Here is What Hedge Funds Think About Northrop Grumman Corporation (NOC)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Northrop Grumman Corporation (NYSE:NOC).

Northrop Grumman Corporation (NYSE:NOC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 40 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that NOC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Metlife Inc (NYSE:MET), Atlassian Corporation Plc (NASDAQ:TEAM), and Southern Copper Corporation (NYSE:SCCO) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the latest hedge fund action regarding Northrop Grumman Corporation (NYSE:NOC).

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

At the end of the first quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NOC over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Northrop Grumman Corporation (NYSE:NOC). Arrowstreet Capital has a $245.1 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $237.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions comprise D. E. Shaw’s D E Shaw, Donald Yacktman’s Yacktman Asset Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Northrop Grumman Corporation (NYSE:NOC), around 6.12% of its 13F portfolio. Blue Grotto Capital is also relatively very bullish on the stock, designating 3.82 percent of its 13F equity portfolio to NOC.

Seeing as Northrop Grumman Corporation (NYSE:NOC) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that slashed their positions entirely last quarter. Interestingly, Panayotis Takis Sparaggis’s Alkeon Capital Management sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $58.2 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also said goodbye to its stock, about $40.8 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Northrop Grumman Corporation (NYSE:NOC). These stocks are Metlife Inc (NYSE:MET), Atlassian Corporation Plc (NASDAQ:TEAM), Southern Copper Corporation (NYSE:SCCO), The Blackstone Group Inc. (NYSE:BX), Moderna, Inc. (NASDAQ:MRNA), Edwards Lifesciences Corporation (NYSE:EW), and Honda Motor Co Ltd (NYSE:HMC). All of these stocks’ market caps are closest to NOC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $1551 million. That figure was $1511 million in NOC’s case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 12 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 overall hedge fund sentiment score for NOC is 56. 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. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on NOC as the stock returned 15.8% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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