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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Parker-Hannifin Corporation (NYSE:PH) to find out whether there were any major changes in hedge funds' views.
Is PH stock a buy or sell? Parker-Hannifin Corporation (NYSE:PH) was in 56 hedge funds' portfolios at the end of December. The all time high for this statistic is 51. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PH has seen an increase in support from the world's most elite money managers of late. There were 51 hedge funds in our database with PH positions at the end of the third quarter. Our calculations also showed that PH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Now let's take a gander at the fresh hedge fund action surrounding Parker-Hannifin Corporation (NYSE:PH).
Do Hedge Funds Think PH Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in PH over the last 22 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Viking Global held the most valuable stake in Parker-Hannifin Corporation (NYSE:PH), which was worth $458.5 million at the end of the fourth quarter. On the second spot was Diamond Hill Capital which amassed $367.7 million worth of shares. 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 5.58% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, dishing out 3.8 percent of its 13F equity portfolio to PH.
Now, some big names have jumped into Parker-Hannifin Corporation (NYSE:PH) headfirst. ZWEIG DIMENNA PARTNERS, managed by Joe DiMenna, created the largest position in Parker-Hannifin Corporation (NYSE:PH). ZWEIG DIMENNA PARTNERS had $16.1 million invested in the company at the end of the quarter. Mario Gabelli's GAMCO Investors also initiated a $2.8 million position during the quarter. The other funds with brand new PH positions are Alexander Becker's Codex Capital, Jinghua Yan's TwinBeech Capital, and Nehal Chopra's Ratan Capital Group.
Let's check out 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 Ford Motor Company (NYSE:F), Trane Technologies plc (NYSE:TT), Centene Corporation (NYSE:CNC), Xilinx, Inc. (NASDAQ:XLNX), Lloyds Banking Group PLC (NYSE:LYG), Barclays PLC (NYSE:BCS), and eBay Inc (NASDAQ:EBAY). This group of 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 F,41,1652221,3 TT,34,998785,-3 CNC,56,2646289,-2 XLNX,66,3837083,20 LYG,5,4389,0 BCS,12,62951,6 EBAY,53,4009566,3 Average,38.1,1887326,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1887 million. That figure was $1602 million in PH's case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 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 81.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on PH as the stock returned 14.5% since the end of Q4 (through 3/19) 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.