General Motors Company (NYSE:GM) was a celebrated stock-holding among hedge funds in 4Q2013, ending the year as the most favorite pick of these money managers. Lately the Detroit-based company has been marred by a string of bad news. The company announced a wave of new recalls on Monday, with the fallout rising to $750 million this time. Previously the company reported that it will take a bump of $300 million in the first quarter of 2014, owing to the three recalls announced in mid-March and the ignition switch recall.
Most analysts believe that the 15% fall in stock price over the year so far has been overblown due to negative media headlines. The general assessment is that the stock has bottomed and will not react to a repetition of the same news. As General Motors’ Chief Executive Mary Barra was facing the questions of Congress and Senate, the company’s shareholders were nursing their losses.
Hedge funds’ favorite stock all around
General Motors Company (NYSE:GM) crowned the list of top hedge fund picks in the last quarter of 2013. According to Goldman Sachs hedge fund trend monitor, 75 of the 778 hedge funds held the automobile company in their top ten holdings. On average these funds allocated 7% of their portfolio to this specific stock. Nearly 14% of the GM’s stock is owned by hedge funds and there are some big names to note here. David Einhorn’s Greenlight Capital holds 17 million shares of the company, making it his third-largest holding. Although not a hedge fund, Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) owns 40 million shares of General Motors. Jamie Dinan’s York Capital holds GM as its second-largest position, amounting to 9.5 million shares.
General Motors could rise 40% over a year: Kyle Bass
Hayman Capital’s Kyle Bass released a bullish thesis on the company back in 2013. Bass is known for accurately predicting the fall of subprime securities and has earned more fame for his macro approach rather than equity longs. Towards the end of 2013, Bass disclosed his major bet on the Detroit based company, calling it the most attractive risk/reward profile at that time. Bass holds 4.6 million shares of General Motors Company (NYSE:GM), which makes it his top equity holding. In his presentation, Bass said that GM’s stock would rise 40% in 12 to 18 months, a prediction that is not looking good under the current scenario.
Other major holders of General Motors include Barry Rosenstein’s Jana Partners with 7.9 million shares and Larry Robbin’s Glenview Capital with 6.34 million shares. There are several other high profile hedge funds that have maintained a position in the company, and the list includes Soros Fund, David Tepper’s Appaloosa Management, Moore Capital, D.E. Shaw and others.
Limited long-term damage for General Motors
Guggenheim Securities’s Matt Stover has reasoned that the recalls are not the only reason GM’s stock is falling. He said it has more to do with the fundamentals, as Ford Motor Company (NYSE:F) has also been under pressure lately. General Motors Company (NYSE:GM) has so far recalled 6.3 million vehicles. In addition to the write-offs the company has estimated for now, it could also face nearly $1.5 billion for raising a plaintiff trust and another $1 billion in federal fines in 2015. UBS said that the recalls will affect GM’s profits to an extent but the likelihood of long-term damage is minimal, with little effect on market share.