General American Investors Company, Inc. (GAM): Are Hedge Funds Right About This Stock?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards General American Investors Company, Inc. (NYSE:GAM).

General American Investors Company, Inc. (NYSE:GAM) has seen an increase in enthusiasm from smart money in recent months. General American Investors Company, Inc. (NYSE:GAM) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. Our calculations also showed that GAM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Levin of Levin Capital

John A. Levin of Levin Capital Strategies

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 take a look at the new hedge fund action regarding General American Investors Company, Inc. (NYSE:GAM).

Hedge fund activity in General American Investors Company, Inc. (NYSE:GAM)

Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in GAM over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Saba Capital, managed by Boaz Weinstein, holds the largest position in General American Investors Company, Inc. (NYSE:GAM). Saba Capital has a $14.8 million position in the stock, comprising 0.6% of its 13F portfolio. On Saba Capital’s heels is Bulldog Investors, managed by Phillip Goldstein, Andrew Dakos and Steven Samuels, which holds a $9.9 million position; 3.2% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise John A. Levin’s Levin Capital Strategies, Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners and . In terms of the portfolio weights assigned to each position Bulldog Investors allocated the biggest weight to General American Investors Company, Inc. (NYSE:GAM), around 3.17% of its 13F portfolio. Saba Capital is also relatively very bullish on the stock, dishing out 0.62 percent of its 13F equity portfolio to GAM.

Now, some big names have jumped into General American Investors Company, Inc. (NYSE:GAM) headfirst. GRT Capital Partners, managed by Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk, established the most valuable position in General American Investors Company, Inc. (NYSE:GAM). GRT Capital Partners had $0.2 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as General American Investors Company, Inc. (NYSE:GAM) but similarly valued. We will take a look at Sprott Inc. (NYSE:SII), Alector, Inc. (NASDAQ:ALEC), QuinStreet Inc (NASDAQ:QNST), Acutus Medical, Inc. (NASDAQ:AFIB), QAD Inc. (NASDAQ:QADA), OceanFirst Financial Corp. (NASDAQ:OCFC), and Johnson Outdoors Inc. (NASDAQ:JOUT). All of these stocks’ market caps match GAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SII 14 103508 6
ALEC 24 124557 -5
QNST 16 173724 -4
AFIB 16 366158 16
QADA 14 122328 -4
OCFC 15 36389 5
JOUT 15 91362 2
Average 16.3 145432 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $28 million in GAM’s case. Alector, Inc. (NASDAQ:ALEC) is the most popular stock in this table. On the other hand Sprott Inc. (NYSE:SII) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks General American Investors Company, Inc. (NYSE:GAM) is even less popular than SII. Our overall hedge fund sentiment score for GAM is 23.1. 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. Hedge funds dodged a bullet by taking a bearish stance towards GAM. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately GAM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GAM investors were disappointed as the stock returned 6.6% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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