5. Heico Corp (NYSE:HEI)
No of HFs: 43
Total Value of HF Holdings: $712 Million
HEI is the 5th best aerospace stock to buy now. The top hedge fund holder of this stock is Robert Joseph Caruso’s Select Equity Group which had $88 million invested in the stock at the end of September. An insider recently purchased 1,054 shares at around $118 in January 2021. The stock is up 8% since then. On January 21, HEI’s Director Alan Schriesheim sold 3,000 shares of the firm’s stock. The stock was sold at an average price of $115.90, for a total transaction of $347,700.00.
4. Boeing (NYSE:BA)
No of HFs: 43
Total Value of HF Holdings: $1.70 Billion
At the end of September, a total of 24 hedge funds tracked by insider monkey were long this stock. An insider recently purchased 1,152 shares at around $173 in August 2020. The stock is up 19% since then. Miller Value Partners mentioned BA in its Q1 2020 investor letter:
“We’ve known Boeing for a long time. It’s always been a high quality company that’s traded for a premium valuation owing to its position as a global duopoly. We’d looked at it recently after weakness due to its highly publicized Max 737 issues, but it never got cheap enough for us to pull the trigger. After the pandemic, the stock went into freefall as its customer bases’ business dried up and people worried about its liquidity. The stock fell from $338 on February 19th when the S&P hit its high to a low of $89. We bought the stock after the new CEO Dave Calhoun said publicly that it would not take government capital if it required equity dilution because it had many other options. Our average price is just above $120 where it was trading for less than 7x what it earned in 2018. It will likely take a while to normalize to those earnings levels, but this business will survive and ultimately we will own a leader in a global duopoly. Even on depressed forecasts, the company currently has about a 10-15% free cash flow yield. If and when the economy normalizes, we think Boeing could be worth more than double its current price.”
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3. Lockheed Martin Corp (NYSE:LMT)
No of HFs: 47
Total Value of HF Holdings: $1.66 Billion
The top hedge fund holder of this stock is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital which had $479 million invested in the stock at the end of September. An insider recently purchased 1,354 shares at around $376 in August 2019. The stock is down 10% since then. LMT was mentioned as one of the Top 10 Earnings Growth Stocks with Dividends for 2021. RiverPark Advisors LLC mentioned LMT in its 1Q 2020 investor letter:
“RingCentral is the largest and fastest growing pure play Unified Communications as a Service (UCaaS) vendor. Traditionally, business communications have been comprised of on-premise hardware-based private branch exchanges (PBX), which primarily support voice-only desktop phones. These systems do not support employees who now communicate from anywhere with any device, using voice, video, text, messaging and social media. UCaaS encompasses solutions addressing all these needs in a capital and labor light model for customers.
Pixabay/Public Domain
2. Raytheon Technologies Corp (NYSE:RTX)
No of HFs: 55
Total Value of HF Holdings: $2.98 Billion
The top hedge fund holder of this stock is Eric W. Mandelbatt’s Soroban Capital Partners’ which had $801 million invested in the stock at the end of September. An insider recently purchased 1,000 shares at around $52 in October 2020. The stock is up 38% since then.
1. Transdigm Group Inc (NYSE:TDG)
No of HFs: 64
Total Value of HF Holdings: $6.12 Billion
TDG tops the list of 10 best aerospace stocks to buy now. The top hedge fund holder of this stock is Chase Coleman and Feroz Dewan’s Tiger Gobal Management LLC which had $834 million invested in the stock at the end of September. An insider recently purchased 1 share at around $600 in December 2020. The stock is up 0.8% since then. Vulcan Value Partners mentioned TDG in its Q2 2020 investor letter:
“TransDigm Group Inc. is an aerospace manufacturing firm that provides highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Most of its products are small volume, low cost items that are sole sourced from TransDigm. It is economically unlikely for a new company to compete on any particular product because volumes on individual components are not large enough to justify the investment in manufacturing facilities and regulatory approval. The company produces high levels of free cash flow, has long equity duration, a strong business model, and an effective, shareholder-oriented management team who are good capital allocators.”
Please also see Top 10 Robotics and Artificial Intelligence Stocks to Buy and Top 10 Earnings Growth Stocks with Dividends for 2021
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Aerospace involves Earth’s atmosphere and the space beyond it. The both are considered as a single realm for activity in the flight of air vehicles and in the launching, guidance, and control of ballistic missiles, earth satellites, dirigible space vehicles, and the like. Aerospace companies focus on the production, research, and operation of aircraft, spacecraft, and even missiles which may be used under the defense system. You can also check out the Top 11 Largest Aerospace Companies in the US.
The aerospace industry has been around since the 1900s when the Wright brothers exemplified the capability of an airplane to sustain a flight. Soon, the industry was admired by many. A study by the Business Research Company shows that the global aerospace market reached a value of nearly $342.4 billion in 2019, having increased at a compound annual growth rate (CAGR) of 3.1% since 2015. However, the coronavirus pandemic hammered the industry. Its total value is expected to decline from $342.4 billion in 2019 to $296.1 billion in 2020 at a rate of -14%.
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Some of the biggest aerospace companies in the world also focus on military aircraft which helped the industry thrive throughout the years. According to data from Business Research Company, the global aerospace and defense industry revenue is expected to grow from $737.36 billion in 2020 to $774.54 billion in 2021 at a CAGR of 5.2%.
The COVID-19 has negatively affected the global aerospace industry. Imposed lockdowns and social distancing in various countries led to an economic downturn where leisure traveling was not considered essential and quarantine regulations influenced decisions to travel. In an article by the Harvard Business Review, in April 2020, the United States Transport Security Administration’s screened passengers dropped to between 90,000 and 130,000 as compared to 2.5 million passengers in 2019. However, as vaccines are being rolled out, people are starting to feel safe to travel again. In a survey by International Airport Review, as of November 2020, despite the pandemic, 20% of global consumers think that it is safe to travel. According to a study by The Business Research Company, the aerospace market is expected to recover and grow at a CAGR of 6.5% from 2021 and reach $358.8 billion in 2023.
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The AI technology is expected to diversify manufacturing and services in the Aerospace industry. The U.S. government is committed to AI for enhancing safety and security. In 2017, the US Department of Defense launched Project Maven, an initiative to develop computer vision algorithms for military purposes.
In order to identify the 10 Best Aerospace Stocks to Buy Now, we started with the 39 holdings from the iShares US Aerospace and Defense ETF as of February 14, 2021, and we were able to narrow down our list to 10 stocks by using the hedge fund sentiment scores. Hedge fund sentiment means the number of hedge funds bullish on a stock. We calculate that by evaluating 13F holdings disclosed by over 800 hedge funds.
Our in-house research showed that by using the hedge fund sentiment data, we can identify a small group of stocks that can outperform the S&P 500 index on average by double digits annually. For instance, the portfolio for stock picks for our monthly newsletter has beaten the market by over 88 percentage points since March 2017 (see details here). Some of the portfolio choices for our monthly newsletter were also publicly shared on our website. In October, we posted this real estate stock and since then it’s been up more than 50 percent.
Based on our hedge fund sentiment data, we present to you the 10 best aerospace stocks to buy now.
10. Aerovironment Inc (NASDAQ:AVAV)
No of HFs: 16
Total Value of HF Holdings: $49.3 Million
AVAV ranks 10th on the list of 10 best aerospace stocks to buy now. At the end of September, a total of 16 hedge funds tracked by Insider Monkey were long this stock. AVAV is known for its unmanned aircraft systems. They recently announced the acquisition of Arcturus UAV with a total transaction value of $405 million in cash and stock. AeroVironment president and chief executive officer mentioned that their acquisition of Arctus will enable the company to accelerate its growth strategy and expand its reach into the more valuable Group 2 and 3 UAS segments
9. Maxar Technologies (NYSE:MAXR)
No of HFs: 17
Total Value of HF Holdings: $150 Million
Notable hedge fund having stakes in MAXR is Mark Hart Lii’s Corriente Advisors which had $49 million invested in the stock at the end of September. An insider recently purchased 2,800 shares at around $23 in November 2020. The stock is up 121% since then. Eschler Asset Management mentioned the stock in its Q3 2020 investor letter:
“At the single stock level, a notable performer during Q3 2020 was Maxar Technologies, whose price doubled in six months from the Fund’s initial purchase on the back of improved orders in the satellite manufacturing segment and stable cash flow in the earth intelligence (satellite imagery) segment. The story is improving but I felt the shares had run up too fast (and become too large a holding) and decided to exit.”
8. AAR Corp (NYSE:AIR)
No of HFs: 18
Total Value of HF Holdings: $43.9 Million
AAR is the 8th best aerospace stock to buy now. Ken Fisher’s Fisher Asset Management had a $13 million stake in the company at the end of September. The company is known for its aviation services to commercial and government customers. In the third quarter of 2020, the company reported sales of $533 million.
7. Virgin Galactic Holdings (NYSE:SPCE)
No of HFs: 24
Total Value of HF Holdings: $76.9 Million
At the end of September, a total of 24 hedge funds tracked by Insider Monkey were long this stock. An insider purchased 25 shares at around $15 in May 2020. The stock is up 260% up since then. During the third quarter of 2020, the company reported a cash equivalent of $742 million.
Virgin Galactic Holdings stock recently rallied after the company said a window for rocket-powered test flight of its SpaceShipTwo Unity February 13, with opportunities for a flight throughout the month, subject to weather.
6. Spirit Aerosystems Holdings Inc (NYSE:SPR)
No of HFs: 31
Total Value of HF Holdings: $468 Million
SPR is known for having the world’s largest first-tier aero-structures manufacturing. On January 27, 2021, the company announced its board of directors declared a regular quarterly $0.01 per share cash dividend on its outstanding common stock. This will be payable on April 9, 2021.
Click to continue reading and see the 5 Best Aerospace Stocks to Buy Now
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Disclosure: None. 10 Best Aerospace Stocks to Buy Now is originally published at Insider Monkey.
