Many investors, such as Carl Icahn or Stan Druckenmiller have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to General Motors Company (NYSE:GM) changed recently.
Is General Motors Company (NYSE:GM) the right investment to pursue these days? Investors who are in the know are turning less bullish. The number of long hedge fund positions retreated by 16 lately.
In today’s marketplace there are a lot of gauges investors have at their disposal to value stocks. Some of the most under-the-radar gauges are hedge fund and insider trading indicators. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace their index-focused peers by a superb margin (see the details here).
Keeping this in mind, we’re going to analyze the new action surrounding General Motors Company (NYSE:GM).
How have hedgies been trading General Motors Company (NYSE:GM)?
Heading into Q4, a total of 88 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably.
Of the funds tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway had the most valuable position in General Motors Company (NYSE:GM), worth close to $1.50 billion, amounting to 1.2% of its total 13F portfolio. The second most bullish hedge fund manager is David Einhorn of Greenlight Capital, with a $489.3 million position; 8.1% of its 13F portfolio is allocated to the company. Other hedgies with similar optimism contain David Tepper’s Appaloosa Management LP, Frank Brosens’s Taconic Capital and Ken Griffin’s Citadel Investment Group.
Because General Motors Company (NYSE:GM) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds who sold off their entire stakes heading into Q4. At the top of the heap, Leon Cooperman’s Omega Advisors dumped the largest position of the 700 funds followed by Insider Monkey, valued at about $122.1 million in stock, and Alan Fournier of Pennant Capital Management was right behind this move, as the fund sold off about $120.7 million worth of stock. These moves are important to note, as aggregate hedge fund interest was cut by 16 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to General Motors Company (NYSE:GM). We will take a look at EMC Corporation (NYSE:EMC), Statoil ASA (ADR) (NYSE:STO), HP Inc (NYSE:HPQ), and Mizuho Financial Group Inc. (ADR) (NYSE:MFG). This group of stocks’ market caps are closest to GM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1626 million. EMC Corporation (NYSE:EMC) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (ADR) (NYSE:MFG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks, General Motors Company (NYSE:GM) is more popular among hedge funds. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio.