Were Hedge Funds Right About Piling Into L3Harris Technologies, Inc. (LHX)?

Is L3Harris Technologies, Inc. (NYSE:LHX) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

L3Harris Technologies, Inc. (NYSE:LHX) investors should be aware of an increase in enthusiasm from smart money in recent months. LHX was in 30 hedge funds’ portfolios at the end of the second quarter of 2019. There were 25 hedge funds in our database with LHX holdings at the end of the previous quarter. Our calculations also showed that LHX isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.

Noam Gottesman GLG Partners

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the new hedge fund action regarding L3Harris Technologies, Inc. (NYSE:LHX).

Hedge fund activity in L3Harris Technologies, Inc. (NYSE:LHX)

At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in LHX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with LHX Positions

More specifically, Citadel Investment Group was the largest shareholder of L3Harris Technologies, Inc. (NYSE:LHX), with a stake worth $244.1 million reported as of the end of March. Trailing Citadel Investment Group was Alyeska Investment Group, which amassed a stake valued at $123 million. GLG Partners, AQR Capital Management, and Holocene Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, key money managers were leading the bulls’ herd. Alyeska Investment Group, managed by Anand Parekh, created the most outsized position in L3Harris Technologies, Inc. (NYSE:LHX). Alyeska Investment Group had $123 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also made a $35 million investment in the stock during the quarter. The other funds with brand new LHX positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Zach Schreiber’s Point State Capital, and Joel Greenblatt’s Gotham Asset Management.

Let’s check out hedge fund activity in other stocks similar to L3Harris Technologies, Inc. (NYSE:LHX). We will take a look at Prudential Financial Inc (NYSE:PRU), Emerson Electric Co. (NYSE:EMR), China Telecom Corporation Limited (NYSE:CHA), and ICICI Bank Limited (NYSE:IBN). This group of stocks’ market caps match LHX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRU 33 512084 2
EMR 32 638009 -12
CHA 7 23306 -1
IBN 29 912531 3
Average 25.25 521483 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $521 million. That figure was $770 million in LHX’s case. Prudential Financial Inc (NYSE:PRU) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 7 bullish hedge fund positions. L3Harris Technologies, Inc. (NYSE:LHX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LHX as the stock returned 10.7% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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