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Is Cooper Tire & Rubber Company (CTB) A Good Stock To Buy?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cooper Tire & Rubber Company (NYSE:CTB).

Cooper Tire & Rubber Company (NYSE:CTB) has experienced a decrease in enthusiasm from smart money recently. CTB was in 10 hedge funds’ portfolios at the end of the third quarter of 2018. There were 12 hedge funds in our database with CTB holdings at the end of the previous quarter. Our calculations also showed that CTB isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

MILLENNIUM MANAGEMENT

Let’s analyze the fresh hedge fund action surrounding Cooper Tire & Rubber Company (NYSE:CTB).

How are hedge funds trading Cooper Tire & Rubber Company (NYSE:CTB)?

Heading into the fourth quarter of 2018, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in CTB at the beginning of this year. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

CTB_dec2018

More specifically, Royce & Associates was the largest shareholder of Cooper Tire & Rubber Company (NYSE:CTB), with a stake worth $72.3 million reported as of the end of September. Trailing Royce & Associates was Citadel Investment Group, which amassed a stake valued at $16.3 million. Rutabaga Capital Management, Millennium Management, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.

Since Cooper Tire & Rubber Company (NYSE:CTB) has faced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few fund managers who sold off their full holdings in the third quarter. It’s worth mentioning that George McCabe’s Portolan Capital Management said goodbye to the biggest stake of the 700 funds tracked by Insider Monkey, worth an estimated $8.7 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $1.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cooper Tire & Rubber Company (NYSE:CTB) but similarly valued. These stocks are Golden Ocean Group Ltd (NASDAQ:GOGL), ICF International Inc (NASDAQ:ICFI), NGL Energy Partners LP (NYSE:NGL), and Summit Hotel Properties Inc (NYSE:INN). This group of stocks’ market values are similar to CTB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOGL 6 200094 -1
ICFI 16 51615 4
NGL 5 9108 -1
INN 12 22584 2
Average 9.75 70850 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $141 million in CTB’s case. ICF International Inc (NASDAQ:ICFI) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 5 bullish hedge fund positions. Cooper Tire & Rubber Company (NYSE:CTB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ICFI might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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