Is GD A Good Stock To Buy According To Hedge Funds?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of General Dynamics Corporation (NYSE:GD) based on that data.

Is GD a good stock to buy? General Dynamics Corporation (NYSE:GD) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 51. GD shareholders have witnessed a decrease in hedge fund sentiment lately. There were 42 hedge funds in our database with GD holdings at the end of June. Our calculations also showed that GD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now let’s go over the key hedge fund action encompassing General Dynamics Corporation (NYSE:GD).

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

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GD over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in General Dynamics Corporation (NYSE:GD) was held by Longview Asset Management, which reported holding $4459.2 million worth of stock at the end of September. It was followed by Farallon Capital with a $176.8 million position. Other investors bullish on the company included Arrowstreet Capital, Abrams Bison Investments, and Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Longview Asset Management allocated the biggest weight to General Dynamics Corporation (NYSE:GD), around 96.81% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, setting aside 7.7 percent of its 13F equity portfolio to GD.

Seeing as General Dynamics Corporation (NYSE:GD) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds who were dropping their positions entirely heading into Q4. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group dropped the biggest position of all the hedgies monitored by Insider Monkey, totaling about $40.2 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $22.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 5 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as General Dynamics Corporation (NYSE:GD) but similarly valued. These stocks are Thomson Reuters Corporation (NYSE:TRI), TC Energy Corporation (NYSE:TRP), DexCom, Inc. (NASDAQ:DXCM), Emerson Electric Co. (NYSE:EMR), Public Storage (NYSE:PSA), Itau Unibanco Holding SA (NYSE:ITUB), and Keurig Dr Pepper Inc. (NASDAQ:KDP). This group of stocks’ market values are closest to GD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $665 million. That figure was $5037 million in GD’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 16 bullish hedge fund positions. General Dynamics Corporation (NYSE:GD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GD is 46.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on GD, though not to the same extent, as the stock returned 11.1% since Q3 (through December 18th) and outperformed the market as well.

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