Did The Smart Money Play General Electric Company (GE) Correctly?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding General Electric Company (NYSE:GE) and determine whether hedge funds had an edge regarding this stock.

General Electric Company (NYSE:GE) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. General Electric Company (NYSE:GE) was in 53 hedge funds’ portfolios at the end of September. The all time high for this statistic is 74. Our calculations also showed that GE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to go over the recent hedge fund action surrounding General Electric Company (NYSE:GE).

Nelson Peltz of Trian Partners

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

At Q3’s end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GE over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Viking Global held the most valuable stake in General Electric Company (NYSE:GE), which was worth $1743.6 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $1408.8 million worth of shares. Pzena Investment Management, Trian Partners, and Southeastern Asset 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 Ardsley Partners allocated the biggest weight to General Electric Company (NYSE:GE), around 7.85% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, designating 7.13 percent of its 13F equity portfolio to GE.

Seeing as General Electric Company (NYSE:GE) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that slashed their entire stakes heading into Q4. Intriguingly, Andreas Halvorsen’s Viking Global dumped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $1235.5 million in stock. Richard S. Pzena’s fund, Pzena Investment Management, also cut its stock, about $1091.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 14 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as General Electric Company (NYSE:GE) but similarly valued. We will take a look at Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), Anheuser-Busch InBev SA/NV (NYSE:BUD), Block, Inc. (NYSE:SQ), and The Estee Lauder Companies Inc (NYSE:EL). This group of stocks’ market caps match GE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.3 hedge funds with bullish positions and the average amount invested in these stocks was $4146 million. That figure was $6245 million in GE’s case. Block, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 11 bullish hedge fund positions. General Electric Company (NYSE:GE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GE is 36.6. 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. This is a slightly positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, GE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GE were disappointed as the stock returned -8.2% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

Suggested Articles:

• 11 Best Canadian Stocks to Buy Now
• 12 Best MLP and Pipeline Stocks To Buy
• 12 Best EV Stocks to Invest In

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