"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Parker-Hannifin Corporation (NYSE:PH).
Parker-Hannifin Corporation (NYSE:PH) shareholders have witnessed a decrease in hedge fund interest recently. Our calculations also showed that PH isn't among the 30 most popular stocks among hedge funds.
If you'd ask most stock holders, hedge funds are assumed to be worthless, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, We look at the aristocrats of this group, about 750 funds. These investment experts shepherd bulk of all hedge funds' total asset base, and by tracking their inimitable picks, Insider Monkey has come up with many investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We're going to take a look at the key hedge fund action surrounding Parker-Hannifin Corporation (NYSE:PH).
How have hedgies been trading Parker-Hannifin Corporation (NYSE:PH)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2018. By comparison, 37 hedge funds held shares or bullish call options in PH a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked 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 $277.4 million position in the stock, comprising 1.5% of its 13F portfolio. Sitting at the No. 2 spot is Richard S. Pzena of Pzena Investment Management, with a $56.4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Ken Griffin's Citadel Investment Group, Cliff Asness's AQR Capital Management and John Overdeck and David Siegel's Two Sigma Advisors.
Since Parker-Hannifin Corporation (NYSE:PH) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies that elected to cut their positions entirely last quarter. At the top of the heap, Robert Bishop's Impala Asset Management dropped the largest position of all the hedgies followed by Insider Monkey, valued at close to $18.7 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also sold off its stock, about $8.7 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Parker-Hannifin Corporation (NYSE:PH). We will take a look at FirstEnergy Corp. (NYSE:FE), Centene Corp (NYSE:CNC), Verisk Analytics, Inc. (NASDAQ:VRSK), and M&T Bank Corporation (NYSE:MTB). All of these stocks' market caps are closest to PH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FE,41,3727862,2 CNC,58,2067914,2 VRSK,20,494091,-10 MTB,36,1236608,-6 Average,38.75,1881619,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $1882 million. That figure was $517 million in PH's case. Centene Corp (NYSE:CNC) is the most popular stock in this table. On the other hand Verisk Analytics, Inc. (NASDAQ:VRSK) is the least popular one with only 20 bullish hedge fund positions. Parker-Hannifin Corporation (NYSE:PH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PH investors were disappointed as the stock returned -8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.