Hedge Funds Are Piling Into Textron Inc. (TXT)

At Insider Monkey, we pore over the filings of nearly 867 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30th. In this article, we will use that wealth of knowledge to determine whether or not Textron Inc. (NYSE:TXT) makes for a good investment right now.

Textron Inc. (NYSE:TXT) investors should pay attention to an increase in enthusiasm from smart money lately. Textron Inc. (NYSE:TXT) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that TXT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the fresh hedge fund action regarding Textron Inc. (NYSE:TXT).

Ken Heebner of Capital Growth Management

Do Hedge Funds Think TXT Is A Good Stock To Buy Now?

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TXT over the last 25 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the largest position in Textron Inc. (NYSE:TXT), worth close to $366.3 million, corresponding to 0.7% of its total 13F portfolio. On Adage Capital Management’s heels is Pzena Investment Management, managed by Richard S. Pzena, which holds a $355.7 million position; 1.4% of its 13F portfolio is allocated to the stock. Other peers with similar optimism consist of Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management and Anand Parekh’s Alyeska Investment Group. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Textron Inc. (NYSE:TXT), around 9.51% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, earmarking 1.95 percent of its 13F equity portfolio to TXT.

As one would reasonably expect, some big names were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, initiated the biggest position in Textron Inc. (NYSE:TXT). Alyeska Investment Group had $46.2 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also made a $21.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Alexander Mitchell’s Scopus Asset Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Textron Inc. (NYSE:TXT) but similarly valued. These stocks are Brown & Brown, Inc. (NYSE:BRO), Omnicom Group Inc. (NYSE:OMC), Confluent Inc. (NASDAQ:CFLT), argenx SE (NASDAQ:ARGX), Novavax, Inc. (NASDAQ:NVAX), Royalty Pharma Plc (NASDAQ:RPRX), and Just Eat Takeaway.com N.V. (NASDAQ:GRUB). This group of stocks’ market values match TXT’s market value.

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As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $1061 million. That figure was $1137 million in TXT’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Just Eat Takeaway.com N.V. (NASDAQ:GRUB) is the least popular one with only 18 bullish hedge fund positions. Textron Inc. (NYSE:TXT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TXT is 77.3. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately TXT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TXT were disappointed as the stock returned 1.4% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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