General Electric Company (GE) Shareholders Might Want To Sell After Reading This
General Electric Company (NYSE:GE) is a cornerstone of almost every investor betting on continued health in the U.S. economy. Shares are up 13% year-to-date, but have fallen off in recent weeks. One indicator that predicted this sell off, and may predict more in the future, is hedge fund sentiment. It suggests you may be best taking your profits with GE; let's take a look why.
To many of your fellow readers, hedge funds are perceived as useless, outdated financial vehicles of a period lost to current times. Although there are In excess of 8,000 hedge funds trading currently, Insider Monkey looks at the bigwigs of this group, about 525 funds. It is widely held that this group controls the lion's share of the hedge fund industry's total capital, and by tracking their best picks, we've figured out a number of investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Just as necessary, positive insider trading activity is another way to look at the financial markets. Obviously, there are plenty of incentives for an upper level exec to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this method if you understand where to look (learn more here).
Keeping this in mind, let's analyze the recent info for General Electric Company (NYSE:GE).
How are hedge funds trading General Electric Company (NYSE:GE)?
At the end of the second quarter, a total of 50 of the hedge funds we track held long positions in this stock, a change of -14% from the previous quarter. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably.
Out of the hedge funds we follow, Ken Fisher's Fisher Asset Management had the most valuable position in General Electric Company (NYSE:GE), worth close to $697.7 million, accounting for 1.8% of its total 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $316.3 million position; the fund has 1% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include D. E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management and Donald Chiboucis's Columbus Circle Investors.
Since General Electric Company (NYSE:GE) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there is a sect of fund managers that slashed their entire stakes last quarter. At the top of the heap, Jim Simons's Renaissance Technologies dumped the largest investment of the 450+ funds we watch, totaling an estimated $87.6 million in stock, and Crispin Odey of Odey Asset Management Group was right behind this move, as the fund dropped about $35.9 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 8 funds last quarter.
How are insiders trading General Electric Company (NYSE:GE)?
Bullish insider trading is particularly usable when the primary stock in question has seen transactions within the past six months. Over the latest half-year time frame, General Electric Company (NYSE:GE) has experienced 1 unique insiders buying, and 1 insider sales (see the details of insider trades here).
We'll go over the relationship between both of these indicators in other stocks similar to General Electric Company (NYSE:GE). These stocks are Illinois Tool Works Inc. (NYSE:ITW), Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), Danaher Corporation (NYSE:DHR), Honeywell International Inc. (NYSE:HON), and Siemens AG (ADR) (NYSE:SI). This group of stocks are the members of the diversified machinery industry and their market caps match GE's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Illinois Tool Works Inc. (NYSE:ITW)
Koninklijke Philips Electronics NV (ADR) (NYSE:PHG)
Danaher Corporation (NYSE:DHR)
Honeywell International Inc. (NYSE:HON)
Siemens AG (ADR) (NYSE:SI)
Using the results demonstrated by the previously mentioned studies, regular investors should always watch hedge fund and insider trading sentiment, and General Electric Company (NYSE:GE) applies perfectly to this mantra.