Is CTB Stock A Buy or Sell?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Cooper Tire & Rubber Company (NYSE:CTB) based on that data.

Is CTB stock a buy? Hedge fund interest in Cooper Tire & Rubber Company (NYSE:CTB) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CTB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Progress Software Corporation (NASDAQ:PRGS), Brandywine Realty Trust (NYSE:BDN), and First Merchants Corporation (NASDAQ:FRME) to gather more data points.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Louis Bacon Moore of Moore Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a gander at the fresh hedge fund action regarding Cooper Tire & Rubber Company (NYSE:CTB).

Do Hedge Funds Think CTB Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CTB over the last 22 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the number one position in Cooper Tire & Rubber Company (NYSE:CTB), worth close to $39.6 million, amounting to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $25.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Thyra Zerhusen’s Fairpointe Capital. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to Cooper Tire & Rubber Company (NYSE:CTB), around 2.64% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, dishing out 1.44 percent of its 13F equity portfolio to CTB.

Seeing as Cooper Tire & Rubber Company (NYSE:CTB) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds that slashed their positions entirely by the end of the fourth quarter. Interestingly, Israel Englander’s Millennium Management dumped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $1.2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cooper Tire & Rubber Company (NYSE:CTB) but similarly valued. We will take a look at Progress Software Corporation (NASDAQ:PRGS), Brandywine Realty Trust (NYSE:BDN), First Merchants Corporation (NASDAQ:FRME), Infinera Corp. (NASDAQ:INFN), Central Garden & Pet Co (NASDAQ:CENT), SkyWest, Inc. (NASDAQ:SKYW), and Meritor Inc (NYSE:MTOR). This group of stocks’ market valuations are similar to CTB’s market valuation.

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As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $177 million in CTB’s case. Infinera Corp. (NASDAQ:INFN) is the most popular stock in this table. On the other hand First Merchants Corporation (NASDAQ:FRME) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Cooper Tire & Rubber Company (NYSE:CTB) is more popular among hedge funds. Our overall hedge fund sentiment score for CTB is 78.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on CTB as the stock returned 41.3% since the end of December (through 4/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.