Did Hedge Funds Make The Right Call On Parker-Hannifin Corporation (PH)?

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 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Parker-Hannifin Corporation (NYSE:PH) and determine whether the smart money was really smart about this stock.

Parker-Hannifin Corporation (NYSE:PH) shareholders have witnessed a decrease in hedge fund interest of late. PH was in 32 hedge funds’ portfolios at the end of March. There were 39 hedge funds in our database with PH positions at the end of the previous quarter. Our calculations also showed that PH 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To most traders, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are more than 8000 funds with their doors open today, We hone in on the top tier of this group, about 850 funds. These investment experts oversee most of the hedge fund industry’s total asset base, and by keeping track of their first-class investments, Insider Monkey has determined a number of investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum 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 .


Louis Bacon Moore of Moore Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 review the new hedge fund action encompassing Parker-Hannifin Corporation (NYSE:PH).

What have hedge funds been doing with Parker-Hannifin Corporation (NYSE:PH)?

At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PH over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Parker-Hannifin Corporation (NYSE:PH) was held by Citadel Investment Group, which reported holding $245.2 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $215.6 million position. Other investors bullish on the company included Holocene Advisors, D E Shaw, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to Parker-Hannifin Corporation (NYSE:PH), around 3.34% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, designating 2.26 percent of its 13F equity portfolio to PH.

Due to the fact that Parker-Hannifin Corporation (NYSE:PH) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds who sold off their entire stakes by the end of the first quarter. Intriguingly, Gregg Moskowitz’s Interval Partners sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $24.9 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund said goodbye to about $7.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Parker-Hannifin Corporation (NYSE:PH). These stocks are DocuSign, Inc. (NASDAQ:DOCU), Mettler-Toledo International Inc. (NYSE:MTD), LyondellBasell Industries NV (NYSE:LYB), and AMETEK, Inc. (NYSE:AME). All of these stocks’ market caps are closest to PH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOCU 47 1082768 14
MTD 31 616788 2
LYB 35 474610 -5
AME 33 639873 1
Average 36.5 703510 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $704 million. That figure was $889 million in PH’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand Mettler-Toledo International Inc. (NYSE:MTD) is the least popular one with only 31 bullish hedge fund positions. Parker-Hannifin Corporation (NYSE:PH) is not the least popular stock in this group but hedge fund interest is still below average. 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on PH as the stock returned 42.1% during the second quarter and outperformed the market by an even larger margin.

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