At a time when the S&P 500 is up over 1%, shares of Procter & Gamble Co (NYSE:PG), AT&T Inc. (NYSE:T), State Street Corp (NYSE:STT), and VF Corp (NYSE:VFC) are trending on various bits of news. Let’s take a closer look at the catalysts that sparked their moves on Friday.
First, a little about ourselves. We at Insider Monkey pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Procter & Gamble Co (NYSE:PG) is up by 3% after reporting first quarter of fiscal 2016 earnings of $0.98 per share on revenues of $16.53 billion, beating EPS estimates by $0.03, but missing revenue estimates by $640 million. Revenue missed because of the strong dollar, while profits beat expectations because management is doing a good job at realizing productivity savings. Core operating profit margin rose by 2.7 percentage points, while currency-neutral core EPS increased 12% year-over-year. Management expects organic sales for the fiscal year of 2016 to be in-line to up to low single digit percentage points above that of fiscal year 2015.
With a forward P/E of 17.38 and dividend yield of 3.54%, Procter & Gamble Co (NYSE:PG) is a good long term holding. The company has many world-leading billion dollar brands, a wide moat, and is a dividend aristocrat, having increased the dividend payout for at least 25 years. A total of 58 funds, out of the around 730 we track, reported stakes worth $9.64 billion (representing 4.50% of the float) in the previous round of 13F filings. Among them, Warren Buffett‘s Berkshire Hathaway owned 52.79 million shares at the end of June.
AT&T Inc. (NYSE:T) jumped 2.33% in pre-market (but has since retracted), after the telecom reported third quarter earnings of $0.74 per share on revenues of $39.1 billion, beating earnings estimates by $0.05 per share, but missing revenue expectations by $1.32 billion. The company added 2.5 million domestic wireless subscribers and 192,000 broadband users in the quarter. Cash from operations was $10.8 billion, while free cash flow stood at $5.5 billion. The company’s outlook is solid, with management expecting EPS to come in at $2.68 – $2.74, higher than current analyst estimates of $2.64.
Given its 5.5% of yield and wide moat, AT&T Inc. (NYSE:T) has been a favorite among dividend investors for many years and this quarterly’s earnings report certainly won’t change that. AT&T Inc. (NYSE:T) ‘s dividend stream is safe, although rising treasury yields might cap gains in the short term. Hedge funds were mixed on AT&T Inc. (NYSE:T) in the time period from March 31 to June 30. Although the number of funds increased to 49 from 43, the total value of their holdings in the stock declined to $1.6 billion (representing just 0.90%% of the float).
In the next page, we analyze why State Street and V F Corp are trending.