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Hedge Funds Started Cashing Out Of The Procter & Gamble Company (PG)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of The Procter & Gamble Company (NYSE:PG) based on that data.

The Procter & Gamble Company (NYSE:PG) has seen a decrease in enthusiasm from smart money in recent months. PG was in 77 hedge funds’ portfolios at the end of the first quarter of 2020. There were 79 hedge funds in our database with PG holdings at the end of the previous quarter. Our calculations also showed that PG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TRIAN PARTNERS

Nelson Peltz of Trian Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 take a peek at the new hedge fund action surrounding The Procter & Gamble Company (NYSE:PG).

How have hedgies been trading The Procter & Gamble Company (NYSE:PG)?

At the end of the first quarter, a total of 77 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PG over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Procter & Gamble Company (NYSE:PG) was held by Trian Partners, which reported holding $3413.8 million worth of stock at the end of September. It was followed by Cedar Rock Capital with a $1230.8 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to The Procter & Gamble Company (NYSE:PG), around 49.2% of its 13F portfolio. Cedar Rock Capital is also relatively very bullish on the stock, dishing out 32.94 percent of its 13F equity portfolio to PG.

Since The Procter & Gamble Company (NYSE:PG) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who sold off their full holdings heading into Q4. At the top of the heap, Rajiv Jain’s GQG Partners dropped the largest stake of the 750 funds followed by Insider Monkey, comprising about $276 million in stock. Michael Kharitonov and Jon David McAuliffe’s fund, Voleon Capital, also dumped its stock, about $15.9 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to The Procter & Gamble Company (NYSE:PG). These stocks are Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Mastercard Incorporated (NYSE:MA), UnitedHealth Group Inc. (NYSE:UNH), and Intel Corporation (NASDAQ:INTC). All of these stocks’ market caps are similar to PG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSM 54 4298613 -9
MA 139 11896575 14
UNH 104 6665163 13
INTC 73 5958759 15
Average 92.5 7204778 8.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 92.5 hedge funds with bullish positions and the average amount invested in these stocks was $7205 million. That figure was $9519 million in PG’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the least popular one with only 54 bullish hedge fund positions. The Procter & Gamble Company (NYSE:PG) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately PG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PG investors were disappointed as the stock returned 3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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