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 Motors Company (NYSE:GM) and determine whether hedge funds had an edge regarding this stock.
Is General Motors Company (NYSE:GM) a bargain? Investors who are in the know were in a pessimistic mood. The number of bullish hedge fund positions were cut by 9 recently. General Motors Company (NYSE:GM) was in 77 hedge funds’ portfolios at the end of September. The all time high for this statistic is 88. Our calculations also showed that GM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 86 hedge funds in our database with GM holdings at the end of June.
Boykin Curry of Eagle Capital
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 view the new hedge fund action encompassing General Motors Company (NYSE:GM).
Do Hedge Funds Think GM Is A Good Stock To Buy Now?
At Q3’s end, a total of 77 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GM over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of General Motors Company (NYSE:GM), with a stake worth $3162.6 million reported as of the end of September. Trailing Berkshire Hathaway was Eagle Capital Management, which amassed a stake valued at $614.8 million. Greenhaven Associates, Citadel Investment Group, and Citadel Investment Group 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 Greenhaven Associates allocated the biggest weight to General Motors Company (NYSE:GM), around 18.26% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, designating 8.77 percent of its 13F equity portfolio to GM.
Since General Motors Company (NYSE:GM) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there exists a select few funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Matthew Stadelman’s Diamond Hill Capital sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $506.2 million in stock, and Jeffrey Altman’s Owl Creek Asset Management was right behind this move, as the fund dumped about $86.1 million worth. These moves are important to note, as total hedge fund interest dropped by 9 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as General Motors Company (NYSE:GM) but similarly valued. These stocks are Fidelity National Information Services Inc. (NYSE:FIS), Duke Energy Corporation (NYSE:DUK), Crown Castle International Corp. (NYSE:CCI), Chubb Limited (NYSE:CB), The Bank of Nova Scotia (NYSE:BNS), The Sherwin-Williams Company (NYSE:SHW), and Capital One Financial Corp. (NYSE:COF). This group of stocks’ market caps are closest to GM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIS | 69 | 6044245 | -3 |
| DUK | 32 | 687541 | -4 |
| CCI | 45 | 2089073 | 3 |
| CB | 30 | 1272774 | -12 |
| BNS | 17 | 193321 | 3 |
| SHW | 44 | 1576816 | -5 |
| COF | 55 | 4708790 | -9 |
| Average | 41.7 | 2367509 | -3.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.7 hedge funds with bullish positions and the average amount invested in these stocks was $2368 million. That figure was $6417 million in GM’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks General Motors Company (NYSE:GM) is more popular among hedge funds. Our overall hedge fund sentiment score for GM is 72.3. 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. 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 still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on GM as the stock returned 0% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
Follow General Motors Co (NYSE:GM)
Follow General Motors Co (NYSE:GM)
Suggested Articles:
- 20 Best Social Media Apps in 2021
- 15 Largest Spice Companies in the World
- Top 10 Vaccine Companies in the World
Disclosure: None. This article was originally published at Insider Monkey.
