Billionaires Buffett, Christian Leone, and Crispin Odey Reveal Latest Moves

According to Bank of America Merrill Lynch, hedge funds have been net buyers of U.S equities for four consecutive weeks. Therefore, it appears that the smart money does not believe that the U.S stock markets are entering a longer-term bear market. Only time will tell whether hedge funds’ collective decision to pile up more equities amid increased volatility and uncertainty was well-thought. Nonetheless, it pays off to monitor hedge funds’ moves, as they tend to reveal great investment opportunities. For that reason, the following article will discuss four filings submitted with the SEC by financial gurus Warren Buffett, Christian Leone, and Crispin Odey. These filings usually reveal interesting research-backed investment ideas, which is the main reason individual investors should be inclined to closely monitor hedge funds’ filings.

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).

Will The Oracle of Omaha ever stop buying shares of Phillips 66 (NYSE:PSX)? According to a Form 4 filing, Berkshire Hathaway purchased another 719,055 Phillips 66 shares on Thursday at prices ranging from $74.33 per share to $80.08 per share, boosting its overall holding in the oil refiner to 69.75 million shares. The freshly-upped position accounts for 13.08% of the company’s outstanding common stock. The shares of the diversified energy manufacturing and logistics company are up by 14% over the last year, but have lost 17% since the beginning of December. It should be noted that the stock trades at a forward price-to-earnings ratio of 11.08, which is notably lower than the average of 15.65 for the companies included in the S&P 500 Index. Although the recent fall in Phillips 66 (NYSE:PSX)’s stock price is mainly attributable to the declining crude oil prices, the company profited enormously from this outcome. The U.S. 3:2:1 crack spread, which represents an indicator for refining margins, increased in the third quarter of 2015 relative to both the second quarter of 2015 and the third quarter of the prior year. With a portfolio of midstream, chemicals, refining, and marketing and specialties businesses, the company seems to represent a great investment opportunity at the moment. Aside from Berkshire Hathaway, D.E. Shaw & Co. L.P., founded by David E. Shaw, represents another large shareholder in Phillips 66 (NYSE:PSX), holding 9.94 million shares as of September 30.

Let’s move on to the next two pages of this article, which discuss the other three filings submitted with the SEC.

As stated by a Schedule 13G filing, Christian Leone’s Luxor Capital Group LP acquired a 20.81 million-share stake in SunEdison Inc. (NYSE:SUNE), which accounts for 5.3% of the company’s shares. The shares of the global renewable energy development company have plummeted by 89% over the past year, and they keep going lower. On January 12, Appaloosa Management L.P., a hedge fund managed by David Tepper, filed a verified stockholder derivative complaint against SunEdison in relation to the acquisition of solar-power provider Vivint Solar Inc (NYSE:VSLR). The lawsuit alleges that SunEdison, as TerraForm Power Inc. (NASDAQ:TERP)’s controlling stockholder, “breached its fiduciary duties to TerraForm Power and its minority stockholders by causing” the yieldco to acquire Vivint’s assets from SunEdison at the expense of TerraForm’s interests by acquiring the assets at an unfair price, among other things. According to the billionaire investor, SunEdison’s intent to buy Vivint Solar for approximately $2.2 billion and force the yieldco to increase its debt burden to over $900 million in assets are not in TerraForm Power’s interests. The smart money sentiment towards SunEdison was very negative in the third quarter, as the number of hedge funds in our database invested in the company dropped to 73 from 93 quarter-over-quarter. David Einhorn’s Greenlight Capital holds 18.61 million shares of SunEdison Inc. (NYSE:SUNE) as of September 30.

According to a freshly-amended 13G filing, Odey Asset Management currently owns 2.62 million shares of BMC Stock Holdings Inc. (NASDAQ:STCK), representing 4.00% of the company’s outstanding shares. On December 1, Stock Building Supply Holdings Inc. and privately-held Building Materials Holding Corp. (BMC) completed their previously-announced deal. Under the terms of the merger deal, BMC shareholders received 0.5231 newly-issued Stock Building Supply shares for each BMC share. After the completion of the merger, the company was renamed BMC Stock Holdings Inc. Odey Asset Management owned 2.35 million shares of the former Stock Building Supply Holdings as of September 30.

BMC Stock Holdings Inc. (NASDAQ:STCK) operates as a diversified lumber and building materials distributor. The company’s shares are down by 22% over the past year, mainly owning to a 26% drop suffered since early 2016. The company reported net sales of $1.01 billion for the nine months that ended September 30, up by $27.6 million relative to the same period of the prior year. The increase was mainly achieved as a result of higher volumes, which was partly offset by commodity price deflation. It is also important to note that the stock trades at a rather attractive forward P/E of 13.66. A total of 11 hedge funds that we track had positions in the company at the end of the third quarter, accumulating 18.90% of its shares. David Keidan’s Buckingham Capital Management acquired a new stake of 650,107 shares of BMC Stock Holdings Inc. (NASDAQ:STCK) during the July-to-September period.

In a separate 13G filing, Odey Asset Management reported an ownership stake of 1.10 million shares in Ethan Allen Interiors Inc. (NYSE:ETH), a dip from the 1.19 million-share position disclosed through the fund’s 13F filing for the September quarter. The freshly-disclosed position accounts for 3.87% of the company’s outstanding common stock. The shares of the interior design company and manufacturer of home furnishings have dropped by 28% over the past year. The company operates eight manufacturing plants worldwide, which include five manufacturing plants and one sawmill plant in the United States, and a manufacturing plant in each of Mexico and Honduras. The company aims to maintain its competitive edge in North America by keeping its order times short and maintaining high quality, but also intends to expand its operations by doubling its upholstery manufacturing facility in Mexico. Meanwhile, the company’s consolidated net sales for the first quarter of fiscal year 2016 that ended September 30 declined slightly, to $190.4 million from $190.7 million a year earlier. The number of smart money investors from our system with positions in the company climbed to 17 from 13 during the third quarter. Those investment vehicles stockpiled slightly over 24% of the company’s shares. Royce & Associates, founded by Chuck Royce, owns 2.89 million shares of Ethan Allen Interiors Inc. (NYSE:ETH) as of the end of the third quarter.

Disclosure: None