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.

#6. Amazon.com Inc. (NASDAQ:AMZN)

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

– Total Value of Hedge Funds’ Holdings (as of June 30): $262.28 Million

Two out of the ten successful asset managers had long positions in Amazon.com Inc. (NASDAQ:AMZN) at the end of June, with those positions being worth $262.28 million on June 30. Just recently, analysts at Guggenheim Securities initiated coverage on Amazon.com Inc. (NASDAQ:AMZN) with a ‘Buy’ rating and a price target of $950, saying that the company’s Amazon Web Services will “remain a key driver for profitability and the share price.” Moreover, Guggenheim analysis anticipate the e-commerce giant to claim around 25% of the domestic e-commerce market by 2017, but only 3% of the total retail market based on their North America revenue estimate of around $100 billion. Going back to Amazon’s Amazon Web Services (AWS), Guggenheim analysts said that the AWS segment “is benefiting meaningfully from the increasing IT acceptance of public cloud infrastructure and reacceleration of data spending in 2016.” Amazon.com has seen its market capitalization jump by 23% since the beginning of the year. Tybourne Capital Management owned 361,303 shares of Amazon.com Inc. (NASDAQ:AMZN) at the end of the June quarter.

#5. AvalonBay Communities Inc. (NYSE:AVB)

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

– Total Value of Hedge Funds’ Holdings (as of June 30): $307.77 Million

AvalonBay Communities Inc. (NYSE:AVB)’s shares resided the portfolios of two of the ten most successful hedge fund managers at the end of the second quarter. The two asset managers had equity investments in the company amounting to $307.77 million on the last day of June. The shares of the equity real estate investment trust that owns multifamily apartment communities across the United States are 1% in the red this year. The company owned and held a direct or indirect ownership interest in 283 apartment communities at the end of June, containing 82,984 apartments. 23 of those communities were under construction and seven were under reconstruction. In mid-September, AvalonBay declared a cash dividend of $1.35 per share for the third quarter, a dividend that yields 3.04% annually. During the June quarter, the company completed the construction of three communities containing 607 apartment homes. Jeffrey Furber’s AEW Capital Management was the equity holder of 1.50 million shares of AvalonBay Communities Inc. (NYSE:AVB) on June 30.

We are half way trough our list of most successful hedge fund managers and their stock picks, so keep on reading!

#4. Automatic Data Processing (NASDAQ:ADP)

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

– Total Value of Hedge Funds’ Holdings (as of June 30): $386.29 Million

Greg Poole’s Echo Street Capital Management and Andy Brown’s Cedar Rock Capital, two of the ten most successful hedge fund managers discussed on the first page, had equity stakes in Automatic Data Processing (NASDAQ:ADP) at the end of June. These asset managers’ equity stakes in ADP were worth $386.29 million on June 30. The well-known provider of cloud-based Human Capital Management (HCM) solutions reported revenue of $11.67 billion for its fiscal 2016 that ended June 30, marking an increase of 7% year-over-year despite two percentage points of combined pressure from foreign currency headwinds and the disposition of the AdvancedMD business. Meanwhile, the company’s diluted earnings per share from continuing operations rose to $3.25 from $2.89 per share reported for the previous fiscal year. The payroll processing firm has seen the value of its shares increase by 6% this year. Cedar Rock Capital reported ownership of 4.18 million shares of Automatic Data Processing (NASDAQ:ADP) through the June round of 13F filings.

#3. Charter Communications Inc. (NASDAQ:CHTR)

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

– Total Value of Hedge Funds’ Holdings (as of June 30): $583.44 Million

Two of the ten most successful hedge fund managers were bullish on Charter Communications Inc. (NASDAQ:CHTR) at the end of June. The combined value of the two asset managers’ equity holdings in the company was $583.44 million at the end of the June quarter. The second-largest U.S. cable operator has seen its market cap increase by 47% since the start of the year. A little while ago, Charter completed the acquisitions of Time Warner Cable and Bright House Networks, a three-way merger that made Charter the second-largest multi service operator in the United States. In early September, cable TV provider Charter Communications joined the elite S&P 500 Index to replace information management company EMC, which was acquired by Dell in a $67 billion-deal. Charter’s shares gained significantly on the announcement, as demand for the company’s shares is anticipated to increase following the ascension to the well-known index. Tybourne Capital Management had 2.33 million shares of Charter Communications Inc. (NASDAQ:CHTR) among its holdings at the end of June.

#2. Dr Pepper Snapple Group Inc. (NYSE:DPS)

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

– Total Value of Hedge Funds’ Holdings (as of June 30): $1.06 Billion

There were two asset managers within the list of the ten most successful hedge fund managers that had equity stakes in Dr Pepper Snapple Group Inc. (NYSE:DPS) at the end of the April-to-June period. Those two managers’ equity stakes in the company amounted to $1.06 billion on June 30. The leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages has seen its market cap drop by a little less than 1% this year. The company’s brand portfolio includes popular carbonated soft drinks such as Dr Pepper, Canada Dry, Squirt, 7UP, to name just a few, as well as non-carbonated beverages brands such as Snapple, Hawaiian Punch, among others. In mid-September, analysts at Credit Suisse initiated coverage on Dr Pepper Snapple Group with an ‘Outperform’ rating and a price target of $108. Credit Suisse analysts said that “the shares trade at the lowest PE in our coverage group and we think the market is undervaluing the role of Allied Brands as the primary driver of growth and margins going forward, contributing incrementally to an already consistent financial algorithm.” The company’s Allied Brands portfolio comprises third-party brands not owned by the beverage company that offers exposure to new and fast-growing segments. Andy Brown’s Cedar Rock Capital had around 10.89 million shares of Dr Pepper Snapple Group Inc. (NYSE:DPS) in its portfolio on June 30.

#1. Barrick Gold Corporation (USA) (NYSE:ABX)

– Number of “Successful” Hedge Fund Shareholders (as of June 30): 3

– Total Value of Hedge Funds’ Holdings (as of June 30): $88.83 Million

Three of the ten most successful hedge fund managers discussed on the first page were invested in Barrick Gold Corporation (USA) (NYSE:ABX) at the end of the second quarter. Those asset managers’ equity positions in the company were valued at $88.83 million on June 30. The shares of the world’s largest gold producer are 142% in the green so far in 2016. The Canadian gold producer reported second-quarter revenues of $2.01 billion, down from $2.23 billion posted in the same period of the prior year. Barrick Gold Corporation plans to reduced its debt load by at least $2 billion this year, with nearly half of the debt reduction target having been met already. The company plans to reduced its current debt burden of $9.0 billion to below the $5 billion-level over the medium term. It should be noted that the gold producer has less than $150 million in debt due before 2018 and around $5 billion of debt does not mature until after 2032. David Iben’s Kopernik Global Investors, the second-most successful hedge fund manager according to our calculations, owned 2.56 million shares of Barrick Gold Corporation (USA) (NYSE:ABX) at the end of the second quarter. That being said, these were the most successful hedge fund managers and their

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