Yahoo Finance Were Hedge Funds Right About Dumping General Motors Company (GM)?
The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtGeneral Motors Company (NYSE:GM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Is General Motors Company (NYSE:GM) a superb investment now? The smart money was getting less bullish. The number of long hedge fund positions were trimmed by 22 lately. Our calculations also showed that GM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). GM was in 53 hedge funds' portfolios at the end of March. There were 75 hedge funds in our database with GM holdings at the end of the previous quarter.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the new hedge fund action surrounding General Motors Company (NYSE:GM).
Hedge fund activity in General Motors Company (NYSE:GM)
At Q1's end, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. By comparison, 53 hedge funds held shares or bullish call options in GM a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in General Motors Company (NYSE:GM) was held by Berkshire Hathaway, which reported holding $1551.9 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $408.6 million position. Other investors bullish on the company included Greenhaven Associates, Citadel Investment Group, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to General Motors Company (NYSE:GM), around 7.81% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, dishing out 6.01 percent of its 13F equity portfolio to GM.
Since General Motors Company (NYSE:GM) has experienced falling interest from hedge fund managers, it's safe to say that there lies a certain "tier" of hedge funds that decided to sell off their entire stakes in the first quarter. Intriguingly, David Einhorn's Greenlight Capital sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling about $225.3 million in stock, and Doug Silverman and Alexander Klabin's Senator Investment Group was right behind this move, as the fund dropped about $91.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 22 funds in the first quarter.
Let's also examine hedge fund activity in other stocks similar to General Motors Company (NYSE:GM). These stocks are Workday Inc (NYSE:WDAY), Canadian Pacific Railway Limited (NYSE:CP), The Bank of New York Mellon Corporation (NYSE:BK), and Mizuho Financial Group Inc. (NYSE:MFG). This group of stocks' market values are closest to GM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDAY,58,2259501,3 CP,32,1568644,3 BK,52,4401625,-6 MFG,6,23691,1 Average,37,2063365,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $2063 million. That figure was $3020 million in GM's case. Workday Inc (NYSE:WDAY) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 6 bullish hedge fund positions. General Motors Company (NYSE:GM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on GM, though not to the same extent, as the stock returned 21.8% during the second quarter and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
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