Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Lockheed Martin Corporation (NYSE:LMT) to find out whether there were any major changes in hedge funds’ views.
Lockheed Martin Corporation (NYSE:LMT) was in 58 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 55. This means the bullish number of hedge fund positions in this stock currently sits at its new all time high. LMT shareholders have witnessed an increase in enthusiasm from smart money of late. There were 50 hedge funds in our database with LMT holdings at the end of March. Our calculations also showed that LMT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
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Do Hedge Funds Think LMT Is A Good Stock To Buy Now?
At second quarter’s end, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LMT over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lockheed Martin Corporation (NYSE:LMT) was held by Citadel Investment Group, which reported holding $380.5 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $233.3 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and D E Shaw. In terms of the portfolio weights assigned to each position Heard Capital allocated the biggest weight to Lockheed Martin Corporation (NYSE:LMT), around 6.86% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, earmarking 4.6 percent of its 13F equity portfolio to LMT.
Consequently, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Lockheed Martin Corporation (NYSE:LMT). Point72 Asset Management had $24.8 million invested in the company at the end of the quarter. Jaime Sterne’s Skye Global Management also made a $14.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Chen Tianqiao’s Shanda Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lockheed Martin Corporation (NYSE:LMT) but similarly valued. We will take a look at GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc. (NYSE:SPGI), Stryker Corporation (NYSE:SYK), Micron Technology, Inc. (NASDAQ:MU), Moderna, Inc. (NASDAQ:MRNA), Uber Technologies, Inc. (NYSE:UBER), and Anthem Inc (NYSE:ANTM). This group of stocks’ market values are similar to LMT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GSK | 28 | 1466364 | 3 |
| SPGI | 71 | 7278360 | 5 |
| SYK | 48 | 3369193 | 2 |
| MU | 87 | 6333058 | -13 |
| MRNA | 37 | 5754554 | -2 |
| UBER | 135 | 10412577 | 5 |
| ANTM | 67 | 4838358 | 9 |
| Average | 67.6 | 5636066 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 67.6 hedge funds with bullish positions and the average amount invested in these stocks was $5636 million. That figure was $1566 million in LMT’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (NYSE:GSK) is the least popular one with only 28 bullish hedge fund positions. Lockheed Martin Corporation (NYSE:LMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LMT is 54. 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 LMT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); LMT investors were disappointed as the stock returned -11.5% 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.
Follow Lockheed Martin Corp (NYSE:LMT)
Follow Lockheed Martin Corp (NYSE:LMT)
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Disclosure: None. This article was originally published at Insider Monkey.
