Hedge Funds Are Buying Back Elbit Systems Ltd. (ESLT)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Elbit Systems Ltd. (NASDAQ:ESLT).

Is Elbit Systems Ltd. (NASDAQ:ESLT) a buy, sell, or hold? Investors who are in the know are in a bullish mood. The number of long hedge fund bets advanced by 3 in recent months. Our calculations also showed that ESLT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Ken Fisher of Fisher Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the recent hedge fund action surrounding Elbit Systems Ltd. (NASDAQ:ESLT).

What have hedge funds been doing with Elbit Systems Ltd. (NASDAQ:ESLT)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in ESLT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Elbit Systems Ltd. (NASDAQ:ESLT), which was worth $5.4 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $4.9 million worth of shares. D E Shaw, Citadel Investment Group, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to Elbit Systems Ltd. (NASDAQ:ESLT), around 0.02% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to ESLT.

As one would reasonably expect, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Elbit Systems Ltd. (NASDAQ:ESLT). Citadel Investment Group had $1.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.5 million position during the quarter. The only other fund with a new position in the stock is Peter Muller’s PDT Partners.

Let’s also examine hedge fund activity in other stocks similar to Elbit Systems Ltd. (NASDAQ:ESLT). We will take a look at Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), and Gentex Corporation (NASDAQ:GNTX). This group of stocks’ market valuations are similar to ESLT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HZNP 41 1686085 8
JAZZ 29 805357 4
KNX 32 352814 6
GNTX 37 478532 5
Average 34.75 830697 5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $831 million. That figure was $14 million in ESLT’s case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Jazz Pharmaceuticals Plc (NASDAQ:JAZZ) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Elbit Systems Ltd. (NASDAQ:ESLT) is even less popular than JAZZ. Hedge funds dodged a bullet by taking a bearish stance towards ESLT. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately ESLT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ESLT investors were disappointed as the stock returned 17% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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