Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Huntington Ingalls Industries Inc (NYSE:HII).
Huntington Ingalls Industries Inc (NYSE:HII) investors should be aware of an increase in enthusiasm from smart money lately. Our calculations also showed that HII isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most traders, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open today, We choose to focus on the bigwigs of this club, about 850 funds. These hedge fund managers direct bulk of all hedge funds’ total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has formulated a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed 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 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing Huntington Ingalls Industries Inc (NYSE:HII).
How are hedge funds trading Huntington Ingalls Industries Inc (NYSE:HII)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HII over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Huntington Ingalls Industries Inc (NYSE:HII), with a stake worth $359.4 million reported as of the end of September. Trailing AQR Capital Management was Adage Capital Management, which amassed a stake valued at $99.6 million. East Side Capital (RR Partners), Winton Capital Management, and Chiron Investment Management 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 East Side Capital (RR Partners) allocated the biggest weight to Huntington Ingalls Industries Inc (NYSE:HII), around 5.42% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, setting aside 2.36 percent of its 13F equity portfolio to HII.
Consequently, key hedge funds have jumped into Huntington Ingalls Industries Inc (NYSE:HII) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the most valuable position in Huntington Ingalls Industries Inc (NYSE:HII). Tudor Investment Corp had $3.3 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $1.6 million position during the quarter. The other funds with brand new HII positions are Minhua Zhang’s Weld Capital Management, Michael Gelband’s ExodusPoint Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Huntington Ingalls Industries Inc (NYSE:HII) but similarly valued. These stocks are CrowdStrike Holdings, Inc. (NASDAQ:CRWD), E*TRADE Financial Corporation (NASDAQ:ETFC), Reinsurance Group of America Inc (NYSE:RGA), and Textron Inc. (NYSE:TXT). This group of stocks’ market valuations are similar to HII’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 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $708 million. That figure was $597 million in HII’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Reinsurance Group of America Inc (NYSE:RGA) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Huntington Ingalls Industries Inc (NYSE:HII) is even less popular than RGA. Hedge funds dodged a bullet by taking a bearish stance towards HII. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately HII wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HII investors were disappointed as the stock returned -37.3% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.