How Marcato Capital’s Bets on Sothebys (BID), Signet Jewelers Ltd. (SIG) & Two Other Stocks Performed in Q3

The $3 trillion hedge fund industry that was once dear to almost every other investor seems to be in shambles as elite investors pull out massive money amid losses and high fee. But our research shows that tracking long positions of hedge funds is still the best way to beat the market. For example, when we look at the third-quarter returns of the hedge funds in our database which had at least 5 long positions in companies valued at $1 billion or more, we see their long picks returned 8.3% on average, a full 5.0 percentage points above S&P 500 ETFs. However, that long stock-picking prowess is often overshadowed by the hedged portion of their portfolios, in options, bonds, and short positions. We believe that investors should pay attention to hedge funds’ top picks for a chance to beat the market.

In this article, we will take a closer look at some of the bets of Richard Mcguire‘s Marcato Capital Management, one of the hedge funds whose long stakes returned positive gains in the third quarter. According to our calculations, Marcato’s 10 holdings in companies valued at over $1.0 billion had a return of 12.32% in the third quarter. The companies that we are going to discuss are The Bank of New York Mellon Corporation (NYSE:BK), Sothebys (NYSE:BID), The Goodyear Tire & Rubber Company (NASDAQ:GT), and  Signet Jewelers Ltd. (NYSE:SIG). 

RichardMcGuire_MarcatoCapitalManagement

Marcato Capital Management unloaded 72% of its stake in The Bank of New York Mellon Corporation (NYSE:BK) during the third quarter, while the stock appreciated by 3.1% in the same period. In this way, the fund held 2.90 million shares of The Bank of New York Mellon worth $115.69 million at the end of September. At the end of June, Marcato was one of 41 funds tracked by us long The Bank of New York Mellon Corporation (NYSE:BK). Among these funds, Nelson Peltz’s Trian Partners had the number one position in The Bank of New York Mellon Corporation (NYSE:BK), worth close to $1.25 billion. The second most bullish fund was First Eagle Investment Management, which held $929.4 million worth of stock. Other funds bullish on the company included Warren Buffett’s Berkshire Hathaway and Mario Gabelli’s GAMCO Investors.

Follow Bank Of New York Mellon Corp (NYSE:BK)

Sothebys (NYSE:BIDis another company in which Marcato trimmed its position, as the fund reported ownership of 4.67 million shares as of the end of September, down by 11% over the quarter. However, as the stock advanced by 38.8% between July and September, the value of the holding surged to $177.55 million. Sothebys (NYSE:BID) was included in the equity portfolios 16 funds from our database at the end of June, down by six funds over the quarter. Third Point, managed by Dan Loeb, held the largest position in Sothebys (NYSE:BID) at the end of June, having reported $182.5 million worth of stock. Some other peers with similar optimism included John W. Rogers’s Ariel Investments, Jeffrey Gates’s Gates Capital Management, and Steve Cohen’s Point72 Asset Management.

Follow Sothebys (NYSE:BID)

Marcato Capital Management held over 4.39 million shares of The Goodyear Tire & Rubber Company (NASDAQ:GTworth $141.79 million at the end of September. The stock grew by 26.2% during the third quarter. The number of funds tracked by us long The Goodyear Tire & Rubber Company (NASDAQ:GT) declined by two to 34 during the second quarter. Among these funds, Adage Capital Management held the most valuable stake in The Goodyear Tire & Rubber Company (NASDAQ:GT), which was worth $217.7 million at the end of June. On the second spot was Citadel Investment Group which amassed $158.9 million worth of shares. Moreover, Diamond Hill Capital, and Atlantic Investment Management were also bullish on The Goodyear Tire & Rubber Company (NASDAQ:GT).

gt

Follow Goodyear Tire & Rubber Co (NASDAQ:GT)

As Signet Jewelers Ltd. (NYSE:SIG)’s stock lost 9.3% in the third quarter, Marcato Capital reduced its position by 26% to 1.3 million shares worth $112.35 million, according to its latest 13F filing. During the second quarter, the number of investors from our database bullish on the company slid to 44 from 55. Select Equity Group held the largest position among these funds, as it amassed $595.3 million worth of stock at the end of June. On the second spot was Corvex Capital, which held $562.3 million worth of shares. Moreover, Abrams Bison Investments, Farallon Capital was also bullish on Signet Jewelers Ltd. (NYSE:SIG).

Follow Signet Jewelers Ltd (NYSE:SIG)

Disclosure: none