Was The Smart Money Right About General Electric Company (GE)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards General Electric Company (NYSE:GE) to find out whether there were any major changes in hedge funds’ views.

Is General Electric Company (NYSE:GE) the right investment to pursue these days? The smart money was getting more optimistic. The number of bullish hedge fund positions moved up by 24 recently. General Electric Company (NYSE:GE) was in 69 hedge funds’ portfolios at the end of December. The all time high for this statistic is 74. Our calculations also showed that GE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.

Nelson Peltz of Trian Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 we’re going to take a gander at the fresh hedge fund action surrounding General Electric Company (NYSE:GE).

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

At fourth quarter’s end, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 53% from the previous quarter. By comparison, 60 hedge funds held shares or bullish call options in GE a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the largest position in General Electric Company (NYSE:GE). Eagle Capital Management has a $1.3511 billion position in the stock, comprising 4.3% of its 13F portfolio. The second most bullish fund manager is Pzena Investment Management, led by Richard S. Pzena, holding a $970.5 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Phill Gross and Robert Atchinson’s Adage Capital Management, Mason Hawkins’s Southeastern Asset Management and Nelson Peltz’s Trian Partners. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to General Electric Company (NYSE:GE), around 7.81% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, earmarking 7.67 percent of its 13F equity portfolio to GE.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, assembled the most valuable position in General Electric Company (NYSE:GE). Viking Global had $315.4 million invested in the company at the end of the quarter. Patrick Degorce’s Theleme Partners also made a $163.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Doug Silverman and Alexander Klabin’s Senator Investment Group, Suzi Nutton (CEO)’s Lansdowne Partners, and Gregg Moskowitz’s Interval Partners.

Let’s also examine hedge fund activity in other stocks similar to General Electric Company (NYSE:GE). We will take a look at Rio Tinto Group (NYSE:RIO), Diageo plc (NYSE:DEO), GlaxoSmithKline plc (NYSE:GSK), Stryker Corporation (NYSE:SYK), Booking Holdings Inc. (NASDAQ:BKNG), The Goldman Sachs Group, Inc. (NYSE:GS), and Uber Technologies, Inc. (NYSE:UBER). This group of stocks’ market caps match GE’s market cap.

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As you can see these stocks had an average of 63.1 hedge funds with bullish positions and the average amount invested in these stocks was $4328 million. That figure was $5685 million in GE’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 23 bullish hedge fund positions. General Electric Company (NYSE:GE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GE is 58.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on GE as the stock returned 24.7% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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