Was The Smart Money Right About Danaher Corporation (DHR)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 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 Danaher Corporation (NYSE:DHR).

Is Danaher Corporation (NYSE:DHR) a healthy stock for your portfolio? The best stock pickers were taking a bearish view. The number of long hedge fund positions were trimmed by 3 in recent months. Danaher Corporation (NYSE:DHR) was in 78 hedge funds’ portfolios at the end of June. The all time high for this statistic is 81. Our calculations also showed that DHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 81 hedge funds in our database with DHR positions at the end of the first quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Ken Fisher of Fisher Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to go over the latest hedge fund action encompassing Danaher Corporation (NYSE:DHR).

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

At Q2’s end, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 76 hedge funds with a bullish position in DHR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Danaher Corporation (NYSE:DHR), which was worth $892.2 million at the end of the second quarter. On the second spot was Third Point which amassed $768.9 million worth of shares. D1 Capital Partners, Akre Capital Management, and Impax Asset 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 Intermede Investment Partners allocated the biggest weight to Danaher Corporation (NYSE:DHR), around 5.66% of its 13F portfolio. Columbus Point is also relatively very bullish on the stock, setting aside 5.05 percent of its 13F equity portfolio to DHR.

Seeing as Danaher Corporation (NYSE:DHR) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds that slashed their entire stakes heading into Q3. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors dropped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $67.4 million in stock. Simon Sadler’s fund, Segantii Capital, also said goodbye to its stock, about $14.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Danaher Corporation (NYSE:DHR). These stocks are Wells Fargo & Company (NYSE:WFC), Accenture Plc (NYSE:ACN), BHP Group (NYSE:BHP), Shopify Inc (NYSE:SHOP), United Parcel Service, Inc. (NYSE:UPS), T-Mobile US, Inc. (NASDAQ:TMUS), and Texas Instruments Incorporated (NASDAQ:TXN). This group of stocks’ market values are closest to DHR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WFC 94 7083950 -2
ACN 52 3151789 4
BHP 18 752906 0
SHOP 85 13978469 -6
UPS 52 2188804 8
TMUS 100 8020682 2
TXN 50 2468540 8
Average 64.4 5377877 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 64.4 hedge funds with bullish positions and the average amount invested in these stocks was $5378 million. That figure was $6415 million in DHR’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Danaher Corporation (NYSE:DHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DHR is 67.5. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on DHR as the stock returned 16.3% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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