Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Northrop Grumman Corporation (NYSE:NOC) was in 35 hedge funds’ portfolios at the end of the first quarter of 2019. NOC has experienced an increase in hedge fund interest in recent months. There were 29 hedge funds in our database with NOC positions at the end of the previous quarter. Our calculations also showed that NOC isn’t among the 30 most popular stocks among hedge funds.
To most investors, hedge funds are seen as slow, outdated investment vehicles of the past. While there are over 8000 funds trading at present, Our experts choose to focus on the bigwigs of this club, around 750 funds. These hedge fund managers command bulk of the hedge fund industry’s total capital, and by following their highest performing equity investments, Insider Monkey has discovered a number of investment strategies that have historically outstripped the market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let’s view the new hedge fund action surrounding Northrop Grumman Corporation (NYSE:NOC).
How are hedge funds trading Northrop Grumman Corporation (NYSE:NOC)?
Heading into the second quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in NOC over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alkeon Capital Management held the most valuable stake in Northrop Grumman Corporation (NYSE:NOC), which was worth $98.9 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $90.9 million worth of shares. Moreover, Millennium Management, Citadel Investment Group, and Adage Capital Management were also bullish on Northrop Grumman Corporation (NYSE:NOC), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers have jumped into Northrop Grumman Corporation (NYSE:NOC) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in Northrop Grumman Corporation (NYSE:NOC). Point72 Asset Management had $56 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $50.3 million position during the quarter. The other funds with brand new NOC positions are Joel Greenblatt’s Gotham Asset Management, Ken Heebner’s Capital Growth Management, and Alexander Mitchell’s Scopus Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Northrop Grumman Corporation (NYSE:NOC) but similarly valued. These stocks are Micron Technology, Inc. (NASDAQ:MU), Illumina, Inc. (NASDAQ:ILMN), Prologis Inc (NYSE:PLD), and China Telecom Corporation Limited (NYSE:CHA). This group of stocks’ market caps are similar to NOC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MU | 61 | 3472436 | 0 |
| ILMN | 42 | 1065266 | -2 |
| PLD | 25 | 454133 | -5 |
| CHA | 8 | 26501 | 0 |
| Average | 34 | 1254584 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1255 million. That figure was $816 million in NOC’s case. Micron Technology, Inc. (NASDAQ:MU) 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 8 bullish hedge fund positions. Northrop Grumman Corporation (NYSE:NOC) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on NOC as the stock returned 14.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
