Where Do Hedge Funds Stand On Huntington Ingalls Industries Inc (HII)?

·6 min read

In this article we will take a look at whether hedge funds think Huntington Ingalls Industries Inc (NYSE:HII) 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.

Huntington Ingalls Industries Inc (NYSE:HII) investors should pay attention to an increase in enthusiasm from smart money recently. Huntington Ingalls Industries Inc (NYSE:HII) was in 21 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that HII isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To the average investor there are several metrics stock traders put to use to appraise stocks. A duo of the best metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can beat their index-focused peers by a solid amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

David Harding
David Harding

David Harding of Winton Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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 take a peek at the new hedge fund action surrounding Huntington Ingalls Industries Inc (NYSE:HII).

Do Hedge Funds Think HII Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in HII a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is HII A Good Stock To Buy?
Is HII A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Huntington Ingalls Industries Inc (NYSE:HII), which was worth $92.1 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $16.1 million worth of shares. D E Shaw, Citadel Investment Group, and Adage Capital Management 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 Factorial Partners allocated the biggest weight to Huntington Ingalls Industries Inc (NYSE:HII), around 0.67% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.39 percent of its 13F equity portfolio to HII.

As one would reasonably expect, key hedge funds have jumped into Huntington Ingalls Industries Inc (NYSE:HII) headfirst. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), initiated the biggest position in Huntington Ingalls Industries Inc (NYSE:HII). Schonfeld Strategic Advisors had $1.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $1.2 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Phil Frohlich's Prescott Group Capital Management, and David Harding's Winton Capital Management.

Let's check out hedge fund activity in other stocks similar to Huntington Ingalls Industries Inc (NYSE:HII). These stocks are Jefferies Financial Group Inc. (NYSE:JEF), Advanced Drainage Systems Inc. (NYSE:WMS), Arrow Electronics, Inc. (NYSE:ARW), Polaris Inc. (NYSE:PII), Life Storage, Inc. (NYSE:LSI), Mirati Therapeutics, Inc. (NASDAQ:MRTX), and TELUS International (Cda) Inc. (NYSE:TIXT). This group of stocks' market values match HII's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JEF,29,698210,-9 WMS,26,1337049,-3 ARW,30,711641,7 PII,20,464211,-9 LSI,21,261561,-5 MRTX,55,2790783,-2 TIXT,6,19229,-4 Average,26.7,897526,-3.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $898 million. That figure was $153 million in HII's case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand TELUS International (Cda) Inc. (NYSE:TIXT) is the least popular one with only 6 bullish hedge fund positions. Huntington Ingalls Industries Inc (NYSE:HII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HII is 41. 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 negative signal and 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately HII wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HII investors were disappointed as the stock returned 1.5% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.

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