Hedge Funds Are Dumping Parker-Hannifin Corp (PH)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Parker-Hannifin Corp (NYSE:PH).

Parker-Hannifin Corp (NYSE:PH) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. PH was in 27 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with PH holdings at the end of the previous quarter. At the end of this article we will also compare PH to other stocks including Entergy Corporation (NYSE:ETR), DENTSPLY International Inc. (NASDAQ:XRAY), and Henry Schein, Inc. (NASDAQ:HSIC) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Parker-Hannifin Corporation (NYSE:PH)?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 13% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Parker-Hannifin Corp (NYSE:PH). Pzena Investment Management has a $440.5 million position in the stock, comprising 2.7% of its 13F portfolio. The second largest stake is held by Diamond Hill Capital, managed by Ric Dillon, which holds a $258.4 million position; 1.6% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Cliff Asness’ AQR Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Robert Polak’s Anchor Bolt Capital.

Judging by the fact that Parker-Hannifin Corporation (NYSE:PH) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies that slashed their positions entirely last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, valued at about $26.2 million in stock. Christopher A. Winham’s fund, Tide Point Capital, also sold off its stock, about $16.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Parker-Hannifin Corp (NYSE:PH). We will take a look at Entergy Corporation (NYSE:ETR), DENTSPLY International Inc. (NASDAQ:XRAY), Henry Schein, Inc. (NASDAQ:HSIC), and Royal Caribbean Cruises Ltd. (NYSE:RCL). This group of stocks’ market valuations are closest to PH’s market valuation.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $841 million. That figure was $1.33 billion in PH’s case. DENTSPLY International Inc. (NASDAQ:XRAY) is the most popular stock in this table. On the other hand Henry Schein, Inc. (NASDAQ:HSIC) is the least popular one with only 23 bullish hedge fund positions. Parker-Hannifin Corp (NYSE:PH) 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 XRAY might be a better candidate to consider a long position.

Disclosure: None