The auto industry red hot streak continues.
On Wednesday, hedge fund giant Kyle Bass and his $2 billion Dallas-based Hayman Capital Management took a large stake in General Motors, stating it expected the company to increase in value by 40% in the next 12 to 18 months.
Hayman Capital’s investment comes on the heels of a very big third quarter for GM, in which the automaker found itself an industry darling among hedge funds likely looking to capitalize on the U.S. government’s exit from the company and a noted increase in demand for U.S. cars and trucks.
Indeed, in the third quarter alone, 115 hedge funds created a new position in GM and 338 increased their stake in the company, according to 13F filings. What’s more, analysts have been optimistic about the U.S. auto sector in recent months.
Just last week, Sterne Agee analyst Michael Ward wrote, “Both General Motors (GM, $39.11, Buy) and Ford have added capacity and have started to introduce new global platforms to the market. The U.S.-based suppliers have followed U.S. and European vehicle manufacturers and most are positioned to grow along with the overall market.”
Even more hedge fund investment could follow Hayman Capital’s to the sector if the Big Three continue to grow momentum that’s been building all fall. It has resulted in November being the sector’s strongest month since 2007 in terms of sales, due to massive discounting and a surge in demand for pickup trucks. It’s no small wonder then that Bass, who is famous for investing in turnarounds, is betting big with an eye on Detroit.
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