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Hedge Funds Are Selling The Progressive Corporation (PGR)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like The Progressive Corporation (NYSE:PGR).

The Progressive Corporation (NYSE:PGR) was in 48 hedge funds’ portfolios at the end of September. PGR investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 50 hedge funds in our database with PGR positions at the end of the previous quarter. Our calculations also showed that PGR isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action surrounding The Progressive Corporation (NYSE:PGR).

How have hedgies been trading The Progressive Corporation (NYSE:PGR)?

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the second quarter of 2019. On the other hand, there were a total of 45 hedge funds with a bullish position in PGR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PGR_nov2019

Among these funds, Renaissance Technologies held the most valuable stake in The Progressive Corporation (NYSE:PGR), which was worth $446.1 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $220.2 million worth of shares. Two Sigma Advisors, D E Shaw, and Ariel Investments 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 Steel Canyon Capital allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 12.12% of its portfolio. One Tusk Investment Partners is also relatively very bullish on the stock, dishing out 8.48 percent of its 13F equity portfolio to PGR.

Seeing as The Progressive Corporation (NYSE:PGR) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies that slashed their full holdings by the end of the third quarter. It’s worth mentioning that Christopher James’s Partner Fund Management dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $52.2 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund dropped about $6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s now review 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 Illumina, Inc. (NASDAQ:ILMN), Baxter International Inc. (NYSE:BAX), Las Vegas Sands Corp. (NYSE:LVS), and Metlife Inc (NYSE:MET). This group of stocks’ market valuations are closest to PGR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ILMN 37 1183062 -6
BAX 33 2445089 -1
LVS 39 1983338 0
MET 35 2050364 9
Average 36 1915463 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1915 million. That figure was $1563 million in PGR’s case. Las Vegas Sands Corp. (NYSE:LVS) is the most popular stock in this table. On the other hand Baxter International Inc. (NYSE:BAX) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks The Progressive Corporation (NYSE:PGR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PGR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PGR were disappointed as the stock returned -8.2% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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