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Hedge Funds Never Been Less Bullish On General Dynamics Corporation (GD)

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards General Dynamics Corporation (NYSE:GD).

General Dynamics Corporation (NYSE:GD) was in 31 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 51. GD has seen a decrease in enthusiasm from smart money in recent months. There were 40 hedge funds in our database with GD positions at the end of the fourth quarter. Our calculations also showed that GD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To most market participants, hedge funds are seen as slow, outdated investment tools of the past. While there are greater than 8000 funds in operation at present, Our experts hone in on the leaders of this club, about 850 funds. These investment experts have their hands on the majority of all hedge funds' total asset base, and by keeping track of their highest performing equity investments, Insider Monkey has found a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 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, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind let's check out the recent hedge fund action encompassing General Dynamics Corporation (NYSE:GD).

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

At the end of March, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GD over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in General Dynamics Corporation (NYSE:GD) was held by Longview Asset Management, which reported holding $5454.4 million worth of stock at the end of December. It was followed by Adage Capital Management with a $82.4 million position. Other investors bullish on the company included Abrams Bison Investments, Markel Gayner Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Longview Asset Management allocated the biggest weight to General Dynamics Corporation (NYSE:GD), around 96.25% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, dishing out 6.47 percent of its 13F equity portfolio to GD.

Because General Dynamics Corporation (NYSE:GD) has faced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there were a few funds that elected to cut their positions entirely heading into Q2. Intriguingly, Marcio Appel's Adam Capital sold off the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $28.2 million in stock, and David Cohen and Harold Levy's Iridian Asset Management was right behind this move, as the fund dropped about $4.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 9 funds heading into Q2.

Let's now review hedge fund activity in other stocks similar to General Dynamics Corporation (NYSE:GD). These stocks are Spotify Technology S.A. (NYSE:SPOT), KLA Corporation (NASDAQ:KLAC), Twitter Inc (NYSE:TWTR), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Canadian Pacific Railway Limited (NYSE:CP), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), and The Kraft Heinz Company (NASDAQ:KHC). This group of stocks' market valuations are closest to GD's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPOT,46,2991078,-2 KLAC,40,1204040,4 TWTR,107,4534754,29 REGN,39,1308238,-7 CP,33,5908185,9 SMFG,14,88068,4 KHC,33,13334618,-3 Average,44.6,4195569,4.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.6 hedge funds with bullish positions and the average amount invested in these stocks was $4196 million. That figure was $5932 million in GD's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 14 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 23.4. 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 negative signal and 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 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately GD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GD investors were disappointed as the stock returned 5.2% since the end of March (through 7/2) 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 most of these stocks already outperformed the market in 2021.

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