10 Most Successful Hedge Fund Managers and Their Stock Picks

Today we’ll present you the most successful hedge fund managers and their stock picks!

According to eVestments, investors withdrew around $25.2 billion from hedge fund vehicles in July. This represents the largest monthly redemption since February 2009, which registered a net outflow of $28.2 billion. However, the main problem for the hedge fund industry is that the July net outflow was not a just one-time phenomenon. Investors withdrew $23.5 billion in June, with the overall net outflow for 2016 totaling $55.9 billion. Clearly, the primary reason why investors are relocating their capital elsewhere stems from hedge funds’ poor performance.

There are bright spots in the hedge fund industry nonetheless: some managers appear to have made well-timed buys in the past year or so, while others’ long-term bets may have started to pay off quite handsomely. Insider Monkey compiled a list of ten most successful hedge fund managers, a ranking based on the long stock positions disclosed in quarterly 13F filings over the last 12 months. Insider Monkey measures a hedge fund’s performance by calculating the weighted average returns of the fund’s long stock positions in companies with over $1 billion in market capitalization. According to this methodology, Peter Palmedo’s Sun Valley Gold LLC hedge fund, backed by hedge fund veteran investor Julian Robertson, was up an impressive 72.8% in the past 12 months. David Iben’s Kopernik Global Investors LLC returned 40.4% in the past 12-month period versus the nearly 13% return generated by the S&P 500 Index over the same time span.

One should keep in mind that the performance measured by Insider Monkey does not represent the actual performance of the hedge funds we monitor, but our measures show the return retail investors could have been able to generate by emulating hedge fund’s 13F moves and positions. The list of the ten most successful hedge fund managers also includes: 3. AEW Capital – 23.6%; 4. Cedar Rock Capital – 22.6%; 5. Wintergreen Advisors – 21.5%; 6. Sloane Robinson – 21.4%; 7. Route One Investment – 16.9%; 8. Tybourne Capital – 14.8%; 9. Echo Street Capital – 14.2%; 10. Value Holdings – 13.5%.

Small investors can engage in hedge-fund-like investing without paying hefty fees or without paying anything at all. Indeed, there is no risk-free way of generating great returns, but it could be beneficial to have a look at the favorite stock picks of the ten most successful hedge fund managers. That said, the following article lays out a list of ten most commonly-owned stocks among the ten hedge fund managers mentioned above.

At Insider Monkey, we track around 740 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).

#10. CubeSmart (NYSE:CUBE)

– Number of “Successful” Hedge Fund Shareholders (as of June 30): 2

– Total Value of Hedge Funds’ Holdings (as of June 30): $127.13 Million

Two of the ten most successful hedge fund managers mentioned above were invested in CubeSmart (NYSE:CUBE) at the end of the second quarter. Those hedge funds’ long positions in CubeSmart amounted to $127.13 million on June 30. The shares of the self-storage real estate company are 9% in the green thus far in 2016. CubeSmart owned 464 self-storage facilities at the end of June, totaling around 32.0 million rentable square feet. The real estate investment trust focused on self-storage facilities acquired five properties during the three months that ended June 30 for $65.6 million. In early August, CubeSmart’s Board of Trustees declared a quarterly dividend of $0.21 per share, which equates to a current annual dividend yield of 3.08%. The REIT’s rental income for the June quarter increased to $111.5 million from $96.8 million, reflecting an increase of 80 basis points in average occupancy and higher rental rates. Jeffrey Furber’s AEW Capital Management, which takes the third spot in our list of ten most successful hedge fund managers, was the owner of 3.66 million shares of CubeSmart (NYSE:CUBE) at the end of June.

The next pages of this article will discuss nine other stocks favored by the ten most successful hedge fund managers mentioned above.

#9. Alphabet Inc. (NASDAQ:GOOGL)

– Number of “Successful” Hedge Fund Shareholders (as of June 30): 2

– Total Value of Hedge Funds’ Holdings (as of June 30): $134.72 Million

There were two managers from the list of ten most successful hedge fund managers invested in Alphabet Inc. (NASDAQ:GOOGL)’s Class A common stock at the end of the second quarter, with their equity investments totaling $134.72 million. At the same time, two managers within that list had Alphabet’s Class C common stock in their portfolios at the end of the June quarter, with the overall value of Class C share-holdings amounting to $36.66 million on June 30. According to Bloomberg, the search giant is currently working with a financial adviser to evaluate of potential bid for Twitter Inc. (NYSE:TWTR), joining the group of possible suitors for the social-media company. Fresh media reports suggest that Twitter hired Goldman Sachs and Allen & Co. to solicit potential buyers. Google is viewed as a natural suitor for the struggling social-media company, well-known for its 140-character Tweets. Alphabet’s Class A shares are up 3% this year. Route One Investment Company L.P., a fund co-founded by William Duhamel that ranks as the seventh-most successful hedge fund manager according to our measures, owns 171,575 Class A shares of Alphabet Inc. (NASDAQ:GOOGL) as of June 30.

#8. Fastenal Company (NASDAQ:FAST)

– Number of “Successful” Hedge Fund Shareholders (as of June 30): 2

– Total Value of Hedge Funds’ Holdings (as of June 30): $171.97 Million

Two asset managers within the list of ten most successful hedge fund managers compiled by Insider Monkey had equity stakes in Fastenal Company (NASDAQ:FAST) at the end of the April-to-June quarter, with the overall value of those stakes equaling $171.97 million. The North American player in the wholesale distribution of industrial and construction supplies has seen the value of its shares increase by 4% since the start of the year. Fastenal Company predominantly operates as a fastener distributor, with the fastener segment accounting roughly 40% of the company’s business. The daily growth of the company’s fastener product line decreased from around 10% in the last six months of 2014 to approximately 6% contraction in the final quarter of 2015 and around 2% contraction in the first half of 2016. The end markets associated with the most pronounced weakening in demand for the company’s fastener product line included heavy machinery manufacturers with exposure to mining, military, agriculture and construction. Greg Poole’s Echo Street Capital Management, whose long positions in companies with a market cap above $1 billion returned 14.2% in the past 12 months, had 35,188 shares of Fastenal Company (NASDAQ:FAST) among its holdings at the end of the second quarter.

#7. salesforce.com inc. (NYSE:CRM)

– Number of “Successful” Hedge Fund Shareholders (as of June 30): 2

– Total Value of Hedge Funds’ Holdings (as of June 30): $196.47 Million

Two of the ten most successful hedge funds mangers discussed above were invested in salesforce.com inc. (NYSE:CRM) at the end of the second quarter. Their long positions in the company were valued at $196.47 million on June 30. The U.S. provider of enterprise cloud computing solutions called on EU regulators last week to investigate antitrust issues related to Microsoft Corporation (NASDAQ:MSFT)’s pending $26.2 billion-acquisition of LinkedIn Corp (NYSE:LNKD), saying that the deal threatens innovation and competition. More specifically, salesforce.com wants regulators in the United States and Europe to block the multi-billion-dollar acquisition of LinkedIn, arguing that the deal would harm competition by giving Microsoft too much control over the social-networking company’s dataset of more than 450 million professionals. While salesforce.com has already lost its bid to buy LinkedIn, the company still seeks to get access to LinkedIn’s treasure trove of data. The shares of salesforce.com are down 9% thus far in 2016. Eashwar Krishnan’s Tybourne Capital Management, the eight-most successful hedge fund manager according to our measures, reported owning 2.36 million shares of salesforce.com inc. (NYSE:CRM) in its 13F for the June quarter.