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

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

L-3 Communications Holdings, Inc. (NYSE:LLL) investors should be aware of an increase in activity from the world’s largest hedge funds recently. LLL was in 34 hedge funds’ portfolios at the end of the third quarter of 2016. There were 33 hedge funds in our database with LLL positions at the end of the previous quarter. 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 Pentair, Ltd. Registered Share (NYSE:PNR), Macerich Co (NYSE:MAC), and Acuity Brands, Inc. (NYSE:AYI) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Keeping this in mind, let’s take a look at the new action surrounding L-3 Communications Holdings, Inc. (NYSE:LLL).

How have hedgies been trading L-3 Communications Holdings, Inc. (NYSE:LLL)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, up 3% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in LLL over the last 5 quarters. So, let’s review 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, AQR Capital Management, led by Cliff Asness, holds the biggest position in L-3 Communications Holdings, Inc. (NYSE:LLL). According to regulatory filings, the fund has a $275.7 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Discovery Capital Management, led by Rob Citrone, holding a $69.6 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Jim Simons’s Renaissance Technologies, Glenn J. Krevlin’s Glenhill Advisors and Principal Global Investors’s Columbus Circle Investors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, key hedge funds have jumped into L-3 Communications Holdings, Inc. (NYSE:LLL) headfirst. Columbus Circle Investors, led by Principal Global Investors, created the largest position in L-3 Communications Holdings, Inc. (NYSE:LLL). According to its latest 13F filing, the fund had $44.3 million invested in the company at the end of the quarter. Jesse Ro’s Tiger Legatus Capital also made a $12.1 million investment in the stock during the quarter. The other funds with brand new LLL positions are Ken Griffin’s Citadel Investment Group, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Mike Vranos’s Ellington.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as L-3 Communications Holdings, Inc. (NYSE:LLL) but similarly valued. These stocks are Pentair, Ltd. Registered Share (NYSE:PNR), Macerich Co (NYSE:MAC), Acuity Brands, Inc. (NYSE:AYI), and Host Hotels and Resorts Inc (NYSE:HST). This group of stocks’ market valuations resemble LLL’s market valuation.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $528 million. That figure was $772 million in LLL’s case. Acuity Brands, Inc. (NYSE:AYI) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NYSE:HST) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks L-3 Communications Holdings, Inc. (NYSE:LLL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.