Cooper Tire & Rubber Co (CTB): Are Hedge Funds Right About This Stock?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Cooper Tire & Rubber Co (NYSE:CTB).

Cooper Tire & Rubber Co (NYSE:CTB) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. 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 LendingClub Corp (NYSE:LC), Government Properties Income Trust (NYSE:GOV), and Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Cooper Tire & Rubber Co (NYSE:CTB)?

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a 5% dip from one quarter earlier. Hedge fund ownership has quickly dropped by more than 25% over the past 2 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the largest position in Cooper Tire & Rubber Co (NYSE:CTB). Royce & Associates has a $27.6 million position in the stock. Coming in second is Ken Griffin of Citadel Investment Group, with a $27.3 million position. Some other peers that hold long positions consist of Cliff Asness’ AQR Capital Management, Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Judging by the fact that Cooper Tire & Rubber Co (NYSE:CTB) has witnessed declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Jacob Gottlieb’s Visium Asset Management dumped the biggest stake of the 700 funds tracked by Insider Monkey, valued at about $15 million in stock, and Alexander Roepers’ Atlantic Investment Management was right behind this move, as the fund sold off about $8.5 million worth of shares. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cooper Tire & Rubber Co (NYSE:CTB) but similarly valued. We will take a look at LendingClub Corp (NYSE:LC), Government Properties Income Trust (NYSE:GOV), Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), and KLX Inc (NASDAQ:KLXI). This group of stocks’ market values are closest to CTB’s market value.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $142 million in CTB’s case. Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) is the most popular stock in this table. On the other hand Government Properties Income Trust (NYSE:GOV) is the least popular one with only 6 bullish hedge fund positions. Cooper Tire & Rubber Co (NYSE:CTB) 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. In this regard LTRPA might be a better candidate to consider a long position in.

Disclosure: None