The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards PPG Industries, Inc. (NYSE:PPG) and see how it was affected.
PPG Industries, Inc. (NYSE:PPG) was in 51 hedge funds’ portfolios at the end of September. PPG has experienced an increase in hedge fund sentiment lately. There were 46 hedge funds in our database with PPG positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as McGraw Hill Financial Inc (NYSE:MHFI), Kellogg Company (NYSE:K), and Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT) to gather more data points.
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In the 21st century investor’s toolkit there are many gauges investors have at their disposal to value stocks. A duo of the most innovative gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the S&P 500 by a very impressive amount (see the details here).
With all of this in mind, let’s review the key action regarding PPG Industries, Inc. (NYSE:PPG).
Hedge fund activity in PPG Industries, Inc. (NYSE:PPG)
At the end of the third quarter, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the largest position in PPG Industries, Inc. (NYSE:PPG). Citadel Investment Group has a $299.5 million position in the stock, comprising 0.3% of its 13F portfolio. On Citadel Investment Group’s heels is Columbus Circle Investors, holding a $247.6 million position; the fund has 2% of its 13F portfolio invested in the stock. Other peers that are bullish comprise Israel Englander’s Millennium Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Steve Cohen’s Point72 Asset Management.
Consequently, key hedge funds have been driving this bullishness. Tourbillon Capital Partners, managed by Jason Karp, created the largest call position in PPG Industries, Inc. (NYSE:PPG). Tourbillon Capital Partners had $35.1 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $30.6 million position during the quarter. The following funds were also among the new PPG investors: Jason Karp’s Tourbillon Capital Partners, Don Morgan’s Brigade Capital, and Clint Murray’s Lodge Hill Capital.
Let’s now take a look at 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 McGraw Hill Financial Inc (NYSE:MHFI), Kellogg Company (NYSE:K), Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT), and The Allstate Corporation (NYSE:ALL). This group of stocks’ market values are closest to PPG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MHFI | 56 | 2584172 | 5 |
| K | 30 | 778773 | 8 |
| CHT | 9 | 81505 | 4 |
| ALL | 39 | 1529914 | -1 |
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $1244 million. That figure was $1625 million in PPG’s case. McGraw Hill Financial Inc (NYSE:MHFI) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT) is the least popular one with only 9 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 MHFI might be a better candidate to consider a long position.
