Textron Inc. (NYSE:TXT) investors should be aware of a decrease in hedge fund sentiment recently.
If you’d ask most traders, hedge funds are assumed to be slow, old financial tools of years past. While there are more than 8000 funds trading at present, we hone in on the masters of this group, around 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total capital, and by tracking their best investments, we have determined a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Equally as beneficial, bullish insider trading sentiment is another way to break down the marketplace. There are many incentives for an insider to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this strategy if shareholders understand where to look (learn more here).
With these “truths” under our belt, we’re going to take a gander at the recent action regarding Textron Inc. (NYSE:TXT).
What have hedge funds been doing with Textron Inc. (NYSE:TXT)?
At the end of the first quarter, a total of 23 of the hedge funds we track were long in this stock, a change of 0% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly.
Of the funds we track, Capital Growth Management, managed by Ken Heebner, holds the most valuable position in Textron Inc. (NYSE:TXT). Capital Growth Management has a $73.9 million position in the stock, comprising 1.8% of its 13F portfolio. On Capital Growth Management’s heels is Citadel Investment Group, managed by Ken Griffin, which held a $60.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Jim Simons’s Renaissance Technologies, Mario Gabelli’s GAMCO Investors and Israel Englander’s Millennium Management.
Judging by the fact that Textron Inc. (NYSE:TXT) has faced falling interest from the smart money, we can see that there is a sect of hedgies who sold off their positions entirely last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest position of all the hedgies we monitor, valued at close to $8.3 million in stock., and Robert Pohly of Samlyn Capital was right behind this move, as the fund cut about $7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Textron Inc. (NYSE:TXT)?
Insider buying is most useful when the primary stock in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Textron Inc. (NYSE:TXT) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Textron Inc. (NYSE:TXT). These stocks are Gencorp Inc (NYSE:GY), AerCap Holdings N.V. (NYSE:AER), Raytheon Company (NYSE:RTN), , and Northrop Grumman Corporation (NYSE:NOC). This group of stocks belong to the aerospace/defense – major diversified industry and their market caps are similar to TXT’s market cap.