During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Raytheon Company (NYSE:RTN) and see how the stock is affected by the recent hedge fund activity.
Raytheon Company (NYSE:RTN) was in 35 hedge funds’ portfolios at the end of September. RTN has experienced a decrease in support from the world’s most elite money managers lately. There were 36 hedge funds in our database with RTN positions at the end of the previous quarter. Our calculations also showed that RTN isn’t among the 30 most popular stocks among hedge funds.
To most traders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are greater than 8,000 funds in operation at the moment, Our experts look at the crème de la crème of this group, approximately 700 funds. Most estimates calculate that this group of people manage the lion’s share of all hedge funds’ total capital, and by monitoring their top stock picks, Insider Monkey has unearthed many investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Cliff Asness of AQR Capital Management
We’re going to check out the latest hedge fund action regarding Raytheon Company (NYSE:RTN).
What does the smart money think about Raytheon Company (NYSE:RTN)?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RTN over the last 13 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, AQR Capital Management held the most valuable stake in Raytheon Company (NYSE:RTN), which was worth $1076.1 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $178.4 million worth of shares. Moreover, GLG Partners, D E Shaw, and Citadel Investment Group were also bullish on Raytheon Company (NYSE:RTN), allocating a large percentage of their portfolios to this stock.
Seeing as Raytheon Company (NYSE:RTN) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that decided to sell off their full holdings heading into Q3. At the top of the heap, Jim Simons’s Renaissance Technologies sold off the largest investment of all the hedgies monitored by Insider Monkey, comprising about $60.8 million in stock. Clint Murray’s fund, Lodge Hill Capital, also said goodbye to its stock, about $19.3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Raytheon Company (NYSE:RTN) but similarly valued. These stocks are Intuit Inc. (NASDAQ:INTU), UBS Group AG (NYSE:UBS), Colgate-Palmolive Company (NYSE:CL), and CME Group Inc (NASDAQ:CME). This group of stocks’ market caps resemble RTN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INTU | 43 | 2393970 | 11 |
| UBS | 14 | 928425 | -1 |
| CL | 33 | 1739318 | 3 |
| CME | 53 | 2018368 | 5 |
| Average | 35.75 | 1770020 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.77 billion. That figure was $1.87 billion in RTN’s case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand UBS Group AG (NYSE:UBS) is the least popular one with only 14 bullish hedge fund positions. Raytheon Company (NYSE:RTN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CME might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
