5 Basic Materials Companies That Billionaires Are Fond Of

Despite a rough start to the year, basic materials ETF’s like ProShares Ultra Basic Materials (ETF) (NYSEARCA:UYM), WisdomTree Intl Basic Materials Fund (NYSEARCA:CCXE), Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT), and the Vanguard Materials ETF (NYSEARCA:VAW) are up substantially year-to-date. In fact, all of these ETF’s have managed to comfortably outperform major U.S. stock indexes. However, the weakness seen in the first 40 days of the year certainly opened up some attractive entry points for investors, many of which built up their stakes in the sector.

In this article we’ll take a look at five basic materials stocks, Air Products & Chemicals, Inc. (NYSE:APD),  Dow Chemical Co (NYSE:DOW), Barrick Gold Corporation (USA) (NYSE:ABX), PPG Industries, Inc. (NYSE:PPG), and Newmont Mining Corp (NYSE:NEM), a collection of stocks which the billionaire investors in our database liked the most as of March 31.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

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#5. Air Products & Chemicals, Inc. (NYSE:APD)

Let’s start with Air Products & Chemicals, Inc. (NYSE:APD), which nine of the billionaires in our database were long as of March 31, down by 25% quarter-over-quarter. Their collective stakes were valued at more than $3.25 billion at the end of March. Among them were Bill Ackman’s Pershing Square, with 7.6 million shares, and Andreas Halvorsen’s Viking Global, which held 6.9 million shares worth almost $1 billion in stock.

Shares of Air Products & Chemicals, Inc. (NYSE:APD) are up by about 15.6% year-to-date. According to a press release issued in early-June, the company inked an agreement to provide a technology license that will allow Air Liquide Advanced Technologies U.S. LLC “to practice the patented Air Products technology incorporated in the Society of Automotive Engineers (SAE) J2601 hydrogen fueling protocol. Air Products makes such hydrogen fueling technology licenses available for use around the world under fair, reasonable, and non-discriminatory (FRAND) terms.”

#4. Dow Chemical Co (NYSE:DOW)

Next up is Dow Chemical Co (NYSE:DOW), in which there was also a reduction in the number of billionaires long the stock, falling to nine as of March 31 from 13 three months earlier. Their combined stakes were valued at $2.5 billion at the end of March. Among the largest shareholders were Dan Loeb’s Third Point, which disclosed ownership of 25 million shares worth $1.27 billion as of March 31 (Third Point cut its position to 20 million shares as of June 30), and Larry Robbins’ Glenview Capital, with 7.24 million shares.

Shares of Dow Chemical Co (NYSE:DOW) are 1.65% in the green year-to-date, but up by more than 25% from their late-January lows, helped in part by the completion of the restructuring of its Dow Corning unit, which is now wholly owned by the company. Corning Incorporated (NYSE:GLW), which owned half of Dow Corning, swapped its stake of the business for $4.8 billion and a 40% stake in Hemlock Semiconductor.

On the next page we’ll take a look at three more basic materials stocks that are popular among billionaires.

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

As of the end of the first quarter, 49 hedge funds in our database were long Barrick Gold Corporation (USA) (NYSE:ABX). Among them were ten funds run by billionaires, up from seven quarter-over-quarter. The billionaires’ combined stakes were valued at $959 million on March 31. One of the most notable positions was the one initiated by billionaire George Soros of Soros Fund Management, which loaded up on 19.4 million shares during the first quarter.

Shares of Barrick Gold Corporation (USA) (NYSE:ABX) are up by 195% year-to-date, accompanying the surge in gold prices. The Toronto-based gold miner, the largest in the world, announced last month that it will look to sell its 50% stake in the Kalgoorlie mine in Australia, as it continues to seek ways to cut $2 billion in debt this year. The company’s top-line declined by 10% year-over-year to $2.01 billion during the second quarter, though its adjusted earnings per share rose to $0.14 from $0.05.

#2. PPG Industries, Inc. (NYSE:PPG)

PPG Industries, Inc. (NYSE:PPG) was also in the portfolio of the ten of the billionaire investors in our database on March 31, down from 11 at the start of the quarter, while their ten positions were valued at $397 million in aggregate. Billionaire David Tepper initiated a stake in PPG during the second quarter, consisting of 217,419 shares. PPG Industries, Inc. (NYSE:PPG) enjoyed strong second quarter growth in China, India, and Europe, and witnessed declines in both North American markets. Revenue from its largest segment, performance coatings, fell slightly year-over-year to $2.34 billion, while its second-largest segment, industrial coatings, saw a slight increase to $1.44 billion.

#1. Newmont Mining Corp (NYSE:NEM)

Lastly we come to Newmont Mining Corp (NYSE:NEM), which witnessed a 37.5% first quarter increase in the number of billionaire shareholders of the stock, with 11 billionaires that we track holding $376 million worth of its shares on March 31. Billionaire Ken Griffin’s Citadel Investment upped its stake in Newmont Mining by 32% to 3.10 million shares. Shares of Newmont Mining Corp (NYSE:NEM) have soared by over 150% year-to-date, aided by surging commodities prices. Barclays and Morgan Stanley both have ‘Equal Weight’ ratings on the stock, with price targets of $45 and $41 respectively. Shares currently change hands at slightly over $45.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.