Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Textron Inc. (NYSE:TXT) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Textron Inc. (NYSE:TXT) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. TXT investors should be aware of an increase in hedge fund sentiment of late. There were 22 hedge funds in our database with TXT holdings at the end of June. Our calculations also showed that TXT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a peek at the key hedge fund action regarding Textron Inc. (NYSE:TXT).
Peter Rathjens of Arrowstreet Capital
Do Hedge Funds Think TXT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in TXT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Textron Inc. (NYSE:TXT) was held by Adage Capital Management, which reported holding $366.3 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $355.7 million position. Other investors bullish on the company included GAMCO Investors, AQR Capital Management, and Alyeska Investment Group. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Textron Inc. (NYSE:TXT), around 9.51% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, earmarking 1.95 percent of its 13F equity portfolio to TXT.
As aggregate interest increased, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, created the most outsized position in Textron Inc. (NYSE:TXT). Alyeska Investment Group had $46.2 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $21.3 million position during the quarter. The other funds with brand new TXT positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Alexander Mitchell’s Scopus Asset Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s check out hedge fund activity in other stocks similar to Textron Inc. (NYSE:TXT). These stocks are Brown & Brown, Inc. (NYSE:BRO), Omnicom Group Inc. (NYSE:OMC), Confluent Inc. (NASDAQ:CFLT), argenx SE (NASDAQ:ARGX), Novavax, Inc. (NASDAQ:NVAX), Royalty Pharma Plc (NASDAQ:RPRX), and Just Eat Takeaway.com N.V. (NASDAQ:GRUB). This group of stocks’ market caps are similar to TXT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRO | 31 | 1392156 | 5 |
| OMC | 25 | 396360 | -5 |
| CFLT | 27 | 1319263 | 27 |
| ARGX | 28 | 1364285 | 1 |
| NVAX | 35 | 786706 | -2 |
| RPRX | 20 | 1961787 | 0 |
| GRUB | 18 | 204963 | -6 |
| Average | 26.3 | 1060789 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $1061 million. That figure was $1137 million in TXT’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Just Eat Takeaway.com N.V. (NASDAQ:GRUB) is the least popular one with only 18 bullish hedge fund positions. Textron Inc. (NYSE:TXT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TXT is 77.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, TXT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TXT were disappointed as the stock returned -2.5% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Textron Inc (NYSE:TXT)
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Disclosure: None. This article was originally published at Insider Monkey.
