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, some big names were breaking ground themselves. Lansdowne Partners, managed by Alex Snow, assembled the most valuable call position in Colgate-Palmolive Company (NYSE:CL). Lansdowne Partners had $238.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $76.4 million position during the quarter. The following funds were also among the new CL investors: Brandon Haley’s Holocene Advisors, Per Johanssoná’s Bodenholm Capital, and Benjamin Pass’s TOMS Capital.

Let’s now review hedge fund activity in other stocks similar to Colgate-Palmolive Company (NYSE:CL). We will take a look at Intuit Inc. (NASDAQ:INTU), EOG Resources Inc (NYSE:EOG), Schlumberger Limited. (NYSE:SLB), and Boston Scientific Corporation (NYSE:BSX). This group of stocks’ market valuations are similar to CL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INTU 39 1755219 -4
EOG 37 520441 0
SLB 52 1948982 -3
BSX 46 1700622 1
Average 43.5 1481316 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.5 hedge funds with bullish positions and the average amount invested in these stocks was $1481 million. That figure was $1866 million in CL’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand EOG Resources Inc (NYSE:EOG) is the least popular one with only 37 bullish hedge fund positions. Colgate-Palmolive Company (NYSE:CL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on CL, though not to the same extent, as the stock returned 13.7% and outperformed the market as well.

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

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