How do we determine whether United Technologies Corporation (NYSE:UTX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
United Technologies Corporation (NYSE:UTX) has seen an increase in activity from the world's largest hedge funds of late. UTX was in 68 hedge funds' portfolios at the end of the third quarter of 2019. There were 65 hedge funds in our database with UTX positions at the end of the previous quarter. Our calculations also showed that UTX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/caption]
We're going to take a peek at the latest hedge fund action regarding United Technologies Corporation (NYSE:UTX).
How are hedge funds trading United Technologies Corporation (NYSE:UTX)?
Heading into the fourth quarter of 2019, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2019. By comparison, 59 hedge funds held shares or bullish call options in UTX a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Third Point, managed by Dan Loeb, holds the largest position in United Technologies Corporation (NYSE:UTX). Third Point has a $819.1 million position in the stock, comprising 9.7% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $729 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions contain Ken Fisher's Fisher Asset Management, Eric W. Mandelblatt and Gaurav Kapadia's Soroban Capital Partners and Robert Rodriguez and Steven Romick's First Pacific Advisors. In terms of the portfolio weights assigned to each position Third Point allocated the biggest weight to United Technologies Corporation (NYSE:UTX), around 9.73% of its portfolio. One Fin Capital Management is also relatively very bullish on the stock, earmarking 8.44 percent of its 13F equity portfolio to UTX.
Now, key hedge funds were breaking ground themselves. Levin Easterly Partners, managed by John Murphy, created the most valuable position in United Technologies Corporation (NYSE:UTX). Levin Easterly Partners had $110.5 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers's Castle Hook Partners also initiated a $87.8 million position during the quarter. The following funds were also among the new UTX investors: Panayotis Takis Sparaggis's Alkeon Capital Management, Anand Parekh's Alyeska Investment Group, and Doug Silverman and Alexander Klabin's Senator Investment Group.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as United Technologies Corporation (NYSE:UTX) but similarly valued. We will take a look at Netflix, Inc. (NASDAQ:NFLX), AstraZeneca plc (NYSE:AZN), Thermo Fisher Scientific Inc. (NYSE:TMO), and Royal Bank of Canada (NYSE:RY). This group of stocks' market caps resemble UTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFLX,95,8996171,-11 AZN,25,1779111,1 TMO,65,3444543,-7 RY,17,491191,2 Average,50.5,3677754,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.5 hedge funds with bullish positions and the average amount invested in these stocks was $3678 million. That figure was $6458 million in UTX's case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 17 bullish hedge fund positions. United Technologies Corporation (NYSE:UTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on UTX as the stock returned 8.7% during the fourth quarter (through 11/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
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