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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Textron Inc. (NYSE:TXT), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is TXT stock a buy? Textron Inc. (NYSE:TXT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds' portfolios at the end of December. Our calculations also showed that TXT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare TXT to other stocks including Mirati Therapeutics, Inc. (NASDAQ:MRTX), Bentley Systems, Incorporated (NASDAQ:BSY), and Centrais Eletricas Brasileiras SA (NYSE:EBR) to get a better sense of its popularity.
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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now we're going to view the new hedge fund action surrounding Textron Inc. (NYSE:TXT).
Do Hedge Funds Think TXT Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TXT over the last 22 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Richard S. Pzena's Pzena Investment Management has the biggest position in Textron Inc. (NYSE:TXT), worth close to $377.5 million, corresponding to 1.8% of its total 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, led by Mario Gabelli, holding a $100.1 million position; 0.9% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of Cliff Asness's AQR Capital Management, John Murphy's Levin Easterly Partners and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Textron Inc. (NYSE:TXT), around 9.19% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, earmarking 3.82 percent of its 13F equity portfolio to TXT.
Since Textron Inc. (NYSE:TXT) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedgies who were dropping their full holdings last quarter. Intriguingly, Brandon Haley's Holocene Advisors dumped the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth about $56.3 million in stock. Jinghua Yan's fund, TwinBeech Capital, also dropped its stock, about $1.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Textron Inc. (NYSE:TXT) but similarly valued. We will take a look at Mirati Therapeutics, Inc. (NASDAQ:MRTX), Bentley Systems, Incorporated (NASDAQ:BSY), Centrais Eletricas Brasileiras SA (NYSE:EBR), CRISPR Therapeutics AG (NASDAQ:CRSP), XPO Logistics Inc (NYSE:XPO), F5 Networks, Inc. (NASDAQ:FFIV), and AbCellera Biologics Inc. (NASDAQ:ABCL). All of these stocks' market caps match TXT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRTX,56,3610322,18 BSY,19,82011,0 EBR,6,4239,2 CRSP,34,2010222,8 XPO,40,2981368,1 FFIV,34,1131637,-2 ABCL,25,2316582,25 Average,30.6,1733769,7.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $1734 million. That figure was $589 million in TXT's case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Centrais Eletricas Brasileiras SA (NYSE:EBR) is the least popular one with only 6 bullish hedge fund positions. Textron Inc. (NYSE:TXT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TXT is 43.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on TXT as the stock returned 22.2% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.