Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Church & Dwight Co., Inc. (NYSE:CHD).
Church & Dwight Co., Inc. (NYSE:CHD) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare CHD to other stocks including Discovery Communications Inc. (NASDAQ:DISCA), Cincinnati Financial Corporation (NASDAQ:CINF), and MGM Resorts International (NYSE:MGM) to get a better sense of its popularity.
In the 21st century investor’s toolkit there are a lot of metrics market participants use to assess their stock investments. A pair of the most underrated metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top money managers can outclass their index-focused peers by a very impressive margin (see the details here).
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 let’s review the latest hedge fund action regarding Church & Dwight Co., Inc. (NYSE:CHD).
How have hedgies been trading Church & Dwight Co., Inc. (NYSE:CHD)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CHD 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.
The largest stake in Church & Dwight Co., Inc. (NYSE:CHD) was held by Renaissance Technologies, which reported holding $63.6 million worth of stock at the end of September. It was followed by AQR Capital Management with a $62.3 million position. Other investors bullish on the company included Echo Street Capital Management, Arrowstreet Capital, and Winton Capital Management. In terms of the portfolio weights assigned to each position Arjuna Capital allocated the biggest weight to Church & Dwight Co., Inc. (NYSE:CHD), around 2.01% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.51 percent of its 13F equity portfolio to CHD.
Due to the fact that Church & Dwight Co., Inc. (NYSE:CHD) has witnessed bearish sentiment from the smart money, it’s easy to see that there lies a certain “tier” of funds that elected to cut their entire stakes in the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, totaling about $47.3 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $45.5 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Church & Dwight Co., Inc. (NYSE:CHD). These stocks are Discovery Communications Inc. (NASDAQ:DISCA), Cincinnati Financial Corporation (NASDAQ:CINF), MGM Resorts International (NYSE:MGM), and Nucor Corporation (NYSE:NUE). All of these stocks’ market caps match CHD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $825 million. That figure was $360 million in CHD’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Nucor Corporation (NYSE:NUE) is the least popular one with only 26 bullish hedge fund positions. Church & Dwight Co., Inc. (NYSE:CHD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on CHD as the stock returned -13.8% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.