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Hedge Funds Are Souring On Lockheed Martin Corporation (LMT)

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 8 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Lockheed Martin Corporation (NYSE:LMT).

Lockheed Martin Corporation (NYSE:LMT) was in 46 hedge funds’ portfolios at the end of the third quarter of 2019. LMT investors should pay attention to a decrease in support from the world’s most elite money managers of late. There were 48 hedge funds in our database with LMT positions at the end of the previous quarter. Our calculations also showed that LMT isn’t among the 30 most popular stocks among hedge funds.

To most market participants, hedge funds are viewed as slow, outdated financial tools of yesteryear. While there are over 8000 funds in operation at the moment, Our experts hone in on the leaders of this group, about 750 funds. It is estimated that this group of investors oversee most of all hedge funds’ total asset base, and by following their top investments, Insider Monkey has spotted many investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action surrounding Lockheed Martin Corporation (NYSE:LMT).

What does smart money think about Lockheed Martin Corporation (NYSE:LMT)?

Heading into the fourth quarter of 2019, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LMT over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

LMT_nov2019

According to Insider Monkey’s hedge fund database, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the biggest position in Lockheed Martin Corporation (NYSE:LMT). Two Sigma Advisors has a $367.9 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $333.9 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include Cliff Asness’s AQR Capital Management, Aaron Cowen’s Suvretta Capital Management and Rajiv Jain’s GQG Partners. In terms of the portfolio weights assigned to each position Grisanti Brown & Partners allocated the biggest weight to Lockheed Martin Corporation (NYSE:LMT), around 4.58% of its portfolio. Suvretta Capital Management is also relatively very bullish on the stock, earmarking 4.04 percent of its 13F equity portfolio to LMT.

Because Lockheed Martin Corporation (NYSE:LMT) has faced declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their entire stakes heading into Q4. At the top of the heap, Alexander Mitchell’s Scopus Asset Management said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $29 million in stock. Louis Bacon’s fund, Moore Global Investments, also dumped its stock, about $16.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lockheed Martin Corporation (NYSE:LMT) but similarly valued. We will take a look at Broadcom Inc (NASDAQ:AVGO), BHP Group (NYSE:BBL), Eli Lilly and Company (NYSE:LLY), and GlaxoSmithKline plc (NYSE:GSK). This group of stocks’ market values match LMT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVGO 54 2515014 1
BBL 21 970915 1
LLY 41 1489505 -2
GSK 26 1891012 1
Average 35.5 1716612 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1717 million. That figure was $1783 million in LMT’s case. Broadcom Inc (NASDAQ:AVGO) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 21 bullish hedge fund positions. Lockheed Martin Corporation (NYSE:LMT) 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 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately LMT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LMT were disappointed as the stock returned 0.2% during the fourth quarter (through 11/22) 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 many of these stocks already outperformed the market so far this year.

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

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