Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards General Motors Company (NYSE:GM).
General Motors Company (NYSE:GM) shareholders have witnessed an increase in hedge fund interest in recent months. General Motors Company (NYSE:GM) was in 86 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 88. Our calculations also showed that GM isn't among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bill Miller of Miller Value Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind let's take a gander at the key hedge fund action regarding General Motors Company (NYSE:GM).
Do Hedge Funds Think GM Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 86 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GM over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Warren Buffett's Berkshire Hathaway has the number one position in General Motors Company (NYSE:GM), worth close to $3.8498 billion, corresponding to 1.4% of its total 13F portfolio. On Berkshire Hathaway's heels is Eagle Capital Management, led by Boykin Curry, holding a $880.1 million position; 2.7% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of Edgar Wachenheim's Greenhaven Associates, Matthew Stadelman's Diamond Hill Capital and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to General Motors Company (NYSE:GM), around 13.7% of its 13F portfolio. Pennant Capital Management is also relatively very bullish on the stock, earmarking 9.88 percent of its 13F equity portfolio to GM.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, initiated the biggest position in General Motors Company (NYSE:GM). Palestra Capital Management had $190.3 million invested in the company at the end of the quarter. Bill Miller's Miller Value Partners also made a $96.9 million investment in the stock during the quarter. The other funds with brand new GM positions are Jeffrey Altman's Owl Creek Asset Management, Jos Shaver's Electron Capital Partners, and Scott Bessent's Key Square Capital Management.
Let's check out hedge fund activity in other stocks similar to General Motors Company (NYSE:GM). These stocks are Mondelez International Inc (NASDAQ:MDLZ), BP plc (NYSE:BP), Canadian National Railway Company (NYSE:CNI), Gilead Sciences, Inc. (NASDAQ:GILD), Automatic Data Processing (NASDAQ:ADP), Fiserv, Inc. (NASDAQ:FISV), and Infosys Limited (NYSE:INFY). This group of stocks' market caps resemble GM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDLZ,45,2845001,-5 BP,29,1243778,0 CNI,36,4705189,5 GILD,65,2689659,-7 ADP,42,2924374,-6 FISV,75,2748118,-19 INFY,26,2011419,3 Average,45.4,2738220,-4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.4 hedge funds with bullish positions and the average amount invested in these stocks was $2738 million. That figure was $8053 million in GM's case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks General Motors Company (NYSE:GM) is more popular among hedge funds. Our overall hedge fund sentiment score for GM is 89.3. 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 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately GM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GM were disappointed as the stock returned -4.2% since the end of the first quarter (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.