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Should I Avoid The Progressive Corporation (PGR)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded The Progressive Corporation (NYSE:PGR) and determine whether the smart money was really smart about this stock.

The Progressive Corporation (NYSE:PGR) was in 50 hedge funds’ portfolios at the end of June. The all time high for this statistics is 51. PGR shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 51 hedge funds in our database with PGR holdings at the end of March. Our calculations also showed that PGR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Glenn Greenberg

Glenn Greenberg of Brave Warrior Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a gander at the key hedge fund action regarding The Progressive Corporation (NYSE:PGR).

How are hedge funds trading The Progressive Corporation (NYSE:PGR)?

At the end of the second quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PGR over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in The Progressive Corporation (NYSE:PGR), worth close to $203.7 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Brave Warrior Capital, managed by Glenn Greenberg, which holds a $141.8 million position; 7.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism encompass John Armitage’s Egerton Capital Limited, Cliff Asness’s AQR Capital Management and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Steel Canyon Capital allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 8.61% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, setting aside 7.56 percent of its 13F equity portfolio to PGR.

Since The Progressive Corporation (NYSE:PGR) has witnessed falling interest from the smart money, logic holds that there is a sect of money managers that elected to cut their full holdings by the end of the second quarter. Interestingly, Andreas Halvorsen’s Viking Global cut the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $154.2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $70.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Progressive Corporation (NYSE:PGR) but similarly valued. We will take a look at Square, Inc. (NYSE:SQ), Relx PLC (NYSE:RELX), Analog Devices, Inc. (NASDAQ:ADI), Westpac Banking Corporation (NYSE:WBK), ConocoPhillips (NYSE:COP), Norfolk Southern Corp. (NYSE:NSC), and Waste Management, Inc. (NYSE:WM). 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
SQ 66 3487480 10
RELX 6 118963 1
ADI 49 2849471 4
WBK 4 28400 -5
COP 44 912521 -10
NSC 47 867199 -4
WM 39 2844869 -1
Average 36.4 1586986 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1587 million. That figure was $1148 million in PGR’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. The Progressive Corporation (NYSE:PGR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PGR is 70.5. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on PGR as the stock returned 18.8% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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