Is LHX Stock A Buy or Sell?

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 fourth 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 L3Harris Technologies, Inc. (NASDAQ:LHX) based on that data.

Is LHX stock a buy? Prominent investors were reducing their bets on the stock. The number of long hedge fund positions were cut by 5 lately. L3Harris Technologies, Inc. (NASDAQ:LHX) was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 51. Our calculations also showed that LHX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 42 hedge funds in our database with LHX holdings at the end of September.

At the moment there are tons of formulas investors have at their disposal to assess stocks. Two of the best formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outpace the market by a healthy margin (see the details here).

Joel Greenblatt of Gotham Asset Management

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

At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. By comparison, 48 hedge funds held shares or bullish call options in LHX a year ago. So, let’s examine 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, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in L3Harris Technologies, Inc. (NASDAQ:LHX). Diamond Hill Capital has a $209.8 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $135.4 million position; 2.5% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to L3Harris Technologies, Inc. (NASDAQ:LHX), around 9.1% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, earmarking 3.06 percent of its 13F equity portfolio to LHX.

Judging by the fact that L3Harris Technologies, Inc. (NASDAQ:LHX) has witnessed declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of funds that elected to cut their entire stakes in the fourth quarter. It’s worth mentioning that Robert Boucai’s Newbrook Capital Advisors dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $57.2 million in stock, and Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management was right behind this move, as the fund cut about $45.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 5 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as L3Harris Technologies, Inc. (NASDAQ:LHX) but similarly valued. We will take a look at Synopsys, Inc. (NASDAQ:SNPS), Amphenol Corporation (NYSE:APH), Digital Realty Trust, Inc. (NYSE:DLR), Chipotle Mexican Grill, Inc. (NYSE:CMG), BCE Inc. (NYSE:BCE), TC Energy Corporation (NYSE:TRP), and Canadian Imperial Bank of Commerce (NYSE:CM). This group of stocks’ market valuations are closest to LHX’s market valuation.

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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 $997 million. That figure was $891 million in LHX’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 bullish hedge fund positions. L3Harris Technologies, Inc. (NASDAQ:LHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LHX is 64.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on LHX as the stock returned 8.3% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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