Were Hedge Funds Right About Honeywell International Inc. (HON)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Honeywell International Inc. (NASDAQ:HON).

Honeywell International Inc. (NASDAQ:HON) has seen an increase in hedge fund sentiment of late. Honeywell International Inc. (NASDAQ:HON) was in 57 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 58. There were 56 hedge funds in our database with HON holdings at the end of March. Our calculations also showed that HON isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the 21st century investor’s toolkit there are a large number of gauges stock traders put to use to evaluate publicly traded companies. Two of the less known gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outclass the S&P 500 by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett’s 3 money saving tips that provide inflation and volatility hedges. We go through lists like the 10 best EV 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 fresh hedge fund action regarding Honeywell International Inc. (NASDAQ:HON).

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

At Q2’s end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in HON over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Millennium Management, managed by Israel Englander, holds the largest position in Honeywell International Inc. (NASDAQ:HON). Millennium Management has a $389 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Diamond Hill Capital, led by Ric Dillon, holding a $236.3 million position; 0.9% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Pittencrieff Partners – Gabalex Capital allocated the biggest weight to Honeywell International Inc. (NASDAQ:HON), around 7.22% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, designating 3.37 percent of its 13F equity portfolio to HON.

With a general bullishness amongst the heavyweights, key money managers have jumped into Honeywell International Inc. (NASDAQ:HON) headfirst. Scopus Asset Management, managed by Alexander Mitchell, created the most valuable call position in Honeywell International Inc. (NASDAQ:HON). Scopus Asset Management had $21.9 million invested in the company at the end of the quarter. Ryan Caldwell’s Chiron Investment Management also initiated a $17 million position during the quarter. The following funds were also among the new HON investors: Paul Tudor Jones’s Tudor Investment Corp, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Bruce Kovner’s Caxton Associates LP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Honeywell International Inc. (NASDAQ:HON) but similarly valued. These stocks are Linde plc (NYSE:LIN), Bristol Myers Squibb Company (NYSE:BMY), Charter Communications, Inc. (NASDAQ:CHTR), Citigroup Inc. (NYSE:C), Union Pacific Corporation (NYSE:UNP), Royal Bank of Canada (NYSE:RY), and Sea Limited (NYSE:SE). This group of stocks’ market values match HON’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 68.7 hedge funds with bullish positions and the average amount invested in these stocks was $7845 million. That figure was $1835 million in HON’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 bullish hedge fund positions. Honeywell International Inc. (NASDAQ:HON) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HON is 58.2. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 26.3% in 2021 through October 29th and surpassed the market again by 2.3 percentage points. Unfortunately HON wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HON investors were disappointed as the stock returned 0.1% since the end of June (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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