General Motors Co. (GM), one of the 10 most popular stocks for hedge funds at the end of last year, fell out of favor in the first quarter as slower growth in China and discounts in the U.S. dimmed the automaker’s prospects.
Bill Ackman’s Pershing Square Capital Management LP, Barry Rosenstein’s Jana Partners LLC and David Tepper’s Appaloosa Management LP were among the 49 hedge funds who sold their entire GM stakes as of March 31, according to regulatory filings compiled by Bloomberg. In total, 81 hedge funds sold GM in the quarter, including Daniel Och’s Och-Ziff Capital Management Group LLC (OZM) and George Soros’s Soros Fund Management LLC.
“We’ve seen some very smart people sell fairly soon,” said Peter Nesvold, a Jefferies & Co. analyst in New York. “It’s probably going to take longer than expected to get paid for holding GM, and investors can always just come back into it.”
GM has dropped 6.6 percent in New York trading from the shares’ $33 initial public offering price in November. Investors expected demand to prop up U.S. vehicle prices and predicted a long-term boom in China’s auto market, Nesvold said. Instead discounts at home climbed more than 10 percent and GM’s China sales fell last month for the first time since December.
GM slid 13 cents to $30.83 yesterday and has declined 22 percent from an intraday high of $39.48 on Jan. 6.
Chief Executive Officer Dan Akerson touted GM’s “high- quality shareholder base” with “marquee names” in a Bloomberg Television interview in November, after the largest U.S. automaker’s IPO. GM doesn’t comment on individual investments in the company, said Jim Cain, a spokesman.
GM had the 10th most hedge fund investors as of Dec. 31, with 112 owning the shares, according to Goldman Sachs Group Inc.’s Hedge Fund Trend Monitor report released in February. GM wasn’t listed in the top 50 of the report issued this month, which analyzes holdings of 700 hedge funds with $812 billion of assets as of March 31.
Ackman’s Pershing Square was the largest seller of GM among hedge funds in the quarter, disposing of 7.19 million shares, according to Bloomberg data. Rosenstein’s Jana sold all 3.53 million of its shares, while Tepper’s Appaloosa sold all of its 1.38 million.
Och-Ziff sold 5.82 million shares and still holds 1.5 million, while Soros sold 828,300 shares and kept 123,700, according to regulatory filings.
Perry, Einhorn Buy
Money managers who oversee more than $100 million in equities must file a Form 13F with the Securities and Exchange Commission within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. Pershing Square, Och-Ziff and Jana declined to comment. Messages left with Soros and Appaloosa were not returned.
Hedge funds still own about 4.04 percent of GM’s outstanding shares, and 37 of them added to positions in the quarter, according to Bloomberg data.
David Einhorn’s Greenlight Capital Inc. opened a new position in GM by buying 3.42 million shares. Richard Perry’s Perry Corp. bought 1.25 million shares in the quarter to raise its GM holding to 3.25 million. Leon Cooperman’s Omega Advisors Inc. added 686,900 shares, increasing its holding to 3.18 million.
Greenlight declined to comment, and messages left with Perry and Omega weren’t returned.
GM may continue to underperform the market because investors expect the U.S. Treasury Department to sell its remaining stake in the automaker, said Darren Fabric, a Chicago- based managing director at IPOX Capital Management LLC, which received an allocation of GM shares during its IPO.
The Treasury Department raised $13.6 billion and lowered its holding in GM to 33 percent in the November IPO. The Treasury won’t sell more shares until at least August to wait for the price to climb, two people familiar with the decision said this month.
“You might be rewarded if you’re a long-term holder, but in the next six months there’s going to be overhang,” IPOX’s Fabric said in a telephone interview. “Treasury wants to get out of their shares. There’s nothing really to propel the stock right now, no short-term catalyst.”
U.S. auto sales may slow to 11.9 million annual rate in May on a seasonally adjusted basis, J.D. Power & Associates said last week. That would be the slowest pace since October and would follow three straight months above 13 million, according to Autodata Corp.
Sales May Slow
High gasoline prices, lower incentive spending and inventory shortages may cause the sales to slow during the U.S. summer and pressure the outlook for the year, said Jeff Schuster, J.D. Power’s executive director of global forecasting. The Westlake Village, California-based researcher predicts sales will total 13 million this year.
GM’s spending on discounts and promotions through March rose to $3,566 per vehicle, 11 percent more than a year earlier, according to Autodata. The industry average fell 5.6 percent to $2,540, the Woodcliff Lake, New Jersey-based researcher said.
Lower prices cut GM’s profit by $300 million in the quarter, mostly because of higher incentive spending in January and February, Chief Financial Officer Dan Ammann said on a May 6 conference call.
GM’s sales in China, where it is the biggest overseas automaker, declined 4.5 percent to 203,367 in April. The drop was GM’s first since December and followed the removal of government incentives that helped the automaker boost sales in the world’s largest market 29 percent to 2.35 million in 2010.
Other recent buyers include Akerson, GM’s 62-year-old CEO, who bought 30,000 shares valued at $939,900 in a personal investment disclosed in a May 12 regulatory filing.
“If you look out three years from now, GM is making a lot of the right moves,” said Jefferies’ Nesvold, who has a “hold” rating on GM shares. “They can capitalize on a lot of the changes they’ve made.”
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