The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Leidos Holdings Inc (NYSE:LDOS) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Leidos Holdings Inc (NYSE:LDOS) investors should be aware of an increase in hedge fund interest of late. Leidos Holdings Inc (NYSE:LDOS) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LDOS 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are seen as unimportant, old financial vehicles of years past. While there are over 8000 funds trading today, Our researchers hone in on the leaders of this group, around 850 funds. These money managers handle the lion’s share of the smart money’s total capital, and by keeping an eye on their matchless picks, Insider Monkey has discovered many investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated 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 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Dmitry Balyasny of Balyasny 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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s take a peek at the key hedge fund action surrounding Leidos Holdings Inc (NYSE:LDOS).
Hedge fund activity in Leidos Holdings Inc (NYSE:LDOS)
At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LDOS over the last 20 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Leidos Holdings Inc (NYSE:LDOS) was held by Southpoint Capital Advisors, which reported holding $221 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $137.7 million position. Other investors bullish on the company included Samlyn Capital, AQR Capital Management, and York Capital Management. In terms of the portfolio weights assigned to each position Southpoint Capital Advisors allocated the biggest weight to Leidos Holdings Inc (NYSE:LDOS), around 5.39% of its 13F portfolio. Kerrisdale Capital is also relatively very bullish on the stock, dishing out 1.81 percent of its 13F equity portfolio to LDOS.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. York Capital Management, managed by James Dinan, assembled the most outsized position in Leidos Holdings Inc (NYSE:LDOS). York Capital Management had $24.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $23.9 million investment in the stock during the quarter. The other funds with brand new LDOS positions are Sahm Adrangi’s Kerrisdale Capital, Israel Englander’s Millennium Management, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to Leidos Holdings Inc (NYSE:LDOS). We will take a look at Wix.Com Ltd (NASDAQ:WIX), Masco Corporation (NYSE:MAS), The Liberty SiriusXM Group (NASDAQ:LSXMA), Western Digital Corporation (NASDAQ:WDC), MongoDB, Inc. (NASDAQ:MDB), Tradeweb Markets Inc. (NASDAQ:TW), and Mid America Apartment Communities Inc (NYSE:MAA). This group of stocks’ market valuations match LDOS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WIX | 27 | 1258178 | -2 |
| MAS | 40 | 827096 | 6 |
| LSXMA | 46 | 1294569 | -2 |
| WDC | 49 | 583698 | 4 |
| MDB | 37 | 1248081 | 7 |
| TW | 33 | 346714 | 3 |
| MAA | 30 | 503965 | 4 |
| Average | 37.4 | 866043 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $617 million in LDOS’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Wix.Com Ltd (NASDAQ:WIX) is the least popular one with only 27 bullish hedge fund positions. Leidos Holdings Inc (NYSE:LDOS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LDOS is 58.2. 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 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 surpassed the market by 23.2 percentage points. Unfortunately LDOS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LDOS investors were disappointed as the stock returned -3.4% since Q2 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 in 2020.
Follow Leidos Holdings Inc. (NYSE:LDOS)
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Disclosure: None. This article was originally published at Insider Monkey.
