Hedge Funds Are Selling The Progressive Corporation (PGR)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in The Progressive Corporation (NYSE:PGR)? The smart money sentiment can provide an answer to this question.

The Progressive Corporation (NYSE:PGR) has experienced a decrease in activity from the world’s largest hedge funds of late. The Progressive Corporation (NYSE:PGR) was in 44 hedge funds’ portfolios at the end of June. The all time high for this statistic is 53. Our calculations also showed that PGR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the 21st century investor’s toolkit there are a lot of indicators stock market investors put to use to size up publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the market by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Rajiv Jain of GQG Partners

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 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing The Progressive Corporation (NYSE:PGR).

Do Hedge Funds Think PGR Is A Good Stock To Buy Now?

At Q2’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the first quarter of 2020. By comparison, 50 hedge funds held shares or bullish call options in PGR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PGR A Good Stock To Buy?

The largest stake in The Progressive Corporation (NYSE:PGR) was held by Brave Warrior Capital, which reported holding $230.6 million worth of stock at the end of June. It was followed by AQR Capital Management with a $173.7 million position. Other investors bullish on the company included GQG Partners, Abrams Bison Investments, and BloombergSen. In terms of the portfolio weights assigned to each position Abrams Bison Investments allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 9.15% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, earmarking 7.92 percent of its 13F equity portfolio to PGR.

Judging by the fact that The Progressive Corporation (NYSE:PGR) has experienced falling interest from the smart money, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their positions entirely last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest investment of the 750 funds watched by Insider Monkey, worth close to $30 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund cut about $10.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to The Progressive Corporation (NYSE:PGR). These stocks are Humana Inc (NYSE:HUM), KE Holdings Inc (NYSE:BEKE), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), NXP Semiconductors NV (NASDAQ:NXPI), Honda Motor Co Ltd (NYSE:HMC), Global Payments Inc (NYSE:GPN), and Twitter Inc (NYSE:TWTR). This group of stocks’ market caps match PGR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUM 59 3257015 6
BEKE 31 2712876 -2
CRWD 66 7266652 -11
NXPI 52 1336949 -1
HMC 10 374945 -2
GPN 66 4858185 4
TWTR 89 6031488 -18
Average 53.3 3691159 -3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 53.3 hedge funds with bullish positions and the average amount invested in these stocks was $3691 million. That figure was $1338 million in PGR’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 bullish hedge fund positions. The Progressive Corporation (NYSE:PGR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PGR is 50.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and surpassed the market again by 5.6 percentage points. Unfortunately PGR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PGR investors were disappointed as the stock returned -7.3% since the end of June (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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