The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded L3Harris Technologies, Inc. (NYSE:LHX) and determine whether the smart money was really smart about this stock.
Is L3Harris Technologies, Inc. (NYSE:LHX) a bargain? Prominent investors were becoming more confident. The number of bullish hedge fund positions went up by 7 in recent months. L3Harris Technologies, Inc. (NYSE:LHX) was in 50 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 56. Our calculations also showed that LHX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 43 hedge funds in our database with LHX positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s view the new hedge fund action regarding L3Harris Technologies, Inc. (NYSE:LHX).
How have hedgies been trading L3Harris Technologies, Inc. (NYSE:LHX)?
At the end of June, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LHX over the last 20 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management has the biggest position in L3Harris Technologies, Inc. (NYSE:LHX), worth close to $182.6 million, amounting to 4.6% of its total 13F portfolio. On Palestra Capital Management’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $167.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Israel Englander’s Millennium Management, David Cohen and Harold Levy’s Iridian Asset Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to L3Harris Technologies, Inc. (NYSE:LHX), around 15.07% of its 13F portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, dishing out 4.99 percent of its 13F equity portfolio to LHX.
As industrywide interest jumped, key money managers have jumped into L3Harris Technologies, Inc. (NYSE:LHX) headfirst. Renaissance Technologies, initiated the most valuable position in L3Harris Technologies, Inc. (NYSE:LHX). Renaissance Technologies had $92.2 million invested in the company at the end of the quarter. Robert Boucai’s Newbrook Capital Advisors also initiated a $71.3 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Tudor Jones’s Tudor Investment Corp, and Charles Davidson and Joseph Jacobs’s Wexford Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as L3Harris Technologies, Inc. (NYSE:LHX) but similarly valued. We will take a look at Monster Beverage Corp (NASDAQ:MNST), General Motors Company (NYSE:GM), Exelon Corporation (NASDAQ:EXC), Veeva Systems Inc (NYSE:VEEV), Eaton Corporation plc (NYSE:ETN), Las Vegas Sands Corp. (NYSE:LVS), and Canadian Pacific Railway Limited (NYSE:CP). This group of stocks’ market valuations match LHX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $1737 million. That figure was $1313 million in LHX’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Exelon Corporation (NASDAQ:EXC) is the least popular one with only 30 bullish hedge fund positions. L3Harris Technologies, Inc. (NYSE:LHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LHX is 62.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately LHX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LHX were disappointed as the stock returned 6.5% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.