With Moody’s Turning Positive On Consumer Durables Stocks, Here Are 5 That Billionaires Are Bullish On

Ratings firm Moody’s recently revised its outlook for the U.S. consumer durables industry to ‘Positive’ from ‘Stable’, citing the impact of “cost savings, modest improvements in select emerging markets, strength in housing market-related spending and low commodity costs.” While the firm acknowledged that a strong U.S. dollar will continue to remain a headwind for multinational giants, it thinks that the industry’s earnings power “will be boosted by companies’ cost-cutting initiatives and acquisitions, low oil costs and the stabilization of some emerging markets.” Apart from the ratings shift, the firm also upped its operating profit growth forecast for the sector to 5%-to-6% over the next 12-to-18 months from its previous forecast of 4%-to-5% growth.

Taking into account Moody’s bullish forecast and the growth that is expected from the industry in the coming quarters, we at Insider Monkey thought of helping our readers find the best consumer durables stocks for their portfolios. To do so, we compiled a list of consumer durables stocks based on their popularity at the end of the second quarter among the over 60 billionaire investors that we track. In this article, we’ll reveal the five stocks that topped our list and will discuss how those stocks have performed so far in 2016.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

#5 B/E Aerospace Inc (NASDAQ:BEAV)

— Number of Billionaires With Shares (as of June 30): 8

— Total Value of Billionaires’ Holdings (as of June 30): $248.54 million

First up on our list is B/E Aerospace Inc (NASDAQ:BEAV), which was held by eight of the billionaire investors in our database on June 30, up by two quarter-over-quarter, though the aggregate value of their holdings in it declined by $214 million during the second quarter. B/E Aerospace Inc (NASDAQ:BEAV)’s stock has performed well this year, appreciating by almost 18%. However, it is still trading down by almost 50% from the high it made in May 2014. The Florida-based manufacturer of aircraft interiors currently pays a quarterly dividend of $0.21 per share, which translates into an annual dividend yield of 1.66%. For its most recent quarter, the company managed to beat analysts’ estimates of EPS of $0.82 and revenue of $713.1 million with its EPS of $0.84 and revenue of $753 million. Despite the strong quarterly numbers, most analysts continue to remain neutral on the stock, including analysts at Jefferies Group, who reiterated their ‘Hold’ rating on it on August 1.

#4 Graphic Packaging Holding Company (NYSE:GPK)

— Number of Billionaires With Shares (as of June 30): 8

— Total Value of Billionaires’ Holdings (as of June 30): $303.61 million

Though the number of billionaire investors that we track which were long Graphic Packaging Holding Company (NYSE:GPK) increased by just one during the second quarter, the aggregate value of their holdings in the company rose by over 50% during the period. Shares of the paper-based packaging solutions company suffered a large decline last year, but have recovered most of those losses in 2016 and are currently trading up by 9% year-to-date. Graphic Packaging Holding Company (NYSE:GPK) started paying a quarterly dividend of $0.05 per share beginning in the first quarter of 2015, which it hasn’t hiked since. On July 27, a day after the company reported its second quarter financial results, which were in-line with analysts’ expectations, analysts at Citigroup reiterated their ‘Buy’ rating on the stock, while upping their price target on it to $16 from $15.50, which represents potential upside of $14.28.

We’ll check out the three most popular consumer durables stocks among billionaires on the next page.

#3 AMETEK, Inc. (NYSE:AME)

— Number of Billionaires With Shares (as of June 30): 8

— Total Value of Billionaires’ Holdings (as of June 30): $380.39 million

The ownership of AMETEK, Inc. (NYSE:AME) among the billionaire investors in our system remained unchanged during the second quarter. One of the billionaire-led hedge funds that initiated a stake in AMETEK, Inc. (NYSE:AME) during the quarter was Dan Loeb‘s Third Point, which purchased 2.7 million shares of the company. After trading in a range for two years starting in 2014, AMETEK’s stock broke below the lower-end of that range earlier this year and has lost almost 12% of its value in 2016. On August 4, the company reported its second quarter results, declaring EPS of $0.59 on revenue of $977.77 million, which met analysts’ EPS estimate, but fell $6.96 million short on the revenue front. Following the earnings release, several analysts lowered their target price on the stock, including analysts at Stifel Nicolaus, who lowered their target price on AMETEK to $50 from $56 while keeping their rating on the stock unchanged at ‘Buy’.

#2 Ball Corporation (NYSE:BLL)

— Number of Billionaires With Shares (as of June 30): 8

— Total Value of Billionaires’ Holdings (as of June 30): $392.22 million

Moving on, Ball Corporation (NYSE:BLL) saw a significant rise in its popularity among the billionaire investors that we follow during the second quarter, as a net total of three more held the stock, while the aggregate value of their positions jumped by 218.6%. The increase in popularity is noteworthy because it happened during a period when Ball Corporation (NYSE:BLL)’s stock remained flat. The only notable thing concerning Ball Corporation that took place during the second quarter was the company winning U.S. antitrust approval from the FTC for its merger with Rexam on June 28, on the condition that the companies sell eight aluminum can plants. Last month Ball Corporation’s stock spiked by more than 15% after the company reported its second quarter results. While its revenue of $2.03 billion missed analysts’ consensus projection by $140 million, the EPS of $1.06 that it declared was $0.06 more than what analysts had projected. Shares of Ball Corporation are 6.1% in the green this year.

#1 Goodyear Tire & Rubber Co (NASDAQ:GT)

— Number of Billionaires With Shares (as of June 30): 9

— Total Value of Billionaires’ Holdings (as of June 30): $493.05 million

Amid a 22.2% drop in its stock during the second quarter, the ownership of Goodyear Tire & Rubber Co (NASDAQ:GT) among the billionaire investors covered by us increased by one and the aggregate value of their holdings in it climbed by 12%. Billionaire investors that initiated a stake in the company during the period included Bruce Kovner (Caxton Associates) and David Tepper (Appaloosa Management). Goodyear Tire’s stock has managed to recoup a large portion of the loss it suffered last quarter, but is still trading down by 9.14% year-to-date. Nevertheless, several analysts who track the stock are confident that it can perform well in the coming months and end 2016 in the green. Of the ten leading analysts and research firms on Wall Street who track the Goodyear, seven have a ‘Buy’ rating on it, including analysts at Deutsche Bank, who upped their rating on the stock to ‘Buy’ from ‘Hold’ on September 6, while keeping their price target on it unchanged at $37. For its fiscal year 2017 third quarter, analysts are expecting Goodyear Tire to report EPS of $1.21 on revenue of $4.02 billion. For the same quarter of its previous fiscal year, the company managed EPS of $0.99 on revenue of $4.18 billion.

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