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Hedge Funds Cashing Out Of General Dynamics Corporation (GD)

Asma UL Husna

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of General Dynamics Corporation (NYSE:GD) based on that data.

General Dynamics Corporation (NYSE:GD) shareholders have witnessed a decrease in support from the world's most elite money managers of late. Our calculations also showed that GD 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.

In the financial world there are a large number of metrics shareholders employ to appraise publicly traded companies. A duo of the most useful metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outclass the broader indices by a significant margin (see the details here).

[caption id="attachment_193030" align="aligncenter" width="399"] Tom Gayner of Markel Gayner Asset Management[/caption]

Tom Gayner

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. With all of this in mind let's take a peek at the key hedge fund action encompassing General Dynamics Corporation (NYSE:GD).

What does smart money think about General Dynamics Corporation (NYSE:GD)?

At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the fourth quarter of 2019. On the other hand, there were a total of 42 hedge funds with a bullish position in GD a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Longview Asset Management held the most valuable stake in General Dynamics Corporation (NYSE:GD), which was worth $4262 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $275.7 million worth of shares. Citadel Investment Group, AQR Capital Management, 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 95.25% of its 13F portfolio. Farallon Capital is also relatively very bullish on the stock, dishing out 2.41 percent of its 13F equity portfolio to GD.

Since General Dynamics Corporation (NYSE:GD) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of funds that decided to sell off their entire stakes last quarter. At the top of the heap, Robert Bishop's Impala Asset Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth about $57.5 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also cut its stock, about $6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let's go over hedge fund activity in other stocks similar to General Dynamics Corporation (NYSE:GD). These stocks are Aon plc (NYSE:AON), Dollar General Corp. (NYSE:DG), Ferrari N.V. (NYSE:RACE), and Norfolk Southern Corp. (NYSE:NSC). 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 AON,47,2705439,-4 DG,60,2102704,10 RACE,29,1729509,-7 NSC,51,1172825,-1 Average,46.75,1927619,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.75 hedge funds with bullish positions and the average amount invested in these stocks was $1928 million. That figure was $5111 million in GD's case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand Ferrari N.V. (NYSE:RACE) is the least popular one with only 29 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. 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 10 most popular stocks among hedge funds 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 and surpassed the market by 13.2 percentage points. Unfortunately GD wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GD investors were disappointed as the stock returned 11.9% during the second quarter 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 in 2020.

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

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