Billionaires Joshua Friedman and Mitchell Julis Are Heavily Bullish On These Stocks

Founded in 1990 by billionaires Joshua Friedman and Mitchell Julis, Canyon Capital Advisors is one of the largest and most successful Los-Angeles based alternative investment management firms. Prior to founding Canyon Capital Advisors both Mr. Friedman and Mr. Julis worked for junk bond king Michael Milken’s Drexel Burnham Lambert. Apart from its headquarters in Los Angeles, the fund also has offices in London, New York, Shanghai and Tokyo and currently employs over 200 people. According to the fund’s website, it currently manages over $24 billion of investors’ money. Canyon Capital Advisors recently submitted its 13F with the Securities and Exchange Commission for the reporting period of September 30. The filing revealed that at the end of September, Canyon Capital Advisors’ U.S equity portfolio was worth over $3.6 billion and 36% of it was committed to stocks from the consumer discretionary sector. Since Canyon Capital Advisors increased its holdings in all of its top five stock picks going into the fourth quarter, our focus in this article will be to analyze those stocks and figure out what has the fund so bullish on those companies.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

#5 Time Warner Cable Inc (NYSE:TWC)

 – Shares Owned by Canyon Capital Advisors (as of September 30): 935,580

 – Value of Holding (as of September 30): $167.82 Million

Owing largely to the 20% addition to its holding during the third quarter, Time Warner Cable Inc (NYSE:TWC) jumped four spots quarter-over-quarter to become Canyon Capital Advisors’ fifth-largest equity holding by the end of September. The popularity of Time Warner Cable Inc (NYSE:TWC) among hedge funds covered by us also saw a slight jump during the same period, with 107 funds disclosing a stake in it as of the end of September, up from 105 as of the end of June. In May, Charter Communications Inc (CHTR) announced that it will acquire Time Warner Cable Inc (NYSE:TWC) for $56 billion. Although Charter Communications Inc (CHTR) has reassured investors that this deal will get completed by the first quarter of 2016, some analysts remain skeptical about it, citing the regulatory hurdles it faces. Billionaire John Paulson‘s Paulson & Co was the largest shareholder of the company among the funds tracked by us, with ownership of over 8.1 million shares.

#4 SolarCity Corp (NASDAQ:SCTY)

 – Shares Owned by Canyon Capital Advisors (as of September 30): 4.45 Million

 – Value of Holding (as of September 30): $190.14 Million

Even though SolarCity Corp (NASDAQ:SCTY)’s stock declined by over 20% during the third quarter, Canyon Capital Advisors ups its stake in the company by 47% during the same period, which helped SolarCity Corp (NASDAQ:SCTY) climb two places quarter-over-quarter to become the fund’s fourth-largest equity pick by the end of September. Shares of SolarCity Corp have lost half their value since August and currently trade down by 44.15% year-to-date. Perhaps hedge funds had anticipated this move early on and that’s why the number of hedge funds tracked by us that disclosed a stake in the company dropped to 29 at the end of September from 34 at the end of June. The company has been undergoing a management shakeup recently. In a regulatory filing on November 24 it revealed that CFO Brad Buss would be stepping down and its current COO, Tanguy Serra, would be the new President of the company. Apart from Canyon Capital Advisors , John Burbank’s Passport Capital also increased its stake in the company during the July-to-September period; it held over 3.6 million shares of SolarCity Corp on September 30.

#3 MGM Resorts International (NYSE:MGM)

 – Shares Owned by Canyon Capital Advisors (as of September 30): 13.3 Million

 – Value of Holding (as of September 30): $245.26 Million

After increasing its stake in MGM Resorts International (NYSE:MGM) by a whopping 372% during the second quarter, Canyon Capital Advisors again raised its stake in the company, by 22% during the third quarter. However, other hedge funds didn’t share the same bullishness as Canyon Capital Advisors , as the number of hedge funds covered by Insider Monkey with a stake in the company dropped to 49 at the end of September from 58 at the end of June. For the third quarter MGM Resorts International (NYSE:MGM) reported EPS of $0.12 on revenue of $2.28 billion. Analysts had expected the company to report EPS of $0.04 on revenue of $2.30 billion. With ownership of nearly 15.84 million shares at the end of September, Daniel S. Och‘s OZ Management continued to remain the largest shareholder of the company among the funds covered by us.

#2 Ally Financial Inc (NYSE:ALLY)

 – Shares Owned by Canyon Capital Advisors (as of September 30): 12.4 Million

 – Value of Holding (as of September 30): $253.0 Million

Ally Financial Inc (NYSE:ALLY)’s stock has been on a continuous decline since the start of the second-half of the year and currently trades down by more than 16% year-to-date. Canyon Capital Advisors boosted its holding in Ally Financial Inc (NYSE:ALLY) by 3% during the July-to-September period, which helped the stock retain its position as the fund’s second-largest equity holding going into the fourth quarter. On November 12, analysts at BTIG Research reiterated their ‘Buy’ rating and $32 price target on the stock of the bank holding company. Among the 57 hedge funds covered by Insider Monkey that disclosed having a stake in the company at the end of September, Stephen Feinberg‘s Cerberus Capital Management was the largest shareholder, owning 41.5 million shares of Ally Financial Inc.

#1 Comcast Corporation (NASDAQ:CMCSA)

 – Shares Owned by Canyon Capital Advisors (as of September 30): 6.79 Million

 – Value of Holding (as of September 30): $386.2 Million

Finally, it seems Canyon Capital Advisors quickly changed its mind on Comcast Corporation (NASDAQ:CMCSA), as after reducing its stake in the company by 30% during the second quarter, the fund increased its stake in the company by 25% during the third quarter. Regardless, Comcast Corporation (NASDAQ:CMCSA) continued to remain the fund’s top equity pick for the third quarter in a row. Shares of Comcast Corporation have remained largely range-bound this year, but its popularity among hedge funds has been on the rise over the past few months. Of the more than 700 hedge funds that we cover, 80 reported having a stake in the company as of the end of September, up from 76 as of the end of June. On November 10, analysts at SunTrust initiated coverage on the stock with a ‘Neutral’ rating and $66 price target, which represents a potential upside of 6.66%. D.E. Shaw, founded by billionaire David E. Shaw, doubled its stake in the company during the third trimester, to 6.4 million shares.

Disclosure: None