Why Lockheed Martin Corporation (LMT)’s Stock in Spotlight Today?

Lockheed Martin Corporation (NYSE:LMT)’s stock is trending today after it was announced that the final F-35 testing won’t begin until calendar year 2018 rather than the original target of the middle of 2017. The six month delay is due to the need to do initial operational tests and evaluations and has nothing to do with previously reported software glitches. The F-35 program is one of the largest defense programs in history, with an estimated cost of around $1.5 trillion over its lifetime. Although the program has run into several delays in its history, many believe the F-35 will be second only to the F-22 in air superiority capability and unrivaled in other tasks once it becomes fully operational. Since the beginning of the year, Lockheed Martin’s stock is up by 10% and the stock is one of the most popular aerospace & defense stocks among hedge funds, according to the latest round of 13F filings.

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 the 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 Lockheed Martin Corporation (NYSE:LMT)? The smart money sentiment can provide an answer to this question.

At the moment there are tons of methods shareholders can use to size up publicly traded companies. A couple of the less known methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can beat the S&P 500 by a healthy amount (see the details here).

Keeping this in mind, we’re going to take a glance at the latest action regarding Lockheed Martin Corporation (NYSE:LMT).

Heading into the second quarter of 2016, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2015. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Lockheed Martin Corporation (NYSE:LMT). AQR Capital Management has a $100.3 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is John Burbank of Passport Capital, with a $84.1 million position; 1.4% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions encompass Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group.

On the next page, we are going to take a look at some funds that decided to dump their positions in Lockheed Martin during the first quarter. In addition, at the end of this article we will also compare LMT to other stocks including Union Pacific Corporation (NYSE:UNP), Goldman Sachs Group, Inc. (NYSE:GS), and Simon Property Group, Inc (NYSE:SPG) to get a better sense of its popularity.

There was a specific group of hedgies who sold off their positions entirely in the first quarter. Interestingly, William B. Gray’s Orbis Investment Management sold off the largest position of all the hedgies monitored by Insider Monkey, totaling close to $22.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $12.8 million worth of shares.

Let’s now review 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 Union Pacific Corporation (NYSE:UNP), Goldman Sachs Group, Inc. (NYSE:GS), Simon Property Group, Inc (NYSE:SPG), and Danaher Corporation (NYSE:DHR). All of these stocks’ market caps are closest to LMT’s market cap.

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $2321 million. That figure was $867 million in LMT’s case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Simon Property Group, Inc (NYSE:SPG) is the least popular one with only 25 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GS might be a better candidate to consider a long position.

Disclosure: None