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 Leidos Holdings Inc (NYSE:LDOS).
Leidos Holdings Inc (NYSE:LDOS) has seen an increase in enthusiasm from smart money of late. Our calculations also showed that LDOS 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.
If you’d ask most investors, hedge funds are viewed as unimportant, outdated investment vehicles of the past. While there are more than 8000 funds trading at the moment, Our experts choose to focus on the aristocrats of this group, approximately 850 funds. These hedge fund managers control most of the smart money’s total capital, and by tailing their highest performing equity investments, Insider Monkey has uncovered various investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 trades like this one. 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. With all of this in mind let’s view the key hedge fund action encompassing Leidos Holdings Inc (NYSE:LDOS).
What does smart money think about Leidos Holdings Inc (NYSE:LDOS)?
Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in LDOS a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Southpoint Capital Advisors, managed by John Smith Clark, holds the biggest position in Leidos Holdings Inc (NYSE:LDOS). Southpoint Capital Advisors has a $257 million position in the stock, comprising 7.5% of its 13F portfolio. On Southpoint Capital Advisors’s heels is Robert Pohly of Samlyn Capital, with a $71.6 million position; 1.8% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Renaissance Technologies, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Southpoint Capital Advisors allocated the biggest weight to Leidos Holdings Inc (NYSE:LDOS), around 7.51% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.99 percent of its 13F equity portfolio to LDOS.
Now, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, assembled the biggest position in Leidos Holdings Inc (NYSE:LDOS). Point72 Asset Management had $15.7 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $9.4 million investment in the stock during the quarter. The other funds with new positions in the stock are David Rosen’s Rubric Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Louis Navellier’s Navellier & Associates.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Leidos Holdings Inc (NYSE:LDOS) but similarly valued. These stocks are Nomura Holdings, Inc. (NYSE:NMR), Markel Corporation (NYSE:MKL), Seagate Technology plc (NASDAQ:STX), and Galapagos NV (NASDAQ:GLPG). This group of stocks’ market valuations are closest to LDOS’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 21 hedge funds with bullish positions and the average amount invested in these stocks was $839 million. That figure was $571 million in LDOS’s case. Markel Corporation (NYSE:MKL) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Leidos Holdings Inc (NYSE:LDOS) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately LDOS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LDOS were disappointed as the stock returned 14.9% 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.