Billionaires Dan Loeb, Jim Simons and Others Reveal Major New Stock Picks

The deadline for submitting 13F filings for the first quarter of 2016 was May 16, which means retail investors can now have a look at the equity portfolios of every major hedge fund vehicle, as of March 31. While some believe these quarterly 13F filings are not overly informative and useful for the investment community because they are filed with up to a 45-day delay, it does pay off to at least have a look at what hedge funds are doing. One only has to look at how the market reacted to Warren Buffett’s new position in Apple Inc. (NASDAQ:AAPL) to comprehend the weight that is given to the investment decisions of some of these money managers (with the caveat that Mr. Buffett is probably the most acclaimed investor in the world). Having this in mind, Insider Monkey has pinpointed five prominent new positions added to the equity portfolios of four world-class hedge fund managers tracked by Insider Monkey during the first quarter of the year.

At Insider Monkey, we track around 785 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 about our small-cap strategy).

Billionaire Jim Simons Purchases New Stake in Freshly-Acquired SanDisk

Jim Simons’ Renaissance Technologies LLC acquired a new stake of 1.77 million shares of SanDisk Corporation (NASDAQ:SNDK) during the first quarter, which was valued at $135.02 million on March 31. In October 2015, the manufacturer of storage solutions agreed to be acquired by Western Digital Corp (NASDAQ:WDC), an acquisition that was successfully completed on May 12. Under the terms of the deal, SanDisk shareholders received $67.50 per share in cash and 0.2387 shares of Western Digital. The multi-billion-dollar cash-and-stock deal was crucial to Western Digital, as the acquirer’s core business that involves selling platter-based hard disk drives  has been pressured by tough competition from makers of solid-state drives (SSDs). The acquisition is set to increase Western Digital’s market share in the SSD market to approximately 14%, making the acquirer the second-largest player in the industry after Samsung. Thomas Steyer’s Farallon Capital was the owner of 6.05 million shares of SanDisk Corporation (NASDAQ:SNDK) at the end of March.

Billionaire Dan Loeb Acquires 3 Million-Share Stake in Lowe’s Companies

In the first quarter of 2016, Dan Loeb’s Third Point LLC added a 3.00 million-share position in Lowe’s Companies Inc. (NYSE:LOW) to its portfolio. The new position, worth $227.25 million on March 31, accounted for roughly 2.1% of Third Point’s equity portfolio at the end of the quarter. Just recently, the leading home improvement company received final regulatory approval to acquire RONA, a Canadian retailer and distributor of hardware, building materials and home renovation products. The $2.3 billion deal received approval under the Investment Canada Act and clearance from the Competition Bureau, so the deal is anticipated to be completed by the end of May. The transaction is set to accelerate the expansion of Lowe’s Companies in the Canadian market, as the acquirer’s store count will increase to 538 from a mere 42 stores. Shares of Lowe’s have gained 13% in the past three months and are up by 1% year-to-date. Edgar Wachenheim’s Greenhaven Associates owns 8.85 million shares of Lowe’s Companies Inc. (NYSE:LOW) as of the end of the first quarter.

Head to the next page to see three more of the biggest hedge fund purchases in the first quarter.

Dan Loeb Also Purchases Large Stake in Signet Jewelers

Third Point also snapped up a new stake of exactly 1.00 million shares of Signet Jewelers Ltd. (NYSE:SIG) during the January-to-March period, which was valued at $124.03 million at the end of the period. The 1.00 million-share stake constituted 1.1% of the worth of the fund’s equity portfolio on March 31. The world’s largest retailer of diamond jewelry has seen its market value drop by 14% since the beginning of 2016. The company’s total sales for fiscal year (FY) 2016 ended January 30 were $6.55 billion, up from $5.74 billion recorded for FY2015. The increase was mainly driven by the $1.46 billion acquisition of Zale Corporation in May 2014. Nonetheless, Signet Jewelers recorded same-store sales growth of 4.1% for FY2016, after the same-store figure increased at the same rate in the prior fiscal year. Meanwhile, FY2016 net income increased by 7.1% year-over-year to $467.9 million. Keith Meister’s Corvex Capital upped its stake in Signet Jewelers Ltd. (NYSE:SIG) by 6% during the March quarter to 5.93 million shares.

Billionaire Seth Klarman Initiates New Position in Allergan Before Inversion Deal Collapses

Seth Klarman’s Baupost Group LLC purchased a new position of 1.72 million shares of Allergan plc (NYSE:AGN) in the first quarter of 2016, which was worth a massive $461.44 million at the end of the quarter. The new stake, acquired before the planned $160 billion inversion deal between Allergan and Pfizer Inc. (NYSE:PFE) was terminated, accounted for nearly 6.7% of Baupost Group’s equity portfolio on March 31. Assuming Mr. Klarman has not adjusted the Allergan stake, the 1.72 million-share position would be worth $387.39 million at the moment, representing a loss of nearly $75 million since the end of March. Soon after the multi-billion-dollar inversion deal was terminated by mutual agreement following new regulations set to crack down on corporate inversions, Allergan acquired Topokine Therapeutics, a privately-held clinical-stage biotechnology company focused on developing medicines for fat reduction. Allergan shares have plummeted by nearly 28% since the start of the year, mainly due to the failed inversion deal. John Paulson’s Paulson & Co had 5.42 million shares of Allergan plc (NYSE:AGN) in its equity portfolio at the end of March.

Billionaire David Tepper Acquires New Stake in Synchrony Financial

The latest round of 13Fs also revealed that David Tepper’s Appaloosa Management LP purchased a new stake of 5.02 million shares of Synchrony Financial (NYSE:SYF) during the first three months of 2016. The new stake was valued at $143.89 million at the end of March and constituted 2.5% of Appaloosa’s equity portfolio. The shares of the credit card issuer have advanced by 10% in the past three months, but are down by 4% year-to-date. Synchrony Financial continues to focus its efforts on growing its deposit base, with the company’s total deposits for the first quarter increasing by 3.7% year-over-year to $45.0 billion. Shares of Synchrony Financial are currently changing hands at around 9.3-times expected earnings, versus the forward P/E multiples of 9.0 for Discover Financial Services (NYSE:DFS) and 11.5 for American Express Company (NYSE:AXP). First Eagle Investment Management, overseen by Mehdi Mahmud, increased its holding in Synchrony Financial (NYSE:SYF) by 11% during the March quarter, to 11.62 million shares.

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