Were Hedge Funds Right About General Dynamics Corporation (GD)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards General Dynamics Corporation (NYSE:GD) and determine whether hedge funds skillfully traded this stock.

Is General Dynamics Corporation (NYSE:GD) worth your attention right now? The smart money was getting less bullish. The number of bullish hedge fund bets went down by 1 recently. General Dynamics Corporation (NYSE:GD) was in 36 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that GD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 recent hedge fund action regarding General Dynamics Corporation (NYSE:GD).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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

At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GD over the last 25 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Longview Asset Management held the most valuable stake in General Dynamics Corporation (NYSE:GD), which was worth $5889.1 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $227.2 million worth of shares. Balyasny Asset Management, Abrams Bison Investments, and Markel Gayner Asset Management 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 Longview Asset Management allocated the biggest weight to General Dynamics Corporation (NYSE:GD), around 96.87% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, designating 6.3 percent of its 13F equity portfolio to GD.

Since General Dynamics Corporation (NYSE:GD) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $14.4 million in stock. Peter Avellone’s fund, Cartenna Capital, also cut its stock, about $14.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as General Dynamics Corporation (NYSE:GD) but similarly valued. We will take a look at Thomson Reuters Corporation (NYSE:TRI), Baidu, Inc. (NASDAQ:BIDU), Honda Motor Co Ltd (NYSE:HMC), DexCom, Inc. (NASDAQ:DXCM), The Progressive Corporation (NYSE:PGR), Metlife Inc (NYSE:MET), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). All of these stocks’ market caps are similar to GD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1541 million. That figure was $6720 million in GD’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 12 bullish hedge fund positions. General Dynamics Corporation (NYSE:GD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GD is 54.4. 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 beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on GD as the stock returned 9.5% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.

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