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In this article we will take a look at whether hedge funds think L3Harris Technologies, Inc. (NASDAQ:LHX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is L3Harris Technologies, Inc. (NASDAQ:LHX) a buy right now? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets advanced by 1 in recent months. L3Harris Technologies, Inc. (NASDAQ:LHX) was in 42 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that LHX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this biotech 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. With all of this in mind we're going to check out the fresh hedge fund action regarding L3Harris Technologies, Inc. (NASDAQ:LHX).
Do Hedge Funds Think LHX Is A Good Stock To Buy Now?
At the end of June, a total of 42 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 LHX over the last 24 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in L3Harris Technologies, Inc. (NASDAQ:LHX) was held by Diamond Hill Capital, which reported holding $267.2 million worth of stock at the end of June. It was followed by Yacktman Asset Management with a $150 million position. Other investors bullish on the company included Iridian Asset Management, GQG Partners, and Element Capital Management. In terms of the portfolio weights assigned to each position Element Capital Management allocated the biggest weight to L3Harris Technologies, Inc. (NASDAQ:LHX), around 11.12% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, dishing out 4.43 percent of its 13F equity portfolio to LHX.
As industrywide interest jumped, some big names have been driving this bullishness. Element Capital Management, managed by Jeffrey Talpins, initiated the most valuable position in L3Harris Technologies, Inc. (NASDAQ:LHX). Element Capital Management had $70.4 million invested in the company at the end of the quarter. Qing Li's Sciencast Management also initiated a $4.6 million position during the quarter. The following funds were also among the new LHX investors: Ryan Caldwell's Chiron Investment Management, Noam Gottesman's GLG Partners, and Nick Thakore's Diametric Capital.
Let's now review hedge fund activity in other stocks similar to L3Harris Technologies, Inc. (NASDAQ:LHX). These stocks are Ross Stores, Inc. (NASDAQ:ROST), Trane Technologies plc (NYSE:TT), MSCI Inc (NYSE:MSCI), Chipotle Mexican Grill, Inc. (NYSE:CMG), Eni SpA (NYSE:E), Exelon Corporation (NYSE:EXC), and Canadian Natural Resources Limited (NYSE:CNQ). This group of stocks' market values match LHX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROST,51,1448653,3 TT,37,1250491,2 MSCI,37,772551,-1 CMG,35,3204586,-6 E,3,69407,-1 EXC,35,1194570,-9 CNQ,27,777129,-2 Average,32.1,1245341,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $1245 million. That figure was $1017 million in LHX's case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 3 bullish hedge fund positions. L3Harris Technologies, Inc. (NASDAQ:LHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LHX is 71.3. 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. 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on LHX, though not to the same extent, as the stock returned 2% since Q2 (through October 1st) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.