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Hedge Funds Are Buying General Dynamics Corporation (GD)

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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards General Dynamics Corporation (NYSE:GD).

General Dynamics Corporation (NYSE:GD) investors should be aware of an increase in hedge fund interest recently. General Dynamics Corporation (NYSE:GD) was in 37 hedge funds' portfolios at the end of June. 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 Q2 rankings).

In today’s marketplace there are a large number of tools stock traders employ to evaluate stocks. A duo of the less utilized tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top fund managers can outclass the S&P 500 by a solid amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Tom Gayner
Tom Gayner

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a peek at the new hedge fund action surrounding General Dynamics Corporation (NYSE:GD).

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

At second quarter's end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GD over the last 24 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Longview Asset Management was the largest shareholder of General Dynamics Corporation (NYSE:GD), with a stake worth $5655.7 million reported as of the end of June. Trailing Longview Asset Management was Adage Capital Management, which amassed a stake valued at $124.2 million. Abrams Bison Investments, Markel Gayner Asset Management, and Balyasny 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 96.45% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, dishing out 6.45 percent of its 13F equity portfolio to GD.

Now, key hedge funds have jumped into General Dynamics Corporation (NYSE:GD) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most valuable position in General Dynamics Corporation (NYSE:GD). Balyasny Asset Management had $54.6 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $12.9 million investment in the stock during the quarter. The following funds were also among the new GD investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Alexander Mitchell's Scopus Asset Management, and D. E. Shaw's D E Shaw.

Let's check out hedge fund activity in other stocks similar to General Dynamics Corporation (NYSE:GD). We will take a look at Takeda Pharmaceutical Company Limited (NYSE:TAK), Enterprise Products Partners L.P. (NYSE:EPD), Spotify Technology S.A. (NYSE:SPOT), Public Storage (NYSE:PSA), Metlife Inc (NYSE:MET), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Biogen Inc. (NASDAQ:BIIB). This group of stocks' market caps are closest to GD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TAK,19,551214,0 EPD,28,246056,2 SPOT,48,3496814,2 PSA,27,1089757,1 MET,41,1056766,9 VRTX,60,2808847,-8 BIIB,67,3116691,4 Average,41.4,1766592,1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.4 hedge funds with bullish positions and the average amount invested in these stocks was $1767 million. That figure was $6236 million in GD's case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Takeda Pharmaceutical Company Limited (NYSE:TAK) is the least popular one with only 19 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 50.5. 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. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on GD as the stock returned 9.1% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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