Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Northrop Grumman Corporation (NYSE:NOC).
Is NOC a good stock to buy now? Northrop Grumman Corporation (NYSE:NOC) shareholders have witnessed a decrease in enthusiasm from smart money recently. Northrop Grumman Corporation (NYSE:NOC) was in 42 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 47. Our calculations also showed that NOC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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According to most traders, hedge funds are seen as unimportant, outdated financial vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, We choose to focus on the elite of this club, around 850 funds. Most estimates calculate that this group of people watch over most of all hedge funds’ total capital, and by watching their highest performing equity investments, Insider Monkey has identified several 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 per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy 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. You can subscribe to our free daily newsletter on our website. Now we’re going to review the latest hedge fund action regarding Northrop Grumman Corporation (NYSE:NOC).
Do Hedge Funds Think NOC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 46 hedge funds with a bullish position in NOC a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Northrop Grumman Corporation (NYSE:NOC), which was worth $196 million at the end of the third quarter. On the second spot was Alkeon Capital Management which amassed $102.8 million worth of shares. Citadel Investment Group, AQR Capital Management, and Millennium 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 Huber Capital Management allocated the biggest weight to Northrop Grumman Corporation (NYSE:NOC), around 3.33% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, earmarking 2.39 percent of its 13F equity portfolio to NOC.
Judging by the fact that Northrop Grumman Corporation (NYSE:NOC) has faced a decline in interest from hedge fund managers, logic holds that there is a sect of fund managers who were dropping their positions entirely in the third quarter. At the top of the heap, Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners said goodbye to the largest position of all the hedgies watched by Insider Monkey, totaling close to $291.4 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also said goodbye to its stock, about $5.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Northrop Grumman Corporation (NYSE:NOC). We will take a look at Chubb Limited (NYSE:CB), Dollar General Corp. (NYSE:DG), Micron Technology, Inc. (NASDAQ:MU), Truist Financial Corporation (NYSE:TFC), Workday Inc (NASDAQ:WDAY), Newmont Corporation (NYSE:NEM), and Autodesk, Inc. (NASDAQ:ADSK). This group of stocks’ market caps resemble NOC’s market cap.
|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 57.6 hedge funds with bullish positions and the average amount invested in these stocks was $2499 million. That figure was $843 million in NOC’s case. Micron Technology, Inc. (NASDAQ:MU) is the most popular stock in this table. On the other hand Truist Financial Corporation (NYSE:TFC) is the least popular one with only 29 bullish hedge fund positions. Northrop Grumman Corporation (NYSE:NOC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NOC is 39.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately NOC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NOC investors were disappointed as the stock returned -3.8% since the end of September (through 12/8) 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.