The Goodyear Tire & Rubber Company (GT) vs. Hedge Fund Favorites in 2019

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like The Goodyear Tire & Rubber Company (NASDAQ:GT) and compare its performance against hedge funds’ favorite stocks.

Is The Goodyear Tire & Rubber Company (NASDAQ:GT) going to take off soon? Hedge funds are reducing their bets on the stock. The number of long hedge fund positions shrunk by 3 recently. Our calculations also showed that GT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a peek at the new hedge fund action regarding The Goodyear Tire & Rubber Company (NASDAQ:GT).

What have hedge funds been doing with The Goodyear Tire & Rubber Company (NASDAQ:GT)?

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in GT a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by David E. Shaw, holds the most valuable position in The Goodyear Tire & Rubber Company (NASDAQ:GT). D E Shaw has a $140.1 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Andrew Wellington and Jeff Keswin of Lyrical Asset Management, with a $127.4 million position; 1.9% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions consist of Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Lyrical Asset Management allocated the biggest weight to The Goodyear Tire & Rubber Company (NASDAQ:GT), around 1.92% of its 13F portfolio. Masters Capital Management is also relatively very bullish on the stock, designating 0.86 percent of its 13F equity portfolio to GT.

Because The Goodyear Tire & Rubber Company (NASDAQ:GT) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who sold off their entire stakes in the third quarter. It’s worth mentioning that Lee Ainslie’s Maverick Capital dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $12.1 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $5.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Goodyear Tire & Rubber Company (NASDAQ:GT) but similarly valued. These stocks are Silgan Holdings Inc. (NASDAQ:SLGN), ASGN Incorporated (NYSE:ASGN), Corporate Office Properties Trust (NYSE:OFC), and American National Insurance Company (NASDAQ:ANAT). This group of stocks’ market values resemble GT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLGN 16 220385 -2
ASGN 14 177280 -7
OFC 15 189405 -1
ANAT 16 60381 1
Average 15.25 161863 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $632 million in GT’s case. Silgan Holdings Inc. (NASDAQ:SLGN) is the most popular stock in this table. On the other hand ASGN Incorporated (NYSE:ASGN) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks The Goodyear Tire & Rubber Company (NASDAQ:GT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately GT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GT were disappointed as the stock returned -20.9% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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