Do Hedge Funds Love Elbit Systems Ltd. (ESLT)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Elbit Systems Ltd. (NASDAQ:ESLT).

Hedge fund interest in Elbit Systems Ltd. (NASDAQ:ESLT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ESLT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare ESLT to other stocks including Canopy Growth Corporation (NYSE:CGC), Woori Financial Group Inc. (NYSE:WF), and Vivint Solar Inc (NYSE:VSLR) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are assumed to be worthless, outdated investment vehicles of the past. While there are more than 8000 funds trading at the moment, Our researchers hone in on the leaders of this club, about 850 funds. These hedge fund managers administer bulk of the hedge fund industry’s total asset base, and by tracking their highest performing stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .


Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a peek at the recent hedge fund action regarding Elbit Systems Ltd. (NASDAQ:ESLT).

How have hedgies been trading Elbit Systems Ltd. (NASDAQ:ESLT)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ESLT over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is ESLT A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Elbit Systems Ltd. (NASDAQ:ESLT). Fisher Asset Management has a $4.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Fisher Asset Management’s heels is Seth Cogswell of Running Oak Capital, with a $2.8 million position; the fund has 1% of its 13F portfolio invested in the stock. Other peers that are bullish contain Renaissance Technologies, Peter Muller’s PDT Partners and . In terms of the portfolio weights assigned to each position Running Oak Capital allocated the biggest weight to Elbit Systems Ltd. (NASDAQ:ESLT), around 1.02% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to ESLT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Running Oak Capital).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Elbit Systems Ltd. (NASDAQ:ESLT) but similarly valued. These stocks are Canopy Growth Corporation (NYSE:CGC), Woori Financial Group Inc. (NYSE:WF), Vivint Solar Inc (NYSE:VSLR), Levi Strauss & Co. (NYSE:LEVI), CDK Global Inc (NASDAQ:CDK), ServiceMaster Global Holdings Inc (NYSE:SERV), and Phillips 66 Partners LP (NYSE:PSXP). This group of stocks’ market valuations resemble ESLT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CGC 9 19074 -2
WF 2 2940 -3
VSLR 23 736401 11
LEVI 17 51394 1
CDK 28 324989 -4
SERV 30 626002 -5
PSXP 4 13182 -2
Average 16.1 253426 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $10 million in ESLT’s case. ServiceMaster Global Holdings Inc (NYSE:SERV) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Elbit Systems Ltd. (NASDAQ:ESLT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ESLT is 21.9. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately ESLT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ESLT investors were disappointed as the stock returned 5.7% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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