We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Danaher Corporation (NYSE:DHR) and determine whether hedge funds skillfully traded this stock.
Danaher Corporation (NYSE:DHR) investors should be aware of an increase in activity from the world’s largest hedge funds of late.Danaher Corporation (NYSE:DHR) was in 76 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 63. This means the bullish number of hedge fund positions in this stock currently is at its all time high. There were 63 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 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.
Paul Marshall of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to review the fresh hedge fund action regarding Danaher Corporation (NYSE:DHR).
Hedge fund activity in Danaher Corporation (NYSE:DHR)
At Q2’s end, a total of 76 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the first quarter of 2020. On the other hand, there were a total of 58 hedge funds with a bullish position in DHR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D1 Capital Partners was the largest shareholder of Danaher Corporation (NYSE:DHR), with a stake worth $566.5 million reported as of the end of September. Trailing D1 Capital Partners was Third Point, which amassed a stake valued at $530.5 million. Fisher Asset Management, 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 Sandell Asset Management allocated the biggest weight to Danaher Corporation (NYSE:DHR), around 13.09% of its 13F portfolio. Third Point is also relatively very bullish on the stock, setting aside 7.26 percent of its 13F equity portfolio to DHR.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Viking Global, managed by Andreas Halvorsen, created the most valuable position in Danaher Corporation (NYSE:DHR). Viking Global had $159.8 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also initiated a $79.6 million position during the quarter. The following funds were also among the new DHR investors: Arthur B Cohen and Joseph Healey’s Healthcor Management LP, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Robert Pohly’s Samlyn Capital.
Let’s now review hedge fund activity in other stocks similar to Danaher Corporation (NYSE:DHR). These stocks are Medtronic plc (NYSE:MDT), Royal Dutch Shell plc (NYSE:RDS), NextEra Energy, Inc. (NYSE:NEE), Texas Instruments Incorporated (NASDAQ:TXN), Union Pacific Corporation (NYSE:UNP), American Tower Corporation (NYSE:AMT), and Shopify Inc (NYSE:SHOP). This group of stocks’ market caps match DHR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDT | 58 | 2705363 | -1 |
| RDS | 34 | 1164812 | 6 |
| NEE | 55 | 1943660 | 3 |
| TXN | 55 | 2131731 | 9 |
| UNP | 68 | 3685933 | 5 |
| AMT | 61 | 4407292 | 4 |
| SHOP | 57 | 5916379 | 14 |
| Average | 55.4 | 3136453 | 5.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.4 hedge funds with bullish positions and the average amount invested in these stocks was $3136 million. That figure was $4288 million in DHR’s case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 34 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 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 returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on DHR as the stock returned 16.2% since the end of June 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.
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Disclosure: None. This article was originally published at Insider Monkey.
