Were Hedge Funds Right About Betting On The Progressive Corporation (PGR)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Progressive Corporation (NYSE:PGR) and determine whether hedge funds had an edge regarding this stock.

The Progressive Corporation (NYSE:PGR) has experienced an increase in hedge fund sentiment recently. PGR was in 51 hedge funds’ portfolios at the end of the first quarter of 2020. There were 48 hedge funds in our database with PGR holdings at the end of the previous quarter. Our calculations also showed that PGR 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.

To most shareholders, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are over 8000 funds trading at the moment, Our experts choose to focus on the bigwigs of this club, around 850 funds. It is estimated that this group of investors have their hands on most of the smart money’s total capital, and by tracking their finest stock picks, Insider Monkey has revealed several investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Glenn Greenberg

Glenn Greenberg of Brave Warrior Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the latest hedge fund action surrounding The Progressive Corporation (NYSE:PGR).

How have hedgies been trading The Progressive Corporation (NYSE:PGR)?

At the end of the first quarter, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PGR over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of The Progressive Corporation (NYSE:PGR), with a stake worth $322.1 million reported as of the end of September. Trailing Renaissance Technologies was Viking Global, which amassed a stake valued at $154.2 million. Brave Warrior Capital, Egerton Capital Limited, and AQR Capital 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 Steel Canyon Capital allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 10.2% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, dishing out 9.77 percent of its 13F equity portfolio to PGR.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, assembled the most outsized position in The Progressive Corporation (NYSE:PGR). Viking Global had $154.2 million invested in the company at the end of the quarter. John Armitage’s Egerton Capital Limited also made a $110.3 million investment in the stock during the quarter. The following funds were also among the new PGR investors: Jonathan Bloomberg’s BloombergSen, Daniel Lascano’s Lomas Capital Management, and Daniel Johnson’s Gillson Capital.

Let’s check out hedge fund activity in other stocks similar to The Progressive Corporation (NYSE:PGR). These stocks are Vale SA (NYSE:VALE), The Sherwin-Williams Company (NYSE:SHW), Applied Materials, Inc. (NASDAQ:AMAT), and Pinduoduo Inc. (NASDAQ:PDD). This group of stocks’ market values resemble PGR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VALE 28 1111939 2
SHW 57 1511243 2
AMAT 56 2317608 -16
PDD 28 1671925 -4
Average 42.25 1653179 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $1653 million. That figure was $1506 million in PGR’s case. The Sherwin-Williams Company (NYSE:SHW) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 28 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. 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 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately PGR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PGR were disappointed as the stock returned 8.6% during the same time period 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 many of these stocks already outperformed the market so far this year.

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