How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Goodyear Tire & Rubber Company (NASDAQ:GT).
The Goodyear Tire & Rubber Company (NASDAQ:GT) shareholders have witnessed an increase in hedge fund interest lately. The Goodyear Tire & Rubber Company (NASDAQ:GT) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistic is 38. There were 23 hedge funds in our database with GT holdings at the end of March. Our calculations also showed that GT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s check out the new hedge fund action encompassing The Goodyear Tire & Rubber Company (NASDAQ:GT).
Do Hedge Funds Think GT Is A Good Stock To Buy Now?
At Q2’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GT over the last 24 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in The Goodyear Tire & Rubber Company (NASDAQ:GT) was held by Arrowstreet Capital, which reported holding $98.2 million worth of stock at the end of June. It was followed by Appaloosa Management LP with a $54.3 million position. Other investors bullish on the company included Point72 Asset Management, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to The Goodyear Tire & Rubber Company (NASDAQ:GT), around 2.82% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, dishing out 1.44 percent of its 13F equity portfolio to GT.
As aggregate interest increased, specific money managers have been driving this bullishness. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, initiated the biggest position in The Goodyear Tire & Rubber Company (NASDAQ:GT). Shellback Capital had $26.7 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $6.9 million position during the quarter. The following funds were also among the new GT investors: John W. Moon’s Moon Capital, Dmitry Balyasny’s Balyasny Asset Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to The Goodyear Tire & Rubber Company (NASDAQ:GT). These stocks are Simpson Manufacturing Co, Inc. (NYSE:SSD), Sprout Social, Inc. (NASDAQ:SPT), Daqo New Energy Corp (NYSE:DQ), TriNet Group Inc (NYSE:TNET), Goosehead Insurance, Inc. (NASDAQ:GSHD), Sterling Bancorp (NYSE:STL), and Kemper Corporation (NYSE:KMPR). This group of stocks’ market valuations are closest to GT’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $235 million. That figure was $498 million in GT’s case. Sprout Social, Inc. (NASDAQ:SPT) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks The Goodyear Tire & Rubber Company (NASDAQ:GT) is more popular among hedge funds. Our overall hedge fund sentiment score for GT is 86.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on GT as the stock returned 9.9% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.