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Five Consumer Durables Stocks Billionaires Love

The demand for white goods such as refrigerators, washing machines, air conditioners and other durable goods is mainly driven by consumer sentiment and the underlying health of an economy, which makes us believe that the consumer durables sector represents a reliable barometer for the health of any economy. But is the U.S. consumer durables sector worth the attention of the investment community? There are certainly a number of positive indicators pointing to continued strength in this sector. For instance, U.S. consumers have cut their debt loads since the not-so-distant financial crisis and the U.S. job market continues to tighten despite a disappointing jobs report for May. According to the Bureau of Labor Statistics, average hourly wages have grown by 2.5% in the past 12 months, which is yet another positive indicator for both the U.S. economy and the nation’s consumer sentiment. The S&P BSE Consumer Durables Index has advanced nearly 15% in the past 12 months versus the negative return of 1% posted by the S&P 500 Index over the same time span, so investors need to be selective as valuations in the consumer durables sector have risen quite strongly. With that in mind, let’s have a look at five consumer durables stocks the billionaire hedge fund managers tracked by Insider Monkey favor.

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).

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#5. Crown Holdings Inc. (NYSE:CCK)

– Billionaires with long positions as of March 31: 7

– Aggregate value of billionaires’ holdings as of March 31: $279.15 Million

The number of funds followed by Insider Monkey managed or founded by billionaire investors that have long positions in Crown Holdings Inc. (NYSE:CCK) increased to seven from four during the first three months of 2016, while the overall value of those positions rose by 63% quarter-over-quarter to $279.15 million. The company’s business involves designing and manufacturing packaged products such as steel and aluminum cans, glass bottles, and metal vacuum closers and caps for consumer goods. Crown Holdings has seen its market value gain nearly 3% since the beginning of 2016. The company’s net sales for the first quarter were impacted by foreign currency headwinds, the pass-through of lower material costs and a decrease in food can volumes, partially offset by an increase in beverage can volumes. Because consumers in both emerging and developed markets continue to favor cans over other beverage packaging formats, Crown Holdings has been busy expanding capacity to meet demand. Adage Capital Management, run by Phill Gross and Robert Atchinson, reported owning 3.43 million shares of Crown Holdings Inc. (NYSE:CCK) in its latest 13F.

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#4. AutoNation Inc. (NYSE:AN)

– Billionaires with long positions as of March 31: 7

– Aggregate value of billionaires’ holdings as of March 31: $639.26 Million

AutoNation Inc. (NYSE:AN) lost some appeal among the billionaire asset managers monitored by our team during the first quarter of 2016, as the number of billionaires with stakes in the company dropped to seven from nine quarter-over-quarter. Meanwhile, the value of all those stakes fell by 25% sequentially to $639.26 million, mainly due to a 22% decline in the value of AutoNation shares. Analysts anticipate that AutoNation, the largest automotive retailer in the U.S., will be impacted the most among new-vehicle retailers by the recalls for potentially faulty Takata air bags, as these recalls keep getting bigger and bigger. Analysts at Goldman Sachs believe AutoNation’s used inventory that cannot be sold because of the recall will increase meaningfully by the end of the second quarter, which will impact notably the company’s full-year bottom line. The auto retailer has seen the value of its shares decline by 20% year-to-date. Ricky Sandler’s Eminence Capital had 3.63 million shares of AutoNation Inc. (NYSE:AN) in its portfolio at the end of March.

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The next page of the article will reveal three other consumer durables stocks loved by the billionaires tracked by our team.

#3. Goodyear Tire & Rubber Co (NASDAQ:GT)

– Billionaires with long positions as of March 31: 8

– Aggregate value of billionaires’ holdings as of March 31: $440.75 Million

Goodyear Tire & Rubber Co (NASDAQ:GT) received some love from billionaire money managers during the January-to-March period, with the number of billionaires from our system with equity investments in the company jumping to eight from five quarter-over-quarter. Correspondingly, the dollar value of those investments increased by 3% sequentially to $440.75 million, partially owing to a 1% gain in the value of GT shares. The shares of the well-known manufacturer of tires have declined 17% so far in 2016, but the stock may recover in the months ahead should gasoline prices remain at relatively low levels. After all, lower gasoline prices should result in more driving and additional wear and tear on tires, which would translate into higher top-line figures for the company. Goodyear Tire & Rubber posted net sales of $3.69 billion for the first quarter of 2016, down from $4.02 billion reported a year ago. The decrease reflects currency exchange headwinds, the deconsolidation of its Venezuelan subsidiary, as well as a decline in price and product mix. Richard McGuire’s Marcato Capital Management cut its stake in Goodyear Tire & Rubber Co (NASDAQ:GT) by 32% during the March quarter to 4.87 million shares.

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– Billionaires with long positions as of March 31: 8

– Aggregate value of billionaires’ holdings as of March 31: $385.24 Million

There were eight billionaire money managers from our system with stakes in AMETEK Inc. (NYSE:AME) at the end of the March quarter, as compared with only one registered at the end of the previous quarter. The aggregate value of those stakes rose to $385.24 million from $138.58 million quarter-over-quarter even though Ametek shares lost nearly 7% of their value during the first quarter. Ametek, which produces various electromechanical devices and electric instruments, has seen its market capitalization drop by 11% since the beginning of 2016. In late April, analysts at BMO Capital Markets lowered the price target on Ametek to $58 from $60 and reiterated their ‘Outperform’ rating on the stock, saying that sales weakness in the company’s oil and gas, and metals businesses “forged a 2016 guidance reduction”. The shares of the electronic components manufacturer are changing hands at around 17.6-times expected earnings, slightly above the forward P/E multiple of 17.3 for the consumer discretionary sector. Malcolm Fairbairn’s Ascend Capital acquired a new stake of 450,000 shares of AMETEK Inc. (NYSE:AME) during the first quarter.

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#1. Mohawk Industries Inc. (NYSE:MHK)

– Billionaires with long positions as of March 31: 10

– Aggregate value of billionaires’ holdings as of March 31: $1.11 Billion

Mohawk Industries Inc. (NYSE:MHK) also received more attention from the pool of money managers with ten-figure fortunes during the first three months of 2016, as the number of billionaires with equity investments in the company climbed to ten from eight quarter-over-quarter. However, the overall value of those investments fell by 6% quarter-over-quarter to $1.11 billion despite a 1% gain in the value of Mohawk shares, so some billionaires were actually trimming their exposure to the company during the March quarter. The shares of the flooring manufacturing company for residential and commercial customers have gained a little less than 2% since the beginning of the year. Mohawk Industries’ top line for the three months that ended April 2 grew to $2.17 billion from $1.88 billion, mainly due to higher sales volume from acquisitions and higher legacy sales. Dan Loeb’s Third Point LLC was the owner of exactly 2.00 million shares of Mohawk Industries Inc. (NYSE:MHK) at the end of the March quarter.

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