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Is Parker-Hannifin Corporation (PH) A Good Stock To Buy?

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. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 28th, 2019. What do these smart investors think about Parker-Hannifin Corporation (NYSE:PH)?

Parker-Hannifin Corporation (NYSE:PH) has seen a decrease in hedge fund interest of late. Our calculations also showed that PH isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the key hedge fund action surrounding Parker-Hannifin Corporation (NYSE:PH).

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

At Q2’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PH over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

PH_oct2019

When looking at the institutional investors followed by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the most valuable position in Parker-Hannifin Corporation (NYSE:PH). Diamond Hill Capital has a $266.6 million position in the stock, comprising 1.4% of its 13F portfolio. The second most bullish fund manager is Richard S. Pzena of Pzena Investment Management, with a $55.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group.

Since Parker-Hannifin Corporation (NYSE:PH) has faced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers who sold off their positions entirely by the end of the second quarter. At the top of the heap, Clint Murray’s Lodge Hill Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, comprising about $15.2 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund said goodbye to about $7.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Parker-Hannifin Corporation (NYSE:PH) but similarly valued. These stocks are Mettler-Toledo International Inc. (NYSE:MTD), Imperial Oil Limited (NYSEAMEX:IMO), McCormick & Company, Incorporated (NYSE:MKC), and American Water Works Company, Inc. (NYSE:AWK). This group of stocks’ market valuations match PH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTD 20 318889 2
IMO 12 48343 -5
MKC 30 214802 6
AWK 23 493606 -5
Average 21.25 268910 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $566 million in PH’s case. McCormick & Company, Incorporated (NYSE:MKC) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSEAMEX:IMO) is the least popular one with only 12 bullish hedge fund positions. Parker-Hannifin Corporation (NYSE:PH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on PH as the stock returned 6.8% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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