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Hedge Funds Are Losing Confidence in Procter & Gamble Company (PG)

Before we spend many hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We like to do so because the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of The Procter & Gamble Company (NYSE:PG).

Hedge fund ownership of The Procter & Gamble Company (NYSE:PG) declined over a quarter for the 4th time in the past 5 quarters during Q2. PG was in 44 hedge funds’ portfolios at the end of June, down from 46 quarter-over-quarter. One fund (or investment adviser in this case) that did still own the stock was Fisher Investments. In fact it ranked 17th among Billionaire Ken Fisher’s Top Stock Picks Heading Into 2019. Ken Fisher has suggested P&G needs more trendy brands that appeal to millenials, who seem to be shunning traditional products.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

TRIAN PARTNERS

What have hedge funds been doing with The Procter & Gamble Company (NYSE:PG)?

At Q3’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 4% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in PG over the last 6 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PG_nov2018

The largest stake in The Procter & Gamble Company (NYSE:PG) was held by Trian Partners, which reported holding $2.96 billion worth of stock at the end of June. It was followed by Yacktman Asset Management with a $1.21 billion position. Other investors bullish on the company included Cedar Rock Capital, Tremblant Capital, and Skybridge Capital.

Because The Procter & Gamble Company (NYSE:PG) has faced declining sentiment from the smart money, we can see that there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. Interestingly, Jim Simons’ Renaissance Technologies sold off the largest stake of all the hedgies tracked by Insider Monkey, valued at close to $213.4 million in call options, and Matthew Mark’s Jet Capital Investors was right behind this move, as the fund said goodbye to about $39.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Procter & Gamble Company (NYSE:PG) but similarly valued. These stocks are The Boeing Company (NYSE:BA), Toyota Motor Corporation (ADR) (NYSE:TM), Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), and HSBC Holdings plc (ADR) (NYSE:HSBC). This group of stocks’ market valuations are closest to PG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BA 53 3413748 -4
TM 13 163809 0
TSM 34 4129122 -1
HSBC 7 744124 -1

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $2.11 million. That figure was $7.18 billion in PG’s case. The Boeing Company (NYSE:BA) is the most popular stock in this table. On the other hand HSBC Holdings plc (ADR) (NYSE:HSBC) is the least popular one with only 7 bullish hedge fund positions. The Procter & Gamble Company (NYSE:PG) 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 BA might be a better candidate to consider a long position.

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

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