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Were Hedge Funds Right About Piling Into Danaher Corporation (DHR)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. 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 Danaher Corporation (NYSE:DHR) and determine whether the smart money was really smart about this stock.

Is Danaher Corporation (NYSE:DHR) ready to rally soon? Hedge funds were taking an optimistic view. The number of bullish hedge fund bets increased by 2 recently. Our calculations also showed that DHR 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). DHR was in 63 hedge funds’ portfolios at the end of the first quarter of 2020. There were 61 hedge funds in our database with DHR holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are several gauges stock traders use to value publicly traded companies. A pair of the less known gauges are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce their index-focused peers by a significant margin (see the details here).

Dan Loeb THIRD POINT

Dan Loeb of Third Point

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. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Danaher Corporation (NYSE:DHR).

Hedge fund activity in Danaher Corporation (NYSE:DHR)

At the end of the first quarter, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the fourth quarter of 2019. On the other hand, there were a total of 58 hedge funds with a bullish position in DHR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, D1 Capital Partners held the most valuable stake in Danaher Corporation (NYSE:DHR), which was worth $537.2 million at the end of the third quarter. On the second spot was Third Point which amassed $494.1 million worth of shares. Citadel Investment Group, Fisher Asset Management, and Akre 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 Eversept Partners allocated the biggest weight to Danaher Corporation (NYSE:DHR), around 8.21% of its 13F portfolio. Third Point is also relatively very bullish on the stock, setting aside 7.89 percent of its 13F equity portfolio to DHR.

As industrywide interest jumped, key money managers have jumped into Danaher Corporation (NYSE:DHR) headfirst. D1 Capital Partners, managed by Daniel Sundheim, assembled the biggest position in Danaher Corporation (NYSE:DHR). D1 Capital Partners had $537.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $132.8 million investment in the stock during the quarter. The following funds were also among the new DHR investors: Brandon Haley’s Holocene Advisors, Alexander Mitchell’s Scopus Asset Management, and D. E. Shaw’s D E Shaw.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Danaher Corporation (NYSE:DHR) but similarly valued. These stocks are American Tower Corporation (REIT) (NYSE:AMT), TOTAL S.A. (NYSE:TOT), Lockheed Martin Corporation (NYSE:LMT), and GlaxoSmithKline plc (NYSE:GSK). This group of stocks’ market caps match DHR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMT 57 3819731 11
TOT 12 836773 -5
LMT 55 1505572 8
GSK 27 1953128 1
Average 37.75 2028801 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $2029 million. That figure was $3194 million in DHR’s case. American Tower Corporation (REIT) (NYSE:AMT) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Danaher Corporation (NYSE:DHR) is more popular among hedge funds. 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 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on DHR, though not to the same extent, as the stock returned 24.5% in Q2 (through June 25th) and outperformed the market as well.

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