Should I Buy Donaldson Company, Inc. (DCI)?

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Donaldson Company, Inc. (NYSE:DCI) makes for a good investment right now.

Donaldson Company, Inc. (NYSE:DCI) has experienced an increase in enthusiasm from smart money in recent months. Donaldson Company, Inc. (NYSE:DCI) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 30. Our calculations also showed that DCI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Do Hedge Funds Think DCI Is A Good Stock To Buy Now?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in DCI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Impax Asset Management held the most valuable stake in Donaldson Company, Inc. (NYSE:DCI), which was worth $96.5 million at the end of the fourth quarter. On the second spot was Greenhouse Funds which amassed $36.4 million worth of shares. Millennium Management, GAMCO Investors, and AQR Capital 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 Greenhouse Funds allocated the biggest weight to Donaldson Company, Inc. (NYSE:DCI), around 3.9% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, setting aside 0.91 percent of its 13F equity portfolio to DCI.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Paloma Partners, managed by Donald Sussman, initiated the most valuable position in Donaldson Company, Inc. (NYSE:DCI). Paloma Partners had $1.4 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Karim Abbadi and Edward McBride’s Centiva Capital, Bruce Kovner’s Caxton Associates LP, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Donaldson Company, Inc. (NYSE:DCI) but similarly valued. We will take a look at Hill-Rom Holdings, Inc. (NYSE:HRC), Advanced Drainage Systems Inc. (NYSE:WMS), BRP Inc. (NASDAQ:DOOO), Euronet Worldwide, Inc. (NASDAQ:EEFT), Targa Resources Corp (NYSE:TRGP), Virgin Galactic Holdings, Inc. (NYSE:SPCE), and Tripadvisor Inc (NASDAQ:TRIP). All of these stocks’ market caps are closest to DCI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $279 million in DCI’s case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 17 bullish hedge fund positions. Donaldson Company, Inc. (NYSE:DCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DCI is 54.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on DCI, though not to the same extent, as the stock returned 12.5% since the end of Q1 (through July 9th) and outperformed the market.

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

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