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Is General American Investors Company (GAM) A Good Stock To Buy?

In this article you are going to find out whether hedge funds think General American Investors Company, Inc. (NYSE:GAM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in General American Investors Company, Inc. (NYSE:GAM) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Myovant Sciences Ltd. (NYSE:MYOV), Limelight Networks, Inc. (NASDAQ:LLNW), and The Buckle, Inc. (NYSE:BKE) to gather more data points. Our calculations also showed that GAM 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).

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

If you’d ask most investors, hedge funds are seen as worthless, outdated investment tools of the past. While there are greater than 8000 funds trading today, Our researchers look at the masters of this group, around 850 funds. These investment experts watch over bulk of the smart money’s total asset base, and by monitoring their first-class equity investments, Insider Monkey has unsheathed several investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Phillip Goldstein of Bulldog Investors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the latest hedge fund action surrounding General American Investors Company, Inc. (NYSE:GAM).

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

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in GAM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Boaz Weinstein’s Saba Capital has the most valuable position in General American Investors Company, Inc. (NYSE:GAM), worth close to $12 million, corresponding to 0.6% of its total 13F portfolio. Sitting at the No. 2 spot is Bulldog Investors, led by Phillip Goldstein, Andrew Dakos and Steven Samuels, holding a $7.7 million position; the fund has 4% of its 13F portfolio invested in the stock. Some other peers 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 4.05% of its 13F portfolio. Saba Capital is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to GAM.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out 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 Myovant Sciences Ltd. (NYSE:MYOV), Limelight Networks, Inc. (NASDAQ:LLNW), The Buckle, Inc. (NYSE:BKE), and Vocera Communications Inc (NYSE:VCRA). This group of stocks’ market caps are closest to GAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYOV 10 41859 0
LLNW 19 87214 3
BKE 15 46702 -6
VCRA 15 99255 2
Average 14.75 68758 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $21 million in GAM’s case. Limelight Networks, Inc. (NASDAQ:LLNW) is the most popular stock in this table. On the other hand Myovant Sciences Ltd. (NYSE:MYOV) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks General American Investors Company, Inc. (NYSE:GAM) is even less popular than MYOV. Hedge funds dodged a bullet by taking a bearish stance towards GAM. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately GAM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); GAM investors were disappointed as the stock returned 14.5% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.