Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards General American Investors Company, Inc. (NYSE:GAM).
Hedge fund interest in General American Investors Company, Inc. (NYSE:GAM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GAM to other stocks including PC Connection, Inc. (NASDAQ:CNXN), Axsome Therapeutics, Inc. (NASDAQ:AXSM), and CIM Commercial Trust Corporation (NASDAQ:CMCT) to get a better sense of its popularity. Our calculations also showed that GAM 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.
In the eyes of most shareholders, hedge funds are seen as underperforming, outdated financial vehicles of years past. While there are greater than 8000 funds trading at present, We look at the top tier of this group, around 750 funds. These hedge fund managers oversee bulk of the hedge fund industry’s total asset base, and by keeping track of their unrivaled stock picks, Insider Monkey has spotted many investment strategies that have historically outrun the market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the key hedge fund action regarding General American Investors Company, Inc. (NYSE:GAM).
How are hedge funds trading General American Investors Company, Inc. (NYSE:GAM)?
At the end of the second quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in GAM a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in General American Investors Company, Inc. (NYSE:GAM) was held by Bulldog Investors, which reported holding $110.3 million worth of stock at the end of March. It was followed by Saba Capital with a $15.8 million position. Other investors bullish on the company included Levin Capital Strategies, Almitas Capital, and GRT Capital Partners.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the second quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as General American Investors Company, Inc. (NYSE:GAM) but similarly valued. These stocks are PC Connection, Inc. (NASDAQ:CNXN), Axsome Therapeutics, Inc. (NASDAQ:AXSM), CIM Commercial Trust Corporation (NASDAQ:CMCT), and Materialise NV (NASDAQ:MTLS). This group of stocks’ market valuations are similar to GAM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNXN | 8 | 38391 | 0 |
| AXSM | 16 | 105819 | 2 |
| CMCT | 1 | 394 | 0 |
| MTLS | 2 | 10287 | -2 |
| Average | 6.75 | 38723 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $128 million in GAM’s case. Axsome Therapeutics, Inc. (NASDAQ:AXSM) is the most popular stock in this table. On the other hand CIM Commercial Trust Corporation (NASDAQ:CMCT) is the least popular one with only 1 bullish hedge fund positions. General American Investors Company, Inc. (NYSE:GAM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on GAM, though not to the same extent, as the stock returned 2.4% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
