We can judge whether The Goodyear Tire & Rubber Company (NASDAQ:GT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is The Goodyear Tire & Rubber Company (NASDAQ:GT) a bargain? Investors who are in the know are betting on the stock. The number of long hedge fund bets rose by 5 recently. Our calculations also showed that GT isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to analyze the new hedge fund action regarding The Goodyear Tire & Rubber Company (NASDAQ:GT).
How are hedge funds trading The Goodyear Tire & Rubber Company (NASDAQ:GT)?
At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in GT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Adage Capital Management was the largest shareholder of The Goodyear Tire & Rubber Company (NASDAQ:GT), with a stake worth $176.1 million reported as of the end of September. Trailing Adage Capital Management was Diamond Hill Capital, which amassed a stake valued at $119.1 million. Levin Capital Strategies, Millennium Management, and Greenvale Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key hedge funds were breaking ground themselves. Greenvale Capital, managed by Bruce Emery, established the most valuable position in The Goodyear Tire & Rubber Company (NASDAQ:GT). Greenvale Capital had $21.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $13.9 million position during the quarter. The other funds with new positions in the stock are Javier Velazquez’s Albar Capital, Alexander Roepers’s Atlantic Investment Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at 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 United Therapeutics Corporation (NASDAQ:UTHR), Popular Inc (NASDAQ:BPOP), Polaris Industries Inc. (NYSE:PII), and Xerox Corporation (NYSE:XRX). This group of stocks’ market caps resemble GT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UTHR | 23 | 972269 | 5 |
| BPOP | 32 | 804171 | 4 |
| PII | 15 | 113485 | -2 |
| XRX | 44 | 888811 | 7 |
| Average | 28.5 | 694684 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $589 million in GT’s case. Xerox Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand Polaris Industries Inc. (NYSE:PII) is the least popular one with only 15 bullish hedge fund positions. The Goodyear Tire & Rubber Company (NASDAQ:GT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GT wasn’t nearly as popular as these 15 stock and hedge funds that were betting on GT were disappointed as the stock returned 0.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
