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In this article we will analyze whether Danaher Corporation (NYSE:DHR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Hedge fund interest in Danaher Corporation (NYSE:DHR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that DHR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Medtronic plc (NYSE:MDT), Novo Nordisk A/S (NYSE:NVO), and Costco Wholesale Corporation (NASDAQ:COST) to gather more data points.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dan Loeb of Third Point
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Do Hedge Funds Think DHR Is A Good Stock To Buy Now?
At first quarter's end, a total of 81 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DHR over the last 23 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of Danaher Corporation (NYSE:DHR), with a stake worth $722.6 million reported as of the end of March. Trailing Fisher Asset Management was Third Point, which amassed a stake valued at $652.7 million. D1 Capital Partners, Akre Capital Management, and Citadel Investment Group 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 Intermede Investment Partners allocated the biggest weight to Danaher Corporation (NYSE:DHR), around 5.08% of its 13F portfolio. D1 Capital Partners is also relatively very bullish on the stock, designating 4.42 percent of its 13F equity portfolio to DHR.
Since Danaher Corporation (NYSE:DHR) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Interestingly, Peter Simmie's Bristol Gate Capital Partners dropped the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $65.9 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund cut about $7.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Danaher Corporation (NYSE:DHR) but similarly valued. These stocks are Medtronic plc (NYSE:MDT), Novo Nordisk A/S (NYSE:NVO), Costco Wholesale Corporation (NASDAQ:COST), T-Mobile US, Inc. (NYSE:TMUS), Citigroup Inc. (NYSE:C), Royal Dutch Shell plc (NYSE:RDS), and Honeywell International Inc. (NYSE:HON). All of these stocks' market caps are closest to DHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDT,65,3627546,6 NVO,23,2929727,0 COST,56,4014769,-5 TMUS,98,9055738,-5 C,90,6938143,-5 RDS,36,2190186,2 HON,56,1731346,11 Average,60.6,4355351,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 60.6 hedge funds with bullish positions and the average amount invested in these stocks was $4355 million. That figure was $5797 million in DHR's case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 23 bullish hedge fund positions. Danaher Corporation (NYSE:DHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DHR is 73.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on DHR as the stock returned 9.7% since the end of Q1 (through 6/11) 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.