While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Danaher Corporation (NYSE:DHR) and see how the stock performed in comparison to hedge funds’ consensus picks.
Danaher Corporation (NYSE:DHR) was in 57 hedge funds’ portfolios at the end of September. DHR has experienced a decrease in hedge fund interest recently. There were 58 hedge funds in our database with DHR positions at the end of the previous quarter. Our calculations also showed that DHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Today there are many indicators shareholders employ to grade their stock investments. A duo of the less utilized indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outperform the S&P 500 by a significant amount (see the details here).
Dan Loeb of Third Point
We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to check out the latest hedge fund action surrounding Danaher Corporation (NYSE:DHR).
How are hedge funds trading Danaher Corporation (NYSE:DHR)?
At Q3’s end, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DHR over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Dan Loeb’s Third Point has the number one position in Danaher Corporation (NYSE:DHR), worth close to $535.8 million, amounting to 6.4% of its total 13F portfolio. On Third Point’s heels is AQR Capital Management, led by Cliff Asness, holding a $372.3 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Charles Akre’s Akre Capital Management, Ian Simm’s Impax Asset Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to Danaher Corporation (NYSE:DHR), around 8.07% of its 13F portfolio. Circle Road Advisors is also relatively very bullish on the stock, setting aside 6.54 percent of its 13F equity portfolio to DHR.
Seeing as Danaher Corporation (NYSE:DHR) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that decided to sell off their positions entirely heading into Q4. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at an estimated $64.9 million in stock. Stephen J. Errico’s fund, Locust Wood Capital Advisers, also cut its stock, about $24.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Danaher Corporation (NYSE:DHR). These stocks are United Parcel Service, Inc. (NYSE:UPS), American Express Company (NYSE:AXP), American Tower Corporation (REIT) (NYSE:AMT), and Diageo plc (NYSE:DEO). This group of stocks’ market valuations are closest to DHR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UPS | 41 | 1365649 | 5 |
| AXP | 48 | 21377087 | 3 |
| AMT | 46 | 3645628 | 4 |
| DEO | 22 | 930335 | 7 |
| Average | 39.25 | 6829675 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $6830 million. That figure was $2732 million in DHR’s case. American Express Company (NYSE:AXP) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Danaher Corporation (NYSE:DHR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on DHR as the stock returned 49.2% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
