Earlier this year, in February, credit rating agency Moody’s changed its outlook on the consumer durables sector to stable from positive. The factors contributing to this change included lower spending by the middle and lower income consumers owing to high food and healthcare costs and weakness in emerging markets which constrained spending. The sector is up by about 8% so far this year. We wanted to find out if some companies in the consumer durables space have been receiving special attention from hedge funds, which deem them to be cheaply valued at current levels given their future prospects. Hence, based on the latest 13F filings we set out to formulate a list of five most popular companies in the sector among professional money managers.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
5. Goodyear Tire & Rubber Co (NASDAQ:GT)
– Investors with Long Positions (as of March 31): 36
– Aggregate Value of Investors’ Holdings (as of March 31): $1.33 Billion
The hedge fund interest in the $7.54 billion tire manufacturer dropped slightly during the first three months of this year as the aggregate value of their holdings dropped by about 12%, while Goodyear Tire & Rubber Co (NASDAQ:GT)’s stock price inched up by 1% during this period. In its financial results for the first quarter Goodyear reported EPS of $0.72, which beat analyst estimates, but revenues of $3.7 billion came in lower than expected. However, future outlook looks upbeat as both Standpoint Research and KeyBnc Capital Markets have recently upgraded the stock to ‘Buy’ from ‘Hold’ and to ‘Overweight’ from ‘Sector Weight’ respectively. Phill Gross and Robert Atchinson‘s Adage Capital Management was bullish on the company during the first quarter, raising its stake by 7% to 6.59 million shares.
4. Whirlpool Corporation (NYSE:WHR)
– Investors with Long Positions (as of March 31): 38
– Aggregate Value of Investors’ Holdings (as of March 31): $2.06 Billion
A fresh wave of enthusiasm from smart money engulfed Whirlpool during the January-March period as the number of hedgies holding the company in their portfolios rose by 15%, while shares of Whirlpool Corporation (NYSE:WHR) gained 23% during that period. Although an industry report in mid-May by Association of Home Appliance Manufacturers reported a 10% slide in major U.S. appliance shipments during April, a more recent report from Best Buy, whose stores boast a significant Whirlpool presence, showed a 14% gain in appliances revenue during the first trimester. Harris Associates was one of the newcomers on our list of Whirlpool Corporation (NYSE:WHR) stockholders, as the firm initiated a stake of 2.31 million shares during the March quarter.
3. Ball Corporation (NYSE:BLL)
– Investors with Long Positions (as of March 31): 40
– Aggregate Value of Investors’ Holdings (as of March 31): $1.45 Billion
The $10.31 billion beverage can maker also registered bullish activity from smart money as the number of funds from our database betting on the company increased by eight during the March quarter, ahead of its $6.6 billion merger with U.K. peer Rexam which is expected to close in late June. Both Ball Corporation (NYSE:BLL) and Rexam have decided to sell $3.42 billion worth of total assets to Luxembourg-based Ardagh Group in order to meet competition requirements for their marriage. Despite a strong performance in the U.S. and European metal beverage business Ball’s first quarter revenues fell by 8.3% on a year-over-year basis to $1.76 billion owing to start-up costs for some growth projects and weakness in the Chinese and U.S. metal food businesses. Doug Silverman and Alexander Klabin‘s Senator Investment Group probably sees this weakness as temporary and boosted its Ball Corporation (NYSE:BLL) holding by 34% to 5.15 million shares during the first quarter.
2. Graphic Packaging Holding Company (NYSE:GPK)
– Investors with Long Positions (as of March 31): 41
– Aggregate Value of Investors’ Holdings (as of March 31): $1.12 Billion
While the total number of hedgies holding shares of the Atlanta-based provider of paper-based packaging solutions remained unchanged during the first three months, the aggregate value of these holdings decreased slightly by 6%. The stock traded nearly sideways during this period. Graphic Packaging Holding Company (NYSE:GPK) posted first-quarter earnings of $0.2 per share on revenue of $1.03 billion, beating EPS estimates by $0.02, but missing revenue expectations by $20 million. The company managed to close three acquisitions during the quarter including that of G-Box, Walter G. Anderson, and Metro Packaging & Imaging. With 28.35 million shares at the end of March, David Cohen and Harold Levy’s Iridian Asset Management is the largest stockholder of Graphic Packaging Holding Company (NYSE:GPK) within our database.
1. Mohawk Industries, Inc. (NYSE:MHK)
– Investors with Long Positions (as of March 31): 49
– Aggregate Value of Investors’ Holdings (as of March 31): $2.32 Billion
The $14.77 billion flooring manufacturer faced a loss in traction as the number of funds followed by Insider Monkey holding shares of Mohawk Industries, Inc. (NYSE:MHK) in their portfolios dropped by six during the first quarter. Mohawk’s first quarter Global Ceramic Segment sales of $773.73 million were up by 8% on a year-over-year basis with the Mexican ceramic business being the fastest growing part of the segment. Sales from the Flooring North America Segment stood at $906.36 million and were also up by 7% from the same quarter last year. Robert Joseph Caruso‘s Select Equity Group had these up trends in mind when it raised its stake in Mohawk Industries, Inc. (NYSE:MHK) by 17% during the first quarter.