General Dynamics Corporation (GD) Investors Beware: This Data’s Not Pretty

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General Dynamics Corporation (NYSE:GD) investors are obviously worried about budget cuts from Uncle Sam, and unlike a more diversified Boeing, the defense company is reliant on the federal government for a significant portion of its revenues. So what does this bearish data say?

To many market players, hedge funds are viewed as useless, old investment tools of an era lost to time. Although there are more than 8,000 hedge funds trading today, Insider Monkey aim at the top tier of this group, close to 525 funds. It is widely held that this group oversees the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their highest performing investments, we’ve unsheathed a few investment strategies that have historically outperformed the S&P 500. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Equally as key, positive insider trading activity is another way to analyze the financial markets. As the old adage goes: there are a variety of reasons for an upper level exec to sell shares of his or her company, but just one, very simple reason why they would buy. Several empirical studies have demonstrated the impressive potential of this tactic if “monkeys” understand what to do (learn more here).

Now that that’s out of the way, we’re going to analyze the recent info for General Dynamics Corporation (NYSE:GD).

How have hedgies been trading General Dynamics Corporation (NYSE:GD)?

In preparation for the third quarter, a total of 37 of the hedge funds we track were bullish in this stock, a change of -23% from the first quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly.

General Dynamics Corporation (NYSE:GD)Out of the hedge funds we follow, James A. Star’s Longview Asset Management had the largest position in General Dynamics Corporation (NYSE:GD), worth close to $2.6125 billion, comprising 83.5% of its total 13F portfolio. Sitting at the No. 2 spot is Harris Associates, managed by Natixis Global Asset Management, which held a $587 million position; 1.2% of its 13F portfolio is allocated to the stock. Some other hedge funds that are bullish include Phill Gross and Robert Atchinson’s Adage Capital Management, Bob Peck and Andy Raab’s FPR Partners and D. E. Shaw’s D E Shaw.

Since General Dynamics Corporation (NYSE:GD) has experienced a fall in interest from the top-tier hedge fund industry, it’s easy to see that there were a few hedgies who were dropping their full holdings last quarter. It’s worth mentioning that Jonathon Jacobson’s Highfields Capital Management cut the largest position of the 450+ funds we watch, comprising about $133.1 million in stock, and Howard Guberman of Gruss Asset Management was right behind this move, as the fund sold off about $31.8 million worth. These transactions are interesting, as total hedge fund interest fell by 11 funds last quarter.

Insider trading activity in General Dynamics Corporation (NYSE:GD)

Insider buying made by high-level executives is at its handiest when the company in focus has experienced transactions within the past half-year. Over the last half-year time frame, General Dynamics Corporation (NYSE:GD) has seen zero unique insiders buying, and 13 insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to General Dynamics Corporation (NYSE:GD). These stocks are L-3 Communications Holdings, Inc. (NYSE:LLL), TransDigm Group Incorporated (NYSE:TDG), Rockwell Collins, Inc. (NYSE:COL), The Boeing Company (NYSE:BA), and Lockheed Martin Corporation (NYSE:LMT). All of these stocks are in the aerospace/defense products & services industry and their market caps resemble GD’s market cap.

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