We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards The Goodyear Tire & Rubber Company (NASDAQ:GT) and determine whether hedge funds skillfully traded this stock.
The Goodyear Tire & Rubber Company (NASDAQ:GT) has experienced a decrease in hedge fund sentiment recently. Our calculations also showed that GT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a lot of methods stock traders employ to analyze publicly traded companies. A pair of the most underrated methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outclass the S&P 500 by a significant margin (see the details here).
[caption id="attachment_731899" align="aligncenter" width="387"] David Tepper of Appaloosa Management LP[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now let's check out the key hedge fund action regarding The Goodyear Tire & Rubber Company (NASDAQ:GT).
How have hedgies been trading The Goodyear Tire & Rubber Company (NASDAQ:GT)?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in GT a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the biggest position in The Goodyear Tire & Rubber Company (NASDAQ:GT). D E Shaw has a $33.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $23.9 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism include David Tepper's Appaloosa Management LP, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Appaloosa Management LP allocated the biggest weight to The Goodyear Tire & Rubber Company (NASDAQ:GT), around 0.6% of its 13F portfolio. Ellington is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to GT.
Due to the fact that The Goodyear Tire & Rubber Company (NASDAQ:GT) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there were a few hedgies who sold off their full holdings last quarter. Intriguingly, Mike Masters's Masters Capital Management dumped the largest stake of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $14.9 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund sold off about $3.3 million worth. These moves are important to note, as total hedge fund interest fell by 6 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to The Goodyear Tire & Rubber Company (NASDAQ:GT). These stocks are Embraer SA (NYSE:ERJ), Itau CorpBanca (NYSE:ITCB), Zogenix, Inc. (NASDAQ:ZGNX), and AMC Networks Inc (NASDAQ:AMCX). This group of stocks' market caps are similar to GT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERJ,16,188996,2 ITCB,1,1270,0 ZGNX,36,579292,3 AMCX,23,112696,-2 Average,19,220564,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $130 million in GT's case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. The Goodyear Tire & Rubber Company (NASDAQ:GT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on GT as the stock returned 53.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.