This Metric Says You Are Smart to Sell General Electric Company (GE)

Is General Electric Company (NYSE:GE) a buy here? Prominent investors are selling. The number of bullish hedge fund positions retreated by 6 in recent months.

In the eyes of most shareholders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds trading today, we hone in on the elite of this club, about 450 funds. Most estimates calculate that this group has its hands on the majority of the smart money’s total capital, and by keeping an eye on their top equity investments, we have revealed a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 24 percentage points in 7 months (see the details here).

Equally as integral, positive insider trading sentiment is a second way to parse down the financial markets. Obviously, there are many reasons for a bullish insider to get rid of shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the useful potential of this strategy if “monkeys” know what to do (learn more here).

Consequently, we’re going to take a glance at the key action surrounding General Electric Company (NYSE:GE).

How are hedge funds trading General Electric Company (NYSE:GE)?

Heading into Q2, a total of 58 of the hedge funds we track were bullish in this stock, a change of -9% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly.

Of the funds we track, Ken Fisher’s Fisher Asset Management had the largest position in General Electric Company (NYSE:GE), worth close to $696.4 million, accounting for 1.9% of its total 13F portfolio. On Fisher Asset Management’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $416 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other peers that hold long positions include D. E. Shaw’s D E Shaw, Donald Chiboucis’s Columbus Circle Investors and Cliff Asness’s AQR Capital Management.

Due to the fact that General Electric Company (NYSE:GE) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers who were dropping their entire stakes in Q1. At the top of the heap, George Soros’s Soros Fund Management dumped the biggest stake of the “upper crust” of funds we key on, comprising close to $102.9 million in stock.. Bill Miller’s fund, Legg Mason Capital Management, also sold off its stock, about $88 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds in Q1.

Insider trading activity in General Electric Company (NYSE:GE)

Insider buying is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last six-month time frame, General Electric Company (NYSE:GE) has seen 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to General Electric Company (NYSE:GE). These stocks are Illinois Tool Works Inc. (NYSE:ITW), Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), Danaher Corporation (NYSE:DHR), Honeywell International Inc. (NYSE:HON), and Siemens AG (ADR) (NYSE:SI). This group of stocks are in the diversified machinery industry and their market caps resemble GE’s market cap.

With the results demonstrated by Insider Monkey’s strategies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and General Electric Company (NYSE:GE) shareholders fit into this picture quite nicely.

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