Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Raytheon Technologies Corp (NYSE:RTX)? The smart money sentiment can provide an answer to this question.
Raytheon Technologies Corp (NYSE:RTX) was in 53 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 81. RTX investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 58 hedge funds in our database with RTX positions at the end of the first quarter. Our calculations also showed that RTX 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.
Charles Clough of Clough Capital Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. 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. Now we’re going to view the key hedge fund action encompassing Raytheon Technologies Corp (NYSE:RTX).
Do Hedge Funds Think RTX Is A Good Stock To Buy Now?
At Q2’s end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RTX over the last 24 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Raytheon Technologies Corp (NYSE:RTX), which was worth $572.8 million at the end of the second quarter. On the second spot was Farallon Capital which amassed $405.2 million worth of shares. Alkeon Capital Management, Citadel Investment Group, and Holocene Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Raytheon Technologies Corp (NYSE:RTX), around 9.94% of its 13F portfolio. Cartenna Capital is also relatively very bullish on the stock, designating 4.17 percent of its 13F equity portfolio to RTX.
Seeing as Raytheon Technologies Corp (NYSE:RTX) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers that elected to cut their entire stakes in the second quarter. Intriguingly, Eric W. Mandelblatt’s Soroban Capital Partners said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $333.2 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $100 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Raytheon Technologies Corp (NYSE:RTX). We will take a look at Goldman Sachs Group, Inc. (NYSE:GS), Toronto-Dominion Bank (NYSE:TD), JD.Com Inc (NASDAQ:JD), American Tower Corporation (NYSE:AMT), Sony Group Corp (NYSE:SONY), Target Corporation (NYSE:TGT), and Caterpillar Inc. (NYSE:CAT). This group of stocks’ market values are closest to RTX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GS | 61 | 5183843 | -16 |
| TD | 17 | 303083 | -2 |
| JD | 76 | 10697800 | 1 |
| AMT | 55 | 4720340 | -3 |
| SONY | 20 | 409056 | -7 |
| TGT | 66 | 5865028 | 6 |
| CAT | 62 | 5264268 | 9 |
| Average | 51 | 4634774 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $4635 million. That figure was $2112 million in RTX’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 17 bullish hedge fund positions. Raytheon Technologies Corp (NYSE:RTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RTX is 50.1. 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 positive signal but 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately RTX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RTX were disappointed as the stock returned 7.5% since the end of June (through 11/5) 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 many of these stocks already outperformed the market since 2019.
Follow Rtx Corp (NYSE:RTX)
Follow Rtx Corp (NYSE:RTX)
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Disclosure: None. This article was originally published at Insider Monkey.
