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Is General Electric Company (GE) Going to Burn These Hedge Funds?

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  • GE

Is General Electric Company (NYSE:GE) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is General Electric Company (NYSE:GE) undervalued? Prominent investors were becoming less hopeful. The number of long hedge fund bets decreased by 14 in recent months. General Electric Company (NYSE:GE) was in 53 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 74. Our calculations also showed that GE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 67 hedge funds in our database with GE 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 go over the key hedge fund action surrounding General Electric Company (NYSE:GE).

Ole Andreas Halvorsen Viking Global
Ole Andreas Halvorsen Viking Global

Ole Andreas Halvorsen of Viking Global

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

At third quarter's end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in GE over the last 25 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Viking Global held the most valuable stake in General Electric Company (NYSE:GE), which was worth $1743.6 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $1408.8 million worth of shares. Pzena Investment Management, Trian Partners, and Southeastern 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 Ardsley Partners allocated the biggest weight to General Electric Company (NYSE:GE), around 7.85% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, earmarking 7.13 percent of its 13F equity portfolio to GE.

Since General Electric Company (NYSE:GE) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few money managers that decided to sell off their positions entirely last quarter. Interestingly, Andreas Halvorsen's Viking Global sold off the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $1235.5 million in stock, and Richard S. Pzena's Pzena Investment Management was right behind this move, as the fund cut about $1091.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 14 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as General Electric Company (NYSE:GE) but similarly valued. We will take a look at Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), Anheuser-Busch InBev SA/NV (NYSE:BUD), Square, Inc. (NYSE:SQ), and The Estee Lauder Companies Inc (NYSE:EL). This group of stocks' market values are closest to GE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DEO,18,703948,-2 JD,66,9057155,-10 CVS,61,1060624,-6 TGT,49,4349899,-17 BUD,11,826303,-7 SQ,98,8884931,4 EL,49,4137243,-1 Average,50.3,4145729,-5.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.3 hedge funds with bullish positions and the average amount invested in these stocks was $4146 million. That figure was $6245 million in GE's case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 11 bullish hedge fund positions. General Electric Company (NYSE:GE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GE is 36.6. 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 positive signal but 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 beat the market again by 5.6 percentage points. Unfortunately GE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GE were disappointed as the stock returned -7.8% 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 many of these stocks already outperformed the market since 2019.

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