Editor’s Note: Related Tickers: The Goodyear Tire & Rubber Company (NASDAQ:GT), Tenet Healthcare Corp (NYSE:THC), Fifth & Pacific Companies Inc (NYSE:FNP), First Horizon National Corporation (NYSE:FHN), WellCare Health Plans, Inc. (NYSE:WCG)
We track 13F filings from hedge funds and other notable investors, and use the included information to help us develop investing strategies. One of our findings has been that the most popular small cap stocks among hedge funds (which we define as those with market capitalizations between $1 billion and $5 billion) outperform the S&P 500 by an average of 18 percentage points per year. Our theoretical explanation for this is that large institutional investors such as mutual funds pay less attention to smaller cap stocks, and so hedge funds are more likely to find an undervalued (or overvalued) company. Small cap picks from individual funds might therefore count as initial ideas which investors can research further if they seem interesting. Here are Robert Pohly’s hedge fund Samlyn Capital’s five largest small cap holdings as of the end of December (or see the full list of stocks the fund reported owning):
Samlyn reported a position of 7.7 million shares in The Goodyear Tire & Rubber Company (NASDAQ:GT) at the end of the fourth quarter of 2012. In the fourth quarter of 2012, Goodyear’s revenue was down by 11% versus a year earlier and this helped drive earnings down over 70%. Wall Street analysts expect the company to improve in terms of net income, resulting in a very low forward earnings multiple, but it might not be wise to be too dependent on their optimism. Billionaire David Tepper’s Appaloosa Management had 14 million shares in its own portfolio at the end of December (check out Tepper’s stock picks).
The fund owned a little over 2 million shares of Tenet Healthcare Corp (NYSE:THC) according to the filing. Tenet owns hospitals and outpatient health centers. The stock price is up 87% in the last year, and as a result the stocks stands out in the normally cheap hospital industry at a trailing earnings multiple of over 30. The bottom line is expected to improve over the next couple of years, however, bringing the forward P/E closer to that of its peers at 12. Glenview Capital, managed by Larry Robbins, was another major shareholder in Tenet Healthcare Corp (NYSE:THC) (find Glenview’s favorite stocks).