The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Parker-Hannifin Corporation (NYSE:PH) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Parker-Hannifin Corporation (NYSE:PH) worth your attention right now? Money managers were becoming hopeful. The number of bullish hedge fund bets improved by 7 in recent months. Parker-Hannifin Corporation (NYSE:PH) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 40. Our calculations also showed that PH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a glance at the latest hedge fund action surrounding Parker-Hannifin Corporation (NYSE:PH).
How are hedge funds trading Parker-Hannifin Corporation (NYSE:PH)?
At the end of June, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PH over the last 20 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the number one position in Parker-Hannifin Corporation (NYSE:PH), worth close to $318.4 million, amounting to 1.9% of its total 13F portfolio. On Diamond Hill Capital’s heels is Viking Global, managed by Andreas Halvorsen, which holds a $264.4 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish encompass Brandon Haley’s Holocene Advisors, Israel Englander’s Millennium Management and Richard S. Pzena’s Pzena Investment Management. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Parker-Hannifin Corporation (NYSE:PH), around 2.94% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, dishing out 1.88 percent of its 13F equity portfolio to PH.
Consequently, key hedge funds have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, initiated the largest position in Parker-Hannifin Corporation (NYSE:PH). Viking Global had $264.4 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $27.9 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Javier Velazquez’s Albar Capital, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s check out hedge fund activity in other stocks similar to Parker-Hannifin Corporation (NYSE:PH). These stocks are Twitter Inc (NYSE:TWTR), Marvell Technology Group Ltd. (NASDAQ:MRVL), American Water Works Company, Inc. (NYSE:AWK), XP Inc. (NASDAQ:XP), Williams Companies, Inc. (NYSE:WMB), Ecopetrol S.A. (NYSE:EC), and Fortive Corporation (NYSE:FTV). This group of stocks’ market values are closest to PH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWTR | 68 | 1278023 | 13 |
| MRVL | 41 | 664690 | 12 |
| AWK | 30 | 653000 | 0 |
| XP | 21 | 430821 | 8 |
| WMB | 41 | 466723 | -6 |
| EC | 11 | 113508 | -1 |
| FTV | 35 | 1372140 | 0 |
| Average | 35.3 | 711272 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $711 million. That figure was $1172 million in PH’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 11 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 63.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately PH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PH were disappointed as the stock returned 12.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
