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Is Lockheed Martin Corporation (LMT) Worthy of Your Portfolio?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Lockheed Martin Corporation (NYSE:LMT) to find out whether it was one of their high conviction long-term ideas.

Lockheed Martin Corporation (NYSE:LMT) was included in the 13F portfolios of 34 investors tracked by Insider Monkey at the end of September. The company saw a decrease in support from the world’s most elite money managers, as there had been 39 funds in our database with LMT holdings at the end of the second quarter. At the end of this article we will also compare LMT to other stocks including Union Pacific Corporation (NYSE:UNP), Westpac Banking Corporation (ADR) (NYSE:WBK), and Mondelez International Inc (NASDAQ:MDLZ) to get a better sense of its popularity.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Lockheed Martin (NYSE:LMT); F-35; strike, fighter, joint, vtol, military, jet, technology, airshow

Jordan Tan / Shutterstock.com

Keeping this in mind, we’re going to take a look at the key action encompassing Lockheed Martin Corporation (NYSE:LMT).

Hedge fund activity in Lockheed Martin Corporation (NYSE:LMT)

A total of 34 funds tracked by Insider Monkey were bullish on Lockheed Martin at the end of September, down by 13% over the quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
lmt
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Lockheed Martin Corporation (NYSE:LMT), worth close to $158.4 million, comprising 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel’s Two Sigma Advisors, with a $121.4 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of Cliff Asness’ AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Ken Griffin’s Citadel Investment Group.

Since Lockheed Martin Corporation (NYSE:LMT) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers that slashed their positions entirely by the end of the third quarter. Intriguingly, First Eagle Investment Management cut the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling about $167.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, worth about $163.4 million. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lockheed Martin Corporation (NYSE:LMT) but similarly valued. These stocks are Union Pacific Corporation (NYSE:UNP), Westpac Banking Corporation (ADR) (NYSE:WBK), Mondelez International Inc (NASDAQ:MDLZ), and Lowe’s Companies, Inc. (NYSE:LOW). 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
UNP 62 2502901 7
WBK 5 31922 -1
MDLZ 53 5902162 -9
LOW 68 3273484 1

As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $2.93 billion. That figure was $756 million in LMT’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand Westpac Banking Corporation (ADR) (NYSE:WBK) is the least popular one with only five investors holding shares. Lockheed Martin Corporation (NYSE:LMT) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LOW might be a better candidate to consider a long position.

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