Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Danaher Corporation (NYSE:DHR)? The smart money sentiment can provide an answer to this question.
Danaher Corporation (NYSE:DHR) has experienced an increase in activity from the world’s largest hedge funds lately. DHR was in 58 hedge funds’ portfolios at the end of the first quarter of 2019. There were 48 hedge funds in our database with DHR holdings at the end of the previous quarter. Our calculations also showed that DHR isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a peek at the latest hedge fund action regarding Danaher Corporation (NYSE:DHR).
What does the smart money think about Danaher Corporation (NYSE:DHR)?
At Q1’s end, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DHR over the last 15 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Third Point was the largest shareholder of Danaher Corporation (NYSE:DHR), with a stake worth $489.8 million reported as of the end of March. Trailing Third Point was AQR Capital Management, which amassed a stake valued at $341 million. Impax Asset Management, Akre Capital Management, and Select Equity Group were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, established the most valuable position in Danaher Corporation (NYSE:DHR). Senator Investment Group had $158.4 million invested in the company at the end of the quarter. John Brennan’s Sirios Capital Management also made a $64.3 million investment in the stock during the quarter. The following funds were also among the new DHR investors: Alexander Mitchell’s Scopus Asset Management, Daniel S. Och’s OZ Management, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Danaher Corporation (NYSE:DHR) but similarly valued. We will take a look at Starbucks Corporation (NASDAQ:SBUX), NextEra Energy, Inc. (NYSE:NEE), American Express Company (NYSE:AXP), and Lowe’s Companies, Inc. (NYSE:LOW). This group of stocks’ market values are similar to DHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBUX | 47 | 4588018 | 5 |
| NEE | 36 | 857567 | -1 |
| AXP | 57 | 19790830 | 7 |
| LOW | 56 | 5256913 | 3 |
| Average | 49 | 7623332 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $7623 million. That figure was $3081 million in DHR’s case. American Express Company (NYSE:AXP) is the most popular stock in this table. On the other hand NextEra Energy, Inc. (NYSE:NEE) is the least popular one with only 36 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on DHR, though not to the same extent, as the stock returned 0.3% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
