One of the most consistent and reliable barometers for the health of an economy has been its consumer durables sector. Unlike non-durables – which most of the time are a necessity – consumers generally spend on durables only when they have sufficient resources in hand, which is why the growth of the economy and the growth of the durables sector are highly correlated. Thus, making a bet on one is nearly the same as making a bet on the other. So, if you’re an investor who believes that the health of the U.S. economy will continue to improve, you should certainly have consumer durable stocks on your radar. To make things easier for our readers, after the latest round of 13F filings, we at Insider Monkey decided to closely examine the portfolio data of the more than 700 firms we track and uncover the best investment opportunities in the consumer durables and non-durables spaces. Having already revealed hedge funds’ favorite consumer non-durables stocks, in this article we are going to reveal the four most popular consumer durables stocks among hedge funds we monitor.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
4. Goodyear Tire & Rubber Co (NASDAQ:GT)
Investors with Long Positions (as of June 30): 42
Aggregate Value of Investors’ Holdings (as of June 30): $1.88 Billion
Although Goodyear Tire & Rubber Co (NASDAQ:GT) slipped in popularity during the second quarter, from 47 hedge funds with aggregate holdings of $1.93 billion at the end of March, it still managed to make it to our list of the favorite consumer durables stocks among hedge funds. The most likely reason for hedge fund ownership to have declined during the second quarter is for profit booking purposes, as its shares climbed by 11.6% during the quarter and broke the $30 mark for the first time since the financial crisis. One of the hedge funds that counts this tire manufacturer among its most prominent holdings is Richard McGuire‘s Marcato Capital Management, which as of June 30 owned over 10.27 million shares of Goodyear Tire & Rubber Co (NASDAQ:GT).
3. Graphic Packaging Holding Company (NYSE:GPK)
Investors with Long Positions (as of June 30): 43
Aggregate Value of Investors’ Holdings (as of June 30): $1.30 Billion
The number of hedge funds that owned a stake in Graphic Packaging Holding Company (NYSE:GPK) remained constant quarter-over-quarter at 43. However, the aggregate value of hedge funds’ holdings saw an increase from the $1.22 billion it stood at as of the end of March. Additionally, the 43 hedge funds covered by us that disclosed a stake in the paper company at the end of June owned 28.60% of its outstanding shares. After witnessing a decent run during the first two months of the year, shares of Graphic Packaging Holding Company (NYSE:GPK) have dipped, ending the second quarter down by 3.9%. Among the hedge funds we cover, six of the ten largest shareholders of the company at the end of June had increased their stake in it during the second quarter. That list included Israel Englander‘s Millennium Management, which as of June 30 owned over 6.58 million shares of Graphic Packaging Holding Company (NYSE:GPK).
2. B/E Aerospace Inc (NASDAQ:BEAV)
Investors with Long Positions (as of June 30): 50
Aggregate Value of Investors’ Holdings (as of June 30): $1.73 Billion
B/E Aerospace Inc (NASDAQ:BEAV) manufactures interior products for business jets and commercial aircraft. The hedge fund ownership of the company increased during the second quarter from 44 at the start of it, but the aggregate value of investments held by hedge funds in the stock showed a decrease of $380 million during the second quarter. This decrease in hedge funds’ holdings can be best explained by the 13.4% decline in B/E Aerospace Inc (NASDAQ:BEAV)’s stock during the quarter. Analysts at RBC Capital reiterated their ‘Outperform’ rating on the stock on August 13, but lowered their price target to $62 from $63, which represents a potential 25% upside to the stock’s current market price. Thomas Steyer‘s Farallon Capital was among the hedge funds that increased its position in the stock most notably during the April-June period, and as of June 30 held over 2.1 million shares.
1. Mohawk Industries, Inc. (NYSE:MHK)
Investors with Long Positions (as of June 30): 59
Aggregate Value of Investors’ Holdings (as of June 30): $3.88 Billion
Thanks partly to the over 25% year-to-date increase in its stock price, Mohawk Industries, Inc. (NYSE:MHK) commanded the top position in our list of most popular consumer durables stocks among hedge funds. Not only did the number of hedge funds that owned the stock increase by three from the first quarter, but the aggregate value of hedge funds’ holdings also went up by 3.1% during the April-June period. Billionaire Dan Loeb – whose hedge fund owned 2.4 million shares of Mohawk Industries, Inc. (NYSE:MHK) at the end of June – noted in his second quarter investor letter that the cyclical recovery in Mohawk Industries, Inc. (NYSE:MHK)’s end markets along with the persistent low interest rate environment and ‘significant’ reduction in fixed-costs by the company has put a long-term “winning formula in place”.
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