We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards General Dynamics Corporation (NYSE:GD).
General Dynamics Corporation (NYSE:GD) was in 46 hedge funds’ portfolios at the end of the fourth quarter of 2019. GD investors should pay attention to an increase in enthusiasm from smart money lately. There were 42 hedge funds in our database with GD positions at the end of the previous quarter. Our calculations also showed that GD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In today’s marketplace there are a lot of methods stock market investors have at their disposal to evaluate stocks. A couple of the most underrated methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite money managers can outperform the S&P 500 by a superb margin (see the details here).
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the fresh hedge fund action regarding General Dynamics Corporation (NYSE:GD).
Hedge fund activity in General Dynamics Corporation (NYSE:GD)
At the end of the fourth quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GD over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Longview Asset Management held the most valuable stake in General Dynamics Corporation (NYSE:GD), which was worth $5765 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $173.1 million worth of shares. AQR Capital Management, Millennium Management, 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 Longview Asset Management allocated the biggest weight to General Dynamics Corporation (NYSE:GD), around 93.85% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, dishing out 4.36 percent of its 13F equity portfolio to GD.
As one would reasonably expect, key hedge funds have jumped into General Dynamics Corporation (NYSE:GD) headfirst. Renaissance Technologies, established the most outsized position in General Dynamics Corporation (NYSE:GD). Renaissance Technologies had $64.1 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $5.1 million position during the quarter. The other funds with brand new GD positions are Matthew Hulsizer’s PEAK6 Capital Management, Matthew L Pinz’s Pinz Capital, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks similar to General Dynamics Corporation (NYSE:GD). We will take a look at Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Uber Technologies, Inc. (NYSE:UBER), Norfolk Southern Corp. (NYSE:NSC), and Suncor Energy Inc. (NYSE:SU). This group of stocks’ market values are similar to GD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMFG | 11 | 584035 | 0 |
| UBER | 94 | 6677417 | 46 |
| NSC | 52 | 1931031 | 2 |
| SU | 39 | 1487356 | -2 |
| Average | 49 | 2669960 | 11.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $2670 million. That figure was $6699 million in GD’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 11 bullish hedge fund positions. General Dynamics Corporation (NYSE:GD) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately GD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GD investors were disappointed as the stock returned -26.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
