The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards The Clorox Company (NYSE:CLX).
Is CLX a good stock to buy now? The Clorox Company (NYSE:CLX) has experienced an increase in hedge fund sentiment in recent months. The Clorox Company (NYSE:CLX) was in 39 hedge funds’ portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that CLX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s take a look at the key hedge fund action surrounding The Clorox Company (NYSE:CLX).
Do Hedge Funds Think CLX Is A Good Stock To Buy Now?
At third quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. By comparison, 37 hedge funds held shares or bullish call options in CLX 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.
More specifically, Renaissance Technologies was the largest shareholder of The Clorox Company (NYSE:CLX), with a stake worth $496.5 million reported as of the end of September. Trailing Renaissance Technologies was Cedar Rock Capital, which amassed a stake valued at $456.1 million. AQR Capital Management, Arrowstreet Capital, and Millennium Management 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 Cedar Rock Capital allocated the biggest weight to The Clorox Company (NYSE:CLX), around 10.38% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 1.67 percent of its 13F equity portfolio to CLX.
Now, specific money managers have been driving this bullishness. AlphaCrest Capital Management, managed by Mika Toikka, initiated the most valuable position in The Clorox Company (NYSE:CLX). AlphaCrest Capital Management had $2.9 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $2.8 million position during the quarter. The other funds with brand new CLX positions are Jinghua Yan’s TwinBeech Capital, Qing Li’s Sciencast Management, and Ran Pang’s Quantamental Technologies.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Clorox Company (NYSE:CLX) but similarly valued. These stocks are Ford Motor Company (NYSE:F), Carrier Global Corporation (NYSE:CARR), Hormel Foods Corporation (NYSE:HRL), The Kroger Co. (NYSE:KR), American Water Works Company, Inc. (NYSE:AWK), HP Inc. (NYSE:HPQ), and Consolidated Edison, Inc. (NYSE:ED). All of these stocks’ market caps match CLX’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 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $1167 million. That figure was $1898 million in CLX’s case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Consolidated Edison, Inc. (NYSE:ED) is the least popular one with only 18 bullish hedge fund positions. The Clorox Company (NYSE:CLX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLX is 70.4. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately CLX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLX were disappointed as the stock returned -2.8% since the end of September (through 12/18) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.