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

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In this article you are going to find out whether hedge funds think Danaher Corporation (NYSE:DHR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Danaher Corporation (NYSE:DHR) was in 81 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 76. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. DHR has experienced an increase in hedge fund sentiment in recent months. There were 75 hedge funds in our database with DHR holdings at the end of September. Our calculations also showed that DHR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Charles Akre Akre Capital Management
Charles Akre Akre Capital Management

Charles Akre of Akre Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now we're going to view the latest hedge fund action encompassing Danaher Corporation (NYSE:DHR).

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

Heading into the first quarter of 2021, a total of 81 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the third quarter of 2020. On the other hand, there were a total of 61 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.

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Danaher Corporation (NYSE:DHR). Fisher Asset Management has a $686.8 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Third Point, managed by Dan Loeb, which holds a $666.4 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Daniel Sundheim's D1 Capital Partners, Charles Akre's Akre Capital Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Third Point allocated the biggest weight to Danaher Corporation (NYSE:DHR), around 5.14% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, earmarking 4.59 percent of its 13F equity portfolio to DHR.

As aggregate interest increased, specific money managers have been driving this bullishness. 11 Capital Partners, managed by Jason McDougall, initiated the most valuable position in Danaher Corporation (NYSE:DHR). 11 Capital Partners had $14.3 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $13.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Matthew Tewksbury's Stevens Capital Management.

Let's now take a look at hedge fund activity in other stocks similar to Danaher Corporation (NYSE:DHR). These stocks are Medtronic plc (NYSE:MDT), SAP SE (NYSE:SAP), NextEra Energy, Inc. (NYSE:NEE), Texas Instruments Incorporated (NASDAQ:TXN), Honeywell International Inc. (NYSE:HON), United Parcel Service, Inc. (NYSE:UPS), and Union Pacific Corporation (NYSE:UNP). This group of stocks' market values match DHR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDT,59,2814949,-3 SAP,14,1390775,-2 NEE,61,3078288,-3 TXN,56,2497473,1 HON,45,983560,4 UPS,48,1253721,-9 UNP,68,3539131,-6 Average,50.1,2222557,-2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.1 hedge funds with bullish positions and the average amount invested in these stocks was $2223 million. That figure was $5379 million in DHR's case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Danaher Corporation (NYSE:DHR) is more popular among hedge funds. Our overall hedge fund sentiment score for DHR is 90. 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 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately DHR wasn't nearly as popular as these 30 stocks and hedge funds that were betting on DHR were disappointed as the stock returned 9% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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