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General Dynamics Corporation (GD) Fell Out Of Favor With Hedge Funds

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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is General Dynamics Corporation (NYSE:GD), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is General Dynamics Corporation (NYSE:GD) the right pick for your portfolio? Hedge funds were taking a bearish view. The number of bullish hedge fund positions were trimmed by 1 recently. General Dynamics Corporation (NYSE:GD) was in 36 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that GD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 37 hedge funds in our database with GD positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we're going to review the key hedge fund action regarding General Dynamics Corporation (NYSE:GD).

Tom Gayner
Tom Gayner

Tom Gayner of Markel Gayner Asset Management

Do Hedge Funds Think GD Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards GD over the last 25 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Longview Asset Management was the largest shareholder of General Dynamics Corporation (NYSE:GD), with a stake worth $5889.1 million reported as of the end of September. Trailing Longview Asset Management was Adage Capital Management, which amassed a stake valued at $227.2 million. Balyasny Asset Management, Abrams Bison Investments, and Markel Gayner Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Longview Asset Management allocated the biggest weight to General Dynamics Corporation (NYSE:GD), around 96.87% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, earmarking 6.3 percent of its 13F equity portfolio to GD.

Because General Dynamics Corporation (NYSE:GD) has faced declining sentiment from the smart money, logic holds that there lies a certain "tier" of funds who sold off their entire stakes in the third quarter. Interestingly, Marc Lisker, Glenn Fuhrman and John Phelan's MSDC Management dropped the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $14.4 million in stock. Peter Avellone's fund, Cartenna Capital, also dropped its stock, about $14.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to General Dynamics Corporation (NYSE:GD). We will take a look at Thomson Reuters Corporation (NYSE:TRI), Baidu, Inc. (NASDAQ:BIDU), Honda Motor Co Ltd (NYSE:HMC), DexCom, Inc. (NASDAQ:DXCM), The Progressive Corporation (NYSE:PGR), Metlife Inc (NYSE:MET), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). This group of stocks' market valuations are similar to GD's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRI,27,246145,0 BIDU,44,2004620,-15 HMC,12,338639,2 DXCM,53,1781583,4 PGR,47,1574950,3 MET,39,1145473,-2 IDXX,43,3698749,4 Average,37.9,1541451,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1541 million. That figure was $6720 million in GD's case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 12 bullish hedge fund positions. General Dynamics Corporation (NYSE:GD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GD is 54.4. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately GD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GD investors were disappointed as the stock returned -3% since the end of September (through 11/30) 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 in 2021.

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