A former long-time holding, Parker Hannifin (PH, Financial) made its way back into the Fund this quarter. We believe investors’ perception of the company as a short-cycle, diversified manufacturer that’s heavily tied to industrial production has become stale. Since becoming CEO in 2015, Thomas Williams has vastly improved operations and shifted the portfolio to longer cycle, higher growth and higher return end markets. With the expected closing of the Meggitt acquisition this calendar year, Parker Hannifin’s highly depressed aerospace segment will become its largest end market. We anticipate a rebound in aerospace revenue, which—combined with the company’s strong position in attractive businesses like clean energy technologies and factory automation—should further accelerate revenue growth. Parker Hannifin trades at a discount to other high-quality industrials, which we believe is unwarranted since its growth and returns should be as good or better than peers. At 12x next year’s cash earnings, Parker Hannifin is an attractive investment, in our view.
From Bill Nygren (Trades, Portfolio)'s Oakmark Fund second-quarter 2022 commentary.
