Is Cooper Tire & Rubber Company (NYSE:CTB) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Cooper Tire & Rubber Company (NYSE:CTB) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Fitbit Inc (NYSE:FIT), Chesapeake Utilities Corporation (NYSE:CPK), and Puma Biotechnology Inc (NASDAQ:PBYI) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's go over the fresh hedge fund action encompassing Cooper Tire & Rubber Company (NYSE:CTB).
Hedge fund activity in Cooper Tire & Rubber Company (NYSE:CTB)
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in CTB a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce's Royce & Associates has the number one position in Cooper Tire & Rubber Company (NYSE:CTB), worth close to $42.2 million, accounting for 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $39.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Peter Schliemann's Rutabaga Capital Management and Israel Englander's Millennium Management.
Judging by the fact that Cooper Tire & Rubber Company (NYSE:CTB) has faced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few hedgies that slashed their positions entirely by the end of the third quarter. It's worth mentioning that Ken Grossman and Glen Schneider's SG Capital Management cut the biggest investment of the "upper crust" of funds followed by Insider Monkey, worth about $16.9 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $9 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cooper Tire & Rubber Company (NYSE:CTB) but similarly valued. We will take a look at Fitbit Inc (NYSE:FIT), Chesapeake Utilities Corporation (NYSE:CPK), Puma Biotechnology Inc (NASDAQ:PBYI), and Actuant Corporation (NYSE:ATU). This group of stocks' market valuations match CTB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIT,18,154058,3 CPK,11,36273,1 PBYI,23,437098,1 ATU,9,278319,-5 Average,15.25,226437,0 [/table]
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 $226 million. That figure was $146 million in CTB's case. Puma Biotechnology Inc (NASDAQ:PBYI) is the most popular stock in this table. On the other hand Actuant Corporation (NYSE:ATU) is the least popular one with only 9 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CTB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CTB were disappointed as the stock returned 3.5% during the same period and underperformed 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.