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Were Hedge Funds Right About Piling Into Parker-Hannifin (PH)?

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·6 min read
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In this article we will take a look at whether hedge funds think Parker-Hannifin Corporation (NYSE:PH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Parker-Hannifin Corporation (NYSE:PH) investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. Parker-Hannifin Corporation (NYSE:PH) was in 56 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 51. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To most investors, hedge funds are perceived as worthless, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, We look at the elite of this group, around 850 funds. Most estimates calculate that this group of people administer most of the hedge fund industry's total capital, and by keeping an eye on their unrivaled picks, Insider Monkey has deciphered a few investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Ric Dillon Diamond Hill Capital
Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks 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 check out the fresh hedge fund action encompassing Parker-Hannifin Corporation (NYSE:PH).

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

At the end of the fourth quarter, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 39 hedge funds with a bullish position in PH a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Andreas Halvorsen's Viking Global has the largest position in Parker-Hannifin Corporation (NYSE:PH), worth close to $458.5 million, amounting to 1.3% of its total 13F portfolio. Sitting at the No. 2 spot is Diamond Hill Capital, led by Ric Dillon, holding a $367.7 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish encompass Ken Griffin's Citadel Investment Group, Brandon Haley's Holocene Advisors and Israel Englander's Millennium Management. 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, earmarking 3.8 percent of its 13F equity portfolio to PH.

Consequently, key hedge funds have jumped into Parker-Hannifin Corporation (NYSE:PH) headfirst. ZWEIG DIMENNA PARTNERS, managed by Joe DiMenna, established 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 similar to Parker-Hannifin Corporation (NYSE:PH). These stocks are 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). All of these stocks' market caps match 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on PH as the stock returned 15.6% since the end of Q4 (through 4/30) 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.

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