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Is Lockheed Martin Corporation (LMT) Going to Burn These Hedge Funds?

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 Lockheed Martin Corporation (NYSE:LMT) and determine whether the smart money was really smart about this stock.

Is Lockheed Martin Corporation (NYSE:LMT) the right pick for your portfolio? The smart money was taking a pessimistic view. The number of long hedge fund positions went down by 2 in recent months. Lockheed Martin Corporation (NYSE:LMT) was in 53 hedge funds’ portfolios at the end of June. The all time high for this statistics is 55. Our calculations also showed that LMT 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According to most investors, hedge funds are seen as unimportant, outdated financial tools of years past. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the top tier of this club, about 850 funds. These money managers have their hands on the majority of the smart money’s total asset base, and by tailing their highest performing investments, Insider Monkey has come up with a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded 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 .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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. Now let’s review the recent hedge fund action encompassing Lockheed Martin Corporation (NYSE:LMT).

How are hedge funds trading Lockheed Martin Corporation (NYSE:LMT)?

At second quarter’s end, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 48 hedge funds with a bullish position in LMT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Lockheed Martin Corporation (NYSE:LMT) was held by GQG Partners, which reported holding $310.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $247.4 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Heard Capital allocated the biggest weight to Lockheed Martin Corporation (NYSE:LMT), around 7.59% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, setting aside 3.42 percent of its 13F equity portfolio to LMT.

Due to the fact that Lockheed Martin Corporation (NYSE:LMT) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes by the end of the second quarter. Intriguingly, Steve Cohen’s Point72 Asset Management said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, worth an estimated $67.9 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $34 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Lockheed Martin Corporation (NYSE:LMT). We will take a look at GlaxoSmithKline plc (NYSE:GSK), Lowe’s Companies, Inc. (NYSE:LOW), Honeywell International Inc. (NYSE:HON), TOTAL SE (NYSE:TOT), Gilead Sciences, Inc. (NASDAQ:GILD), Royal Bank of Canada (NYSE:RY), and United Parcel Service, Inc. (NYSE:UPS). All of these stocks’ market caps are closest to LMT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GSK 28 2068711 1
LOW 89 6589304 18
HON 50 1447569 6
TOT 19 861496 7
GILD 68 2286230 -8
RY 16 237643 0
UPS 37 781926 -11
Average 43.9 2038983 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $2039 million. That figure was $1554 million in LMT’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 16 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. Our overall hedge fund sentiment score for LMT is 57.3. 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 LMT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LMT were disappointed as the stock returned 7.6% 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.

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