Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at PPG Industries, Inc. (NYSE:PPG) from the perspective of those elite funds.
PPG Industries, Inc. (NYSE:PPG) investors should pay attention to a decrease in support from the world’s most elite money managers lately. At the end of this article we will also compare PPG to other stocks including Liberty Global Inc. (NASDAQ:LBTYA), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), and Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, let’s review the recent action regarding PPG Industries, Inc. (NYSE:PPG).
Hedge fund activity in PPG Industries, Inc. (NYSE:PPG)
Heading into the fourth quarter of 2016, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Columbus Circle Investors, managed by Principal Global Investors, holds the largest position in PPG Industries, Inc. (NYSE:PPG). Columbus Circle Investors has a $136.6 million position in the stock, comprising 1.5% of its 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $89.6 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of David Cohen and Harold Levy’s Iridian Asset Management, Cliff Asness’ AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Because PPG Industries, Inc. (NYSE:PPG) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds who were dropping their positions entirely heading into Q4. It’s worth mentioning that David Tepper’s Appaloosa Management LP cut the largest stake of the 700 funds tracked by Insider Monkey, valued at close to $22.6 million in stock, and Robert Polak’s Anchor Bolt Capital was right behind this move, as the fund dropped about $18 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PPG Industries, Inc. (NYSE:PPG) but similarly valued. We will take a look at Liberty Global Inc. (NASDAQ:LBTYA), Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), Eaton Corporation, PLC Ordinary Shares (NYSE:ETN), and Health Care REIT, Inc. (NYSE:HCN). This group of stocks’ market caps are similar to PPG’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $872 million. That figure was $726 million in PPG’s case. Liberty Global Inc. (NASDAQ:LBTYA) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) is the least popular one with only 10 bullish hedge fund positions. PPG Industries, Inc. (NYSE:PPG) 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 LBTYA might be a better candidate to consider a long position.