Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of General Electric Company (NYSE:GE) based on that data.
Is General Electric Company (NYSE:GE) undervalued? Prominent investors are reducing their bets on the stock. The number of bullish hedge fund bets were cut by 2 in recent months. Our calculations also showed that GE 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_731853" align="aligncenter" width="399"] Scott Bessent of Key Square Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. 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. Now we're going to take a look at the new hedge fund action encompassing General Electric Company (NYSE:GE).
What have hedge funds been doing with General Electric Company (NYSE:GE)?
Heading into the second quarter of 2020, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GE over the last 18 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the largest position in General Electric Company (NYSE:GE). Eagle Capital Management has a $958.7 million position in the stock, comprising 4% of its 13F portfolio. The second most bullish fund manager is Richard S. Pzena of Pzena Investment Management, with a $512.7 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Nelson Peltz's Trian Partners, Renaissance Technologies and Mason Hawkins's Southeastern Asset Management. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to General Electric Company (NYSE:GE), around 7.35% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, earmarking 6.45 percent of its 13F equity portfolio to GE.
Judging by the fact that General Electric Company (NYSE:GE) has faced bearish sentiment from the smart money, it's safe to say that there is a sect of money managers who were dropping their positions entirely last quarter. Intriguingly, James Crichton's Hitchwood Capital Management cut the largest position of the 750 funds followed by Insider Monkey, totaling close to $46.9 million in stock. Doug Silverman and Alexander Klabin's fund, Senator Investment Group, also dropped its stock, about $44.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to General Electric Company (NYSE:GE). These stocks are American Express Company (NYSE:AXP), BlackRock, Inc. (NYSE:BLK), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), and Cigna Corporation (NYSE:CI). This group of stocks' market caps match GE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXP,57,15414059,-1 BLK,38,678087,-5 KOF,7,325265,-3 CI,74,2988126,2 Average,44,4851384,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $4851 million. That figure was $3532 million in GE's case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 7 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. 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 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 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately GE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GE were disappointed as the stock returned -19.3% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.