Here is What Hedge Funds Think About Donaldson Company, Inc. (DCI)

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Donaldson Company, Inc. (NYSE:DCI) in this article.

Donaldson Company, Inc. (NYSE:DCI) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. 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 Arris Group, Inc. (NASDAQ:ARRS), Starz (NASDAQ:STRZA), and Vail Resorts, Inc. (NYSE:MTN) to gather more data points.

In the eyes of most shareholders, hedge funds are assumed to be slow, old financial tools of the past. While there are over 8000 funds in operation at present, Our experts look at the masters of this club, around 700 funds. These money managers shepherd most of the smart money’s total asset base, and by keeping an eye on their inimitable picks, Insider Monkey has uncovered various investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to review the new action regarding Donaldson Company, Inc. (NYSE:DCI).

How have hedgies been trading Donaldson Company, Inc. (NYSE:DCI)?

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a surge of 47% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Donaldson Company, Inc. (NYSE:DCI). At the end of the quarter, the fund reportedly held a $44.6 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Generation Investment Management, led by David Blood and Al Gore, holding a $18.4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Ian Simm’s Impax Asset Management, Ken Griffin’s Citadel Investment Group and Chuck Royce’s Royce & Associates.

As aggregate interest increased, some big names were breaking ground themselves. Generation Investment Management, managed by David Blood and Al Gore, created the most valuable position in Donaldson Company, Inc. (NYSE:DCI), valued at $18.4 million as mentioned before. Jim Simons’s Renaissance Technologies also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new DCI investors: George Hall’s Clinton Group, Joel Greenblatt’s Gotham Asset Management, and Tom Gayner’s Markel Gayner Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Donaldson Company, Inc. (NYSE:DCI) but similarly valued. We will take a look at Arris Group, Inc. (NASDAQ:ARRS), Starz (NASDAQ:STRZA), Vail Resorts, Inc. (NYSE:MTN), and Sonoco Products Company (NYSE:SON). All of these stocks’ market caps are closest to DCI’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $598 million. That figure was just $113 million in DCI’s case. Arris Group, Inc. (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Sonoco Products Company (NYSE:SON) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Donaldson Company, Inc. (NYSE:DCI) is even less popular than SON. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.