Most investors like buying stakes in big multinational companies that have enormous revenue streams and market caps. While this works fine for some investors, at Insider Monkey we are more interested in smaller-cap companies and emerging stocks, which our research has shown the top investors are much better at generating high returns from than they are their best large-cap picks. With the 13F filings for the reporting period of March 31 now out, we have sifted through the data to identify some of the top under-the-radar stocks held by the more than 60 billionaire investors that we track. Of these, three caught our attention, considering their previous performance records and how they performed in the first quarter of 2015. The three companies are FleetCor Technologies, Inc. (NYSE:FLT), Mohawk Industries, Inc. (NYSE:MHK),and MGIC Investment Corp. (NYSE:MTG), which we’ll discuss in this article.
As mentioned, we discovered through our research that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 84 percentage points, returning over 144% (read the details here). Hence a retail investor needs to isolate himself from the herd and take advantage of the prevalent arbitrage opportunities in the market by concentrating on small-cap stocks.
Let’s start with FleetCor Technologies, Inc. (NYSE:FLT), in which 13 billionaires hold $2.80 billion of the company’s shares as of March 31. Those numbers represent a big increase from the nine billionaires which held $2.42 billion worth of stock at the end of 2014. The international independent provider of secure payment services and products currently offers its services to more than 500,000 commercial entities and millions of personal cardholders around the globe. Its services are sought after by over 800 partnering companies from diverse industries, including technology, oil, and finance. FleetCor Technologies, Inc. (NYSE:FLT) posted $1.45 in earnings per share for the first quarter of 2015, beating analysts’ consensus estimates of $1.40 by $0.05. While that performance was impressive, many brokers and analysts have even brighter forecasts for the stock. The company’s guidance for its fiscal year 2015 sets earnings per share at $6.00-$6.20, which is higher than the previous guidance of $5.95-$6.15, while the consensus estimate for the period stands at $6.09. Analysts at Deutsche Bank give the stock a “Buy” rating while those at Barclays recently raised the company’s price target to $180 from $170, showing potential upside of 15%. Billionaires Stephen Mandel and Daniel Och have the largest positions in FleetCor among the investors we track, while Thomas Steyer of Farallon Capital was one of the billionaires to open a new position in the company during the first quarter.
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Mohawk Industries, Inc. (NYSE:MHK) rallied to beat analysts’ estimates for the first quarter of 2015, sending the stock up by 7% over the following three weeks. The company’s adjusted earnings for the quarter were $1.70 per share, beating Zack’s projection by 5.6%. While raw materials accounted for a substantial percentage of the company’s expenditure, the company managed to maintain relatively low expenditures while growing revenues. That was good news for the company’s billionaire investors, of which there were 12 as of March 31, with those dozen wealthy investors holding an aggregate of $2.57 billion in Mohawk Industries’ stock. Those figures were also solidly up from the end of 2014 when 10 billionaires held $2.16 billion in shares. Mohawk Industries, Inc. (NYSE:MHK)’s performance in the second quarter of 2015 is expected to improve further, to somewhere between $2.51 and $2.60 in earnings per share. The flooring company’s recent acquisitions of Kai and IVC are expected to contribute to its earnings per share performance in 2015, with the contribution estimated to be somewhere between $0.06 and $0.08. Among other things, that led to Mohawk Industries being upgraded to a “Buy” rating recently by Zacks. After trimming his stake in Mohawk Industries during the fourth quarter of 2014 after being bullish on the company throughout the rest of 2014, billionaire Andreas Halvorsen was back to buying shares of the company, increasing his holding by 12% during the first quarter of 2015. Billionaire Dan Loeb also increased his stake in the firm during the quarter, while David Tepper opened a new position in it.
MGIC Investment Corp. (NYSE:MTG) is held by 12 billionaires with $1.01 billion invested in the stock between them, nearly identical to the previous reporting period when 12 billionaires held $987 million worth of the company’s shares. MGIC is seen favorably by several analysts, who have given strong projections for its second quarter 2015 performance. MGIC Investment Corp. (NYSE:MTG) performed very well in the first quarter of 2015, beating the Zack’s consensus estimate by 4% and many investors are optimistic the stock will continue to surprise, having done so in seven of the past eight quarters. MGIC Investment Corp. (NYSE:MTG) posted enormous improvement in revenue and diluted net income per share for the first quarter of 2015 compared to the same period last year. Its net income for the quarter was $133.1 million, which is more than double its net income of $60 million posted in the same quarter one year ago. Several billionaires hold the largest positions in MGIC among the investors we follow, including John Griffin, Lee Ainslie, Howard Marks, and Rob Citrone.
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