Although there was a ton of cash on the sidelines ahead the United Kingdom’s referendum on whether to leave the European Union or not, most hedge fund managers appear to have been hit by the shockwaves caused by the British electorate’s decision to leave the economic and political bloc. Equities across the entire globe were on a free fall on Friday and Monday and the British pound plunged to a 30-year low against the green buck, so there is little chance the hedge fund industry has not been impacted by the so-called Brexit.
However, there was a handful of hedge fund vehicles that benefited from Britons’ surprising decision. For instance, David Harding’s Winton Capital Management, which runs automated computer programs to trade equities and other instruments, gained big from the U.K.’s historic decision to leave the EU, thanks to bets against the British pound and the euro, as Financial Times wrote. Interestingly enough, Mr. Harding was a prominent backer of the Remain campaign, as he donated roughly $5.1 million to a lobby group that was persuading Britons to vote to remain in the EU. Leaving this discussion aside, Insider Monkey decided to have a look at the British investment firm’s top stock picks at the end of the March quarter.
At Insider Monkey, we track around 770 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5. Goodyear Tire & Rubber Co (NASDAQ:GT)
– Shares owned by Winton Capital Management as of March 31: 3.20 Million
– Value of Winton Capital Management’s holding as of March 31: $105.55 Million
Winton Capital Management upped its stake in Goodyear Tire & Rubber Co (NASDAQ:GT) by 390,581 shares during the March quarter to 3.20 million shares. The upped stake was valued at $105.55 million on March 31 and accounted for 1.1% of the firm’s entire portfolio. The well-known manufacturer of tires has lost one-fifth of its market capitalization since the beginning of 2016. Although some might have anticipated that lower gas prices would eventually lead to more driving and additional wear and tear on tires, this line of thought does not seem to be reflected in the company’s stock performance. Goodyear Tire & Rubber reported net sales of $3.69 billion for the first quarter of 2016, down from $4.02 billion posted a year ago. The decrease in the company’s top line was mainly attributable to foreign currency headwinds, the deconsolidation of its Venezuelan subsidiary, as well as lower motorcycle tire sales in Americas. Richard McGuire’s Marcato Capital Management owned 4.87 million shares of Goodyear Tire & Rubber Co (NASDAQ:GT) at the end of March.
#4. eBay Inc. (NASDAQ:EBAY)
– Shares owned by Winton Capital Management as of March 31: 4.50 Million
– Value of Winton Capital Management’s holding as of March 31: $107.36 Million
The British asset manager reduced its exposure to eBay Inc. (NASDAQ:EBAY) by 15% during the January-to-March period, ending the first quarter with 4.50 million shares. The reduced stake was worth $107.36 million at the end of March and made up 1.2% of the fund’s portfolio. The commerce giant has seen its market value plunge by 17% so far in 2016 and investors do not seem to believe eBay has strong growth catalysts for the foreseeable future. The ongoing shift to e-commerce appears to be one strong growth catalyst for eBay, along with the company’s online ticket platform StubHub. StubHub dominates the secondary market for buying and selling entertainment tickets, recently inking a nearly seven-year revenue-sharing deal to resell tickets for the New York Yankees. eBay’s ticket platform will commence running the ticket-resale business for the baseball team in early July. Cliff Asness’ AQR Capital Management upped its eBay Inc. (NASDAQ:EBAY) stake by 54% during the March quarter to 10.52 million shares.
The second page of this article will discuss Winton Capital Management’s three-largest equity holding at the end of the March quarter.