Was The Smart Money Right About Progressive Corporation (PGR)?
The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded The Progressive Corporation (NYSE:PGR) based on those filings.
Is The Progressive Corporation (NYSE:PGR) worth your attention right now? The smart money was getting more optimistic. The number of bullish hedge fund positions moved up by 1 lately. The Progressive Corporation (NYSE:PGR) was in 48 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 53. Our calculations also showed that PGR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 47 hedge funds in our database with PGR holdings at the end of September.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Glenn Greenberg of Brave Warrior Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a glance at the recent hedge fund action regarding The Progressive Corporation (NYSE:PGR).
Do Hedge Funds Think PGR Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in PGR over the last 22 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GQG Partners was the largest shareholder of The Progressive Corporation (NYSE:PGR), with a stake worth $414.9 million reported as of the end of December. Trailing GQG Partners was Egerton Capital Limited, which amassed a stake valued at $298.2 million. Brave Warrior Capital, AQR Capital Management, and Abrams Bison Investments 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 Abrams Bison Investments allocated the biggest weight to The Progressive Corporation (NYSE:PGR), around 10.28% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, dishing out 6.78 percent of its 13F equity portfolio to PGR.
As one would reasonably expect, key hedge funds have jumped into The Progressive Corporation (NYSE:PGR) headfirst. Viking Global, managed by Andreas Halvorsen, initiated the most outsized position in The Progressive Corporation (NYSE:PGR). Viking Global had $88.5 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $4.3 million position during the quarter. The following funds were also among the new PGR investors: Nicholas Bagnall's Te Ahumairangi Investment Management, Qing Li's Sciencast Management, and Mitch Rubin's RiverPark Advisors.
Let's check out hedge fund activity in other stocks similar to The Progressive Corporation (NYSE:PGR). These stocks are Ferrari N.V. (NYSE:RACE), ABB Ltd (NYSE:ABB), Workday Inc (NASDAQ:WDAY), Takeda Pharmaceutical Company Limited (NYSE:TAK), Edwards Lifesciences Corporation (NYSE:EW), PetroChina Company Limited (NYSE:PTR), and Itau Unibanco Holding SA (NYSE:ITUB). This group of stocks' market valuations are closest to PGR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RACE,29,1527088,-2 ABB,8,467566,-5 WDAY,80,4443166,6 TAK,18,835529,-1 EW,38,1243466,-8 PTR,5,61529,-1 ITUB,19,451744,3 Average,28.1,1290013,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $1290 million. That figure was $1745 million in PGR's case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 5 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 61.8. 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. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 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 7% since the end of December (through 4/30) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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