Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Raytheon Technologies Corp (NYSE:RTX) based on that data and determine whether they were really smart about the stock.
Raytheon Technologies Corp (NYSE:RTX) investors should be aware of a decrease in support from the world’s most elite money managers lately. Raytheon Technologies Corp (NYSE:RTX) was in 59 hedge funds’ portfolios at the end of June. The all time high for this statistics is 81. There were 62 hedge funds in our database with RTX positions at the end of the first quarter. Our calculations also showed that RTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s review the key hedge fund action surrounding Raytheon Technologies Corp (NYSE:RTX).
Hedge fund activity in Raytheon Technologies Corp (NYSE:RTX)
Heading into the third quarter of 2020, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 65 hedge funds held shares or bullish call options in RTX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Soroban Capital Partners held the most valuable stake in Raytheon Technologies Corp (NYSE:RTX), which was worth $761.4 million at the end of the third quarter. On the second spot was Third Point which amassed $324.4 million worth of shares. Fisher Asset Management, OZ Management, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Soroban Capital Partners allocated the biggest weight to Raytheon Technologies Corp (NYSE:RTX), around 9.75% of its 13F portfolio. Third Point is also relatively very bullish on the stock, designating 4.44 percent of its 13F equity portfolio to RTX.
Since Raytheon Technologies Corp (NYSE:RTX) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies who sold off their full holdings heading into Q3. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $389.1 million in stock. Nicolai Tangen’s fund, Ako Capital, also sold off its stock, about $281.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Raytheon Technologies Corp (NYSE:RTX) but similarly valued. These stocks are 3M Company (NYSE:MMM), British American Tobacco plc (NYSE:BTI), Starbucks Corporation (NASDAQ:SBUX), CVS Health Corporation (NYSE:CVS), Sony Corporation (NYSE:SNE), HDFC Bank Limited (NYSE:HDB), and Fidelity National Information Services Inc. (NYSE:FIS). This group of stocks’ market caps match RTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MMM | 42 | 1038241 | -2 |
| BTI | 11 | 824986 | 1 |
| SBUX | 54 | 2683454 | -14 |
| CVS | 65 | 1136206 | -6 |
| SNE | 28 | 598881 | 0 |
| HDB | 42 | 1177218 | 4 |
| FIS | 111 | 8173639 | 6 |
| Average | 50.4 | 2233232 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.4 hedge funds with bullish positions and the average amount invested in these stocks was $2233 million. That figure was $2952 million in RTX’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 11 bullish hedge fund positions. Raytheon Technologies Corp (NYSE:RTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RTX is 47.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately RTX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RTX were disappointed as the stock returned 1.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
