Hedge Funds Are Selling L-3 Communications Holdings, Inc. (LLL)

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of L-3 Communications Holdings, Inc. (NYSE:LLL).

L-3 Communications Holdings, Inc. (NYSE:LLL) has experienced a decrease in hedge fund sentiment of late. LLL was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. There were 22 hedge funds in our database with LLL holdings at the end of the previous quarter. At the end of this article we will also compare LLL to other stocks including Total System Services, Inc. (NYSE:TSS), Lear Corporation (NYSE:LEA), and International Flavors & Fragrances Inc (NYSE:IFF) to get a better sense of its popularity.

Now, we’re going to view the key action regarding L-3 Communications Holdings, Inc. (NYSE:LLL).

Hedge fund activity in L-3 Communications Holdings, Inc. (NYSE:LLL)

Heading into Q4, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’ AQR Capital Management has the biggest position in L-3 Communications Holdings, Inc. (NYSE:LLL), worth close to $94.4 million, comprising 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is David Harding of Winton Capital Management, with a $60.9 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain Richard S. Pzena’s Pzena Investment Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Since L-3 Communications Holdings, Inc. (NYSE:LLL) has experienced a declination in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds that slashed their positions entirely in the third quarter. Interestingly, Jim Simons’s Renaissance Technologies dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $33.8 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock, about $26.1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to L-3 Communications Holdings, Inc. (NYSE:LLL). We will take a look at Total System Services, Inc. (NYSE:TSS), Lear Corporation (NYSE:LEA), International Flavors & Fragrances Inc (NYSE:IFF), and J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT). This group of stocks’ market values match LLL’s market value.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $412 million. That figure was $227 million in LLL’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand International Flavors & Fragrances Inc (NYSE:IFF) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks L-3 Communications Holdings, Inc. (NYSE:LLL) is as less popular as IFF. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.