Billionaire hedge fund managers stand out for a very clear and obvious reason: they manage huge equity portfolios and have influence other investors don’t due to the sheer size of their investments, and the pressure they can exert over companies they invest in. Since these funds manage such large sums of money, they are drawn towards large-cap stocks. After all, stocks of companies with a small market capitalization only offer billionaires limited investment options, since the purchase of too great a stake exposes the funds’ moves and often drives up the price of that stock, and there simply aren’t enough high quality small-cap stocks to be able to invest billions of dollars into.
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Hence, billionaire hedge fund managers usually hold positions in numerous large-cap stocks, while small-cap stocks are used to run-up returns. With this in mind, it becomes clear why institutional investors often have a hard time beating the market, even if only by a small margin. Since stocks of large-cap companies tend to offer less promising returns, a hedge fund’s performance can suffer from having too much capital to invest. Hence, investing directly in a hedge fund might not be as profitable as some seem to anticipate, as hedge funds continue to manage record amounts of investors’ capital; especially once the hefty fees come into play. Nevertheless, following the moves of billionaire investors can be quite interesting, especially when it comes to small-cap stocks, since this is where the largest margins can be achieved.
With this information in mind, it becomes clear why taking a closer look at the equities held by billionaire hedge fund managers is not in vain. The five basic industries stocks that these individuals were betting the most on last quarter were: Air Products & Chemicals, Inc. (NYSE:APD), Dow Chemical Co (NYSE:DOW), LyondellBasell Industries NV (NYSE:LYB), Ecolab Inc. (NYSE:ECL), and Eastman Chemical Company (NYSE:EMN).
With a total of 10 billionaires holding a stake in the company, Air Products & Chemicals, Inc. (NYSE:APD) was clearly the most favored stock in this sector amongst this group of wealthy hedge fund managers. As the company’s largest institutional investor, Bill Ackman’s Pershing Square is clearly the most bullish of the lot. The fund’s stake amounts to 20.54 million shares and accounts for more than 18% of its equity portfolio. Another billionaire betting on this stock is the famous Andreas Halvorsen, who increased his fund’s exposure to Air Products & Chemicals, Inc. (NYSE:APD) by 51% last quarter and now holds a position of 5.36 million shares. Last year, the stock gained more than 27%, while shares have already climbed by almost 9% year-to-date as of the closing bell on Tuesday.
Of the 59 funds managed by billionaires taken into consideration for this article, nine held Dow Chemical Co (NYSE:DOW) in their equity portfolios. The billionaire with the largest stake in the company among that collection is Dan Loeb, the founder and current manager of Third Point. Mr. Loeb’s fund has a holding of 22 million shares, which makes up more than 9% of its equity portfolio. Daniel S. Och’s OZ Management was increasingly bullish regarding Dow Chemical Co (NYSE:DOW), increasing its exposure to the stock by 38% last quarter to 13.70 million shares. George Soros is also betting on the stock, which has gained 9.2% year-to-date, after a mediocre performance in 2014.
With a total of eight major hedge funds disclosing a position in the stock, LyondellBasell Industries NV (NYSE:LYB) was certainly a popular pick amongst billionaire managers. Among the funds we track, David E. Shaw holds the largest stake in the company, which amounts to 9.70 million shares following a 43% increase to his fund’s exposure in the company last quarter. Furthermore, George Soros’ Soros Fund Management revealed LyondellBasell Industries NV (NYSE:LYB) as one of its new positions in the fourth quarter.
Billionaires are also piling into Ecolab Inc. (NYSE:ECL) and Eastman Chemical Company (NYSE:EMN), as a total of eight managers are betting on each stock. Although shares remained practically stagnant overall in 2014, Ecolab Inc. (NYSE:ECL) is off to a great start this quarter, gaining more than 8% year-to-date. Boykin Curry’s Eagle Capital Management was the company’s largest supporter on our billionaire list, revealing a stake of 9.87 million shares last quarter. Eastman Chemical Company (NYSE:EMN) on the other hand is backed by Leon Cooperman, who holds 1.63 million shares through his fund Omega Advisors. Ken Griffin is also betting on this stock, which has yet to improve its performance this year; Griffin has a position of 639,300 shares.
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