Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Did Hedge Funds Drop The Ball On Lockheed Martin Corporation (LMT) ?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.

Lockheed Martin Corporation (NYSE:LMT) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that LMT isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken-Heebner

Let’s analyze the new hedge fund action regarding Lockheed Martin Corporation (NYSE:LMT).

What does the smart money think about Lockheed Martin Corporation (NYSE:LMT)?

Heading into the second quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in LMT over the last 15 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

LMT_june2019

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Lockheed Martin Corporation (NYSE:LMT). Citadel Investment Group has a $233.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $223.3 million position; 0.6% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.

Judging by the fact that Lockheed Martin Corporation (NYSE:LMT) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of funds who were dropping their positions entirely heading into Q3. At the top of the heap, Brandon Haley’s Holocene Advisors dropped the biggest investment of the 700 funds tracked by Insider Monkey, worth close to $71 million in stock, and Matt Simon (Citadel)’s Ashler Capital was right behind this move, as the fund sold off about $52.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 7 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Lockheed Martin Corporation (NYSE:LMT). We will take a look at Banco Santander (Brasil) SA (NYSE:BSBR), Gilead Sciences, Inc. (NASDAQ:GILD), ASML Holding N.V. (NASDAQ:ASML), and Booking Holdings Inc. (NASDAQ:BKNG). All of these stocks’ market caps are closest to LMT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BSBR 10 160949 0
GILD 58 3780289 1
ASML 15 504431 -1
BKNG 77 5667848 -7
Average 40 2528379 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $2528 million. That figure was $1220 million in LMT’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 10 bullish hedge fund positions. Lockheed Martin Corporation (NYSE:LMT) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on LMT as the stock returned 13.9% during the same time frame and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...