Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of The Goodyear Tire & Rubber Company (NASDAQ:GT).
The Goodyear Tire & Rubber Company (NASDAQ:GT) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that gt isn’t among the 30 most popular stocks among hedge funds.
In today’s marketplace there are a large number of formulas market participants put to use to value publicly traded companies. A duo of the most innovative formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best investment managers can trounce their index-focused peers by a healthy amount (see the details here).
Let’s take a peek at the recent hedge fund action regarding The Goodyear Tire & Rubber Company (NASDAQ:GT).
How have hedgies been trading The Goodyear Tire & Rubber Company (NASDAQ:GT)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -37% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in GT over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Goodyear Tire & Rubber Company (NASDAQ:GT) was held by Arrowstreet Capital, which reported holding $91.7 million worth of stock at the end of March. It was followed by Adage Capital Management with a $76.7 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Maverick Capital.
Because The Goodyear Tire & Rubber Company (NASDAQ:GT) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that slashed their full holdings heading into Q3. Interestingly, Ric Dillon’s Diamond Hill Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $119.1 million in stock. John A. Levin’s fund, Levin Capital Strategies, also sold off its stock, about $87.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 11 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Goodyear Tire & Rubber Company (NASDAQ:GT) but similarly valued. These stocks are TriNet Group Inc (NYSE:TNET), Commscope Holding Company Inc (NASDAQ:COMM), Spire Inc. (NYSE:SR), and Performance Food Group Company (NYSE:PFGC). This group of stocks’ market valuations match GT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TNET | 24 | 416936 | 7 |
| COMM | 23 | 1123484 | -5 |
| SR | 15 | 100138 | 2 |
| PFGC | 25 | 192437 | 7 |
| Average | 21.75 | 458249 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $348 million in GT’s case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 15 bullish hedge fund positions. The Goodyear Tire & Rubber Company (NASDAQ:GT) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately GT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GT investors were disappointed as the stock returned -22.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
