Were Hedge Funds Right About Buying Raytheon Company (RTN)?

How do we determine whether Raytheon Company (NYSE:RTN) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Raytheon Company (NYSE:RTN) a buy right now? The smart money is taking a bullish view. The number of bullish hedge fund bets inched up by 3 in recent months. Our calculations also showed that RTN isn’t among the 30 most popular stocks among hedge funds. RTN was in 38 hedge funds’ portfolios at the end of December. There were 35 hedge funds in our database with RTN positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management

We’re going to take a peek at the key hedge fund action regarding Raytheon Company (NYSE:RTN).

What does the smart money think about Raytheon Company (NYSE:RTN)?

At Q4’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RTN over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Raytheon Company (NYSE:RTN). AQR Capital Management has a $656.6 million position in the stock, comprising 0.8% of its 13F portfolio. On AQR Capital Management’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $183.6 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Jim Simons’s Renaissance Technologies.

As industrywide interest jumped, some big names have jumped into Raytheon Company (NYSE:RTN) headfirst. Renaissance Technologies, founded by Jim Simons, initiated the most outsized position in Raytheon Company (NYSE:RTN). Renaissance Technologies had $129.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $8.8 million position during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Raytheon Company (NYSE:RTN). These stocks are Exelon Corporation (NYSE:EXC), Orange S.A. (NYSE:ORAN), Intercontinental Exchange Inc (NYSE:ICE), and HCA Healthcare Inc (NYSE:HCA). All of these stocks’ market caps are similar to RTN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXC 33 2059393 0
ORAN 2 398 1
ICE 41 2692581 5
HCA 56 2707875 10
Average 33 1865062 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1865 million. That figure was $1602 million in RTN’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Orange S.A. (NYSE:ORAN) is the least popular one with only 2 bullish hedge fund positions. Raytheon Company (NYSE:RTN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on RTN, though not to the same extent, as the stock returned 16.0% and outperformed the market as well.

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