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General Motors Company (GM) vs. Hedge Fund Favorites in 2019

Abigail Fisher

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

General Motors Company (NYSE:GM) was in 68 hedge funds' portfolios at the end of the third quarter of 2019. GM investors should be aware of an increase in activity from the world's largest hedge funds lately. There were 49 hedge funds in our database with GM holdings at the end of the previous quarter. Our calculations also showed that GM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30647" align="aligncenter" width="478"] Boykin Curry of Eagle Capital[/caption]

Boykin Curry EAGLE CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's take a gander at the new hedge fund action encompassing General Motors Company (NYSE:GM).

Hedge fund activity in General Motors Company (NYSE:GM)

At the end of the third quarter, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of 39% from the previous quarter. By comparison, 61 hedge funds held shares or bullish call options in GM a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in General Motors Company (NYSE:GM) was held by Berkshire Hathaway, which reported holding $2708.7 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $763.1 million position. Other investors bullish on the company included Greenhaven Associates, Citadel Investment Group, and Greenlight Capital. In terms of the portfolio weights assigned to each position Greenlight Capital allocated the biggest weight to General Motors Company (NYSE:GM), around 16.6% of its 13F portfolio. Greenhaven Associates is also relatively very bullish on the stock, earmarking 15.28 percent of its 13F equity portfolio to GM.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in General Motors Company (NYSE:GM). Arrowstreet Capital had $89.3 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $80.5 million position during the quarter. The other funds with new positions in the stock are Josh Donfeld and David Rogers's Castle Hook Partners, Benjamin A. Smith's Laurion Capital Management, and Michael Gelband's ExodusPoint Capital.

Let's now review hedge fund activity in other stocks similar to General Motors Company (NYSE:GM). We will take a look at Takeda Pharmaceutical Company Limited (NYSE:TAK), Prologis Inc (NYSE:PLD), Vodafone Group Plc (NASDAQ:VOD), and DuPont de Nemours, Inc. (NYSE:DD). This group of stocks' market caps resemble GM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TAK,28,1243754,1 PLD,27,360500,3 VOD,19,685397,8 DD,47,1502453,5 Average,30.25,948026,4.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $6376 million in GM's case. DuPont de Nemours, Inc. (NYSE:DD) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks General Motors Company (NYSE:GM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately GM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GM were disappointed as the stock returned 14.5% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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