While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Parker-Hannifin Corporation (NYSE:PH).
Is PH a good stock to buy now? Money managers were in a bullish mood. The number of bullish hedge fund positions advanced by 12 lately. Parker-Hannifin Corporation (NYSE:PH) was in 51 hedge funds’ portfolios at the end of September. The all time high for this statistics is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 39 hedge funds in our database with PH holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a multitude of gauges market participants use to grade their holdings. A couple of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite fund managers can outpace the broader indices by a very impressive amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. With all of this in mind we’re going to review the fresh hedge fund action regarding Parker-Hannifin Corporation (NYSE:PH).
Hedge fund activity in Parker-Hannifin Corporation (NYSE:PH)
At Q3’s end, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PH over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Viking Global was the largest shareholder of Parker-Hannifin Corporation (NYSE:PH), with a stake worth $509.6 million reported as of the end of September. Trailing Viking Global was Diamond Hill Capital, which amassed a stake valued at $351.7 million. Citadel Investment Group, Holocene Advisors, and Millennium Management 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 Albar Capital allocated the biggest weight to Parker-Hannifin Corporation (NYSE:PH), around 5.69% of its 13F portfolio. Iszo Capital is also relatively very bullish on the stock, earmarking 5.69 percent of its 13F equity portfolio to PH.
As aggregate interest increased, key hedge funds have been driving this bullishness. Renaissance Technologies, created the most outsized position in Parker-Hannifin Corporation (NYSE:PH). Renaissance Technologies had $67.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $45.2 million position during the quarter. The other funds with new positions in the stock are Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Zach Schreiber’s Point State Capital, and Principal Global Investors’s Columbus Circle Investors.
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. We will take a look at Liberty Broadband Corp (NASDAQ:LBRDK), NIO Inc. (NYSE:NIO), Microchip Technology Incorporated (NASDAQ:MCHP), AFLAC Incorporated (NYSE:AFL), Stanley Black & Decker, Inc. (NYSE:SWK), Fresenius Medical Care AG & Co. (NYSE:FMS), and Fastenal Company (NASDAQ:FAST). This group of stocks’ market valuations are similar to PH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1168 million. That figure was $2051 million in PH’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 9 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 overall hedge fund sentiment score for PH is 84.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on PH as the stock returned 34% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.