Hedge Fund Buys into Cooper Tire & Rubber

On 18 September Trafelet & Company, disclosed that it now holds 5.756 million shares in Cooper Tire & Rubber – a 9.4 per cent stake. Trafelet is now Cooper Tire & Rubber’s fourth-largest shareholder behind value investors Shapiro Capital Management (11.4 per cent), Brandes Investment Partners (11.4 per cent) and Perkins, Wolf, McDonnell & Company (10 per cent).

Trafelet & Company have not disclosed when they bought the shares. However, financial news sources are reporting that is did not hold any Cooper shares at the end of the second quarter, and the company passed the 5 per cent ownership mark on 8 September.

Adjusting for dividends, shares of Cooper Tire & Rubber fell to a six-year low of $7.71 on 10 August, one week after the company released news of disappointing earning and the departure of Tom Dattilo. The stock valued as high as $17.03 in September 2005. Cooper Tire & Rubber began picking up again towards the $10 mark on 7 September when the company disclosed details of a presentation it gave to analysts and investors. The share price then jumped 15 per cent the next day on news that Cooper Tire & Rubber had a plan to cut costs and realize “profit improvement[s].”

Commenting on Cooper Tire & Rubber’s turnaround plan at the time, Morgan Stanley analyst Jonathan Steinmetz reinforced his “underweight” rating. “We still see Cooper as poorly positioned competitively and struggle to see enough earnings power/cash generation to support the share price,” Steinmetz said. “However, it will likely be six to 12 months before investors can really judge the success of the plan which may put a lid on near-term downward pressure.”