Billionaire Halvorsen and John Lykouretzos Are Betting On The Same Stocks

Both Andreas Halvorsen and John Lykouretzos are former Tiger Cubs who once traded equities at Julian Robertson’s Tiger Management hedge fund. Halvorsen was a senior managing director at Tiger Management prior to launching his own hedge fund firm Viking Global, whereas Lykouretzos worked as an industrials analyst, financial services analyst, and portfolio manager at Robertson’s hedge fund firm. Later on, John Lykouretzos joined Halvorsen’s Viking Global before founding his Hoplite Capital Management. Therefore, it’s highly likely that their investment strategy is very similar. Both Halvorsen and Lykouretzos often show similar interest in stock investments (as Tiger Cubs are known for), with common positions in many companies. So if investors can’t get into Viking Global, they should consider Hoplite Capital, as 20% of their positions are identical in terms of the portfolio weight of each stock. Here then are the most noteworthy stocks that we will cover in this article which are shared investments by the two fund managers: Allergan plc (NYSE:AGN), Walgreens Boots Alliance Inc. (NASDAQ:WBA), Valeant Pharmaceuticals International Inc. (NYSE:VRX), Sealed Air Corporation (NYSE:SEE) and Envision Healthcare Holdings Inc. (NYSE:EVHC).

First a quick word on why we track hedge fund activity. In 2014, equity hedge funds returned just 1.4%. In 2013, that figure was 11.3%, and in 2012, they returned just 4.8%. These are embarrassingly low figures compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. Does this mean that hedge fund managers are dumber than a bucket of rocks when it comes to picking stocks? The answer is definitely no. Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012, outperforming the market each year (it’s outperforming it so far in 2015 too). What’s the reason for this discrepancy you may ask? The reason is simple: size. Hedge funds have gotten so large, they have to allocate the majority of their money into large-cap liquid stocks that are more efficiently priced. They are like mutual funds now. Consider Ray Dalio’s Bridgewater Associates, the largest in the industry with about $165 billion in AUM. It can’t allocate too much money into a small-cap stock as merely obtaining 2% exposure would really move the price. In fact, Dalio can’t even obtain 2% exposure to many small-cap stocks, even if he essentially owned the entire company, as they’re simply too small (or rather, his fund is too big). This is where we come in. Our research has shown that it is actually hedge funds’ small-cap picks that are their best performing ones and we have consistently identified the best picks of the best managers, returning 145% since the launch of our small-cap strategy compared to less than 60% for the S&P 500 (see the details).

We will start out by looking at the newly-created largest drug maker by sales in the world, Allergan plc (NYSE:AGN). On June 25, Actavis plc announced that it changed its name to Allergan plc, after acquiring the maker of the anti-wrinkle treatment Botox at the beginning of the year. Additionally, the company has already changed its stock ticker to “AGN” on the New York Stock Exchange. According to its most recent 13F filing that was submitted a little while ago, Andreas Halvorsen’s Viking Global owns 6.11 million shares in Allergan, which are valued at $1.82 billion as of March 31. Meanwhile, John Lykouretzos’ Hoplite Capital Management reported owning 874,730 shares, which are worth $260.34 million. Within our database, the hedge fund firm managed by John Paulson represents one of the largest shareholders in the pharmaceuticals company, with 5.64 million shares.

Another stock owned by these two investors is Walgreens Boots Alliance Inc. (NASDAQ:WBA). Both Halvorsen and Lykouretzos have decreased their positions in Walgreens during the most recent quarter, though the size of their stakes are different. Viking Global reduced its stake in Walgreens by 4.33 million shares, ending the quarter with 14.60 million shares valued at $1.24 billion. At the same time, Hoplite Capital Management decreased its position by 16% to 1.91 million shares worth $161.89 million. The shares of Walgreens Boots Alliance are currently trading at $86, achieving a gain of nearly 14% year-to-date. Walgreens is making the most of its existing collaboration with MDLIVE, which is a leading provider of telehealth services in the United States. Walgreens, the nation’s largest drugstore chain, will trigger further expansion of its digital telehealth platform among users of several states in the U.S. Another investor, Barry Rosenstein’s JANA Partners, owns 13.75 million shares in Walgreens Boots Alliance Inc. (NASDAQ:WBA) and represents the second-largest shareholder in the company within our database.

Valeant Pharmaceuticals International Inc. (NYSE:VRX) is yet another healthcare stock owned by both Halvorsen and Lykouretzos. It seems that they are working in tandem like two legs walking, as they both reduced their positions in Valeant. In its most recent 13F filing, Viking Global disclosed ownership of 4.06 million shares valued at $806.07 million, whereas Hoplite Capital Management reported owning a lesser stake of 962,721 shares worth $191.22 million. The shares of Valeant have grown by over 59% since the beginning of the current year and there are no major signs that the stock will stop rising. Even though Valeant have been previously criticized for its growth plan driven by acquisitions, it keeps seeking out potential purchases. Just recently, Valeant approached Zoetis, an animal health company, with an acquisition offer. Within our database, Bill Ackman’s Pershing Square represents the largest investor in Valeant Pharmaceuticals International Inc. (NYSE:VRX), holding a stake of 19.47 million shares.

Oddly, Andreas Halvorsen and John Lykouretzos have made different moves in Sealed Air Corporation (NYSE:SEE). Viking Capital augmented its position in the company by 11.24 million shares to 14.48 million shares, which are valued at $659.49 million as of March 31. Meanwhile, Hoplite Capital Management reported the sell-off of 1.14 million shares, ending the first quarter with 5.04 million shares valued at $229.67 million. The stock has increased by almost 24% year-to-date and is now trading at $52 per share. Sealed Air, which is a global manufacturer of protective and specialty packaging for food and consumer goods, is expected to increase the share of revenues from its new products to 20% by 2020, compared to the current figure of 13%. Moreover, analysts believe that the company will outperform the market by creating and targeting new markets with its value sell business model. David E. Shaw’s D.E. Shaw & Co. is among the largest shareholders in Sealed Air Corporation (NYSE:SEE), with 3.11 million shares.

Lastly, the two Tiger Cubs both took long positions in Envision Healthcare Holdings Inc. (EVHC) during the most recent quarter. Viking Capital reported owning a stake of 6.85 million shares in Envision, which are valued at $262.76 million. Simultaneously, Hoplite Capital Management disclosed in its 13F filing that it owns 2.62 million shares in the company valued at $100.36 million. The shares of Envision have grown by over 15% year-to-date, trading at around $40 per share. The financial performance of the company for the first quarter of the year was at least in line with the analysts’ expectations. Envision reported a profit per share of $0.17 and earnings, adjusted for amortization costs and costs related to M&A activities, of $0.26 per share, which met the Wall Street forecasts. Moreover, the company delivered better-than-expected revenue of $1.24 billion for the period. Within our database of over 700 hedge funds, Daniel S. Och’s OZ Management is the largest investor in Envision Healthcare Holdings Inc. (EVHC), owning 8.24 million shares.

Disclosure: None