L-3 Communications Holdings, Inc. (NYSE:LLL) was in 14 hedge funds’ portfolio at the end of the fourth quarter of 2012. LLL has seen a decrease in hedge fund sentiment in recent months. There were 20 hedge funds in our database with LLL holdings at the end of the previous quarter.
To most stock holders, hedge funds are assumed to be worthless, outdated investment vehicles of the past. While there are more than 8000 funds in operation at the moment, we at Insider Monkey look at the crème de la crème of this club, about 450 funds. Most estimates calculate that this group controls the majority of all hedge funds’ total asset base, and by monitoring their highest performing investments, we have come up with a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).
Just as beneficial, positive insider trading activity is another way to parse down the financial markets. Obviously, there are many incentives for a corporate insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this tactic if you understand what to do (learn more here).
With all of this in mind, let’s take a glance at the key action regarding L-3 Communications Holdings, Inc. (NYSE:LLL).
How have hedgies been trading L-3 Communications Holdings, Inc. (NYSE:LLL)?
At year’s end, a total of 14 of the hedge funds we track were long in this stock, a change of -30% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly.
When looking at the hedgies we track, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in L-3 Communications Holdings, Inc. (NYSE:LLL). Pzena Investment Management has a $244 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $45 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include D. E. Shaw’s D E Shaw, David Harding’s Winton Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Seeing as L-3 Communications Holdings, Inc. (NYSE:LLL) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of money managers that decided to sell off their full holdings last quarter. At the top of the heap, Yale M. Fergang and Robert W. Medway’s Royal Capital sold off the biggest stake of all the hedgies we track, worth close to $14 million in stock.. Tom Facciola’s fund, Tigershark Partners, also sold off its stock, about $1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds last quarter.
How have insiders been trading L-3 Communications Holdings, Inc. (NYSE:LLL)?
Bullish insider trading is best served when the company in question has experienced transactions within the past 180 days. Over the last six-month time frame, L-3 Communications Holdings, Inc. (NYSE:LLL) has seen zero unique insiders buying, and 9 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to L-3 Communications Holdings, Inc. (NYSE:LLL). These stocks are Triumph Group Inc (NYSE:TGI), Rockwell Collins, Inc. (NYSE:COL), B/E Aerospace Inc (NASDAQ:BEAV), Embraer SA (ADR) (NYSE:ERJ), and TransDigm Group Incorporated (NYSE:TDG). All of these stocks are in the aerospace/defense products & services industry and their market caps are closest to LLL’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Triumph Group Inc (NYSE:TGI)||23||2||3|
|Rockwell Collins, Inc. (NYSE:COL)||16||0||11|
|B/E Aerospace Inc (NASDAQ:BEAV)||28||0||9|
|Embraer SA (ADR) (NYSE:ERJ)||8||0||0|
|TransDigm Group Incorporated (NYSE:TDG)||31||1||7|
With the returns demonstrated by Insider Monkey’s studies, retail investors should always pay attention to hedge fund and insider trading activity, and L-3 Communications Holdings, Inc. (NYSE:LLL) applies perfectly to this mantra.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.