As hedge fund managers become billionaires and their funds grow to encompass billions of dollars in capital, they are forced to invest differently to utilize all of it, sinking more money into lower margin large-cap stocks, rather than having larger chunks of their portfolios dedicated to promising small-cap equities. This makes it a lot harder for billionaire hedge funds to beat the market by a wide margin. Furthermore, the high fees charged by these institutional investors often do not justify the returns they offer. Nevertheless, it is always worth knowing what stocks billionaire hedge fund managers are bullish on, especially regarding equities of small-cap companies. In addition, our research indicates that the 30 top picks made by hedge funds were able to outperform the market by around 2% between 1999 and 2009. So while allowing a hedge fund to manage your money might not be the smartest move, taking a closer look at their stock picks is still worth the effort.
In this article we will be taking a look at the five most popular capital goods stocks amongst billionaire hedge fund managers. The holdings of 59 billionaires are taken into account in order to establish a ranking of equities, according to the amount of backing each receives from these noteworthy billionaire investors.
Last quarter, General Motors Company (NYSE:GM) was held by a total of 15 billionaire hedge fund managers, including Warren Buffett. His holding company Berkshire Hathaway increased its exposure to the company by 3% last quarter and now has a stake of 41.0 million shares in the automobile manufacturer. Steve Cohen’s Point72 Asset Management is also betting on General Motors Company (NYSE:GM) with a holding of 4.42 million shares. Like Warren Buffett, who has been backing the company for years, Mr. Cohen has also held this stock in his funds’ equity portfolios for years, carrying over from his former fund SAC Capital Advisors into its current iteration as the family office Point72. At the end of the last quarter, Point72 revealed an increase of 3.75 million shares to its position, in a significant display of optimism towards the stock. General Motors Company (NYSE:GM) has been performing well so far, with its stock gaining around 8% year-to-date, after losing more than 14% last year. In addition to the billionaire bulls who recognize the stock’s huge upside potential, such as George Soros, the company is viewed as undervalued by numerous analysts.
With the backing of 12 billionaires, Thermo Fisher Scientific Inc. (NYSE:TMO) ranks as the second most popular capital goods stock amongst this group of select hedge fund managers. Larry Robbins holds the largest stake and is the company’s biggest institutional investor amongst the funds we track, with a position of 11.39 million shares. In fact, Mr. Robbins’ Glenview Capital has around 7% of its entire equity portfolio placed locked up in this stock. Andreas Halvorsen was also betting on Thermo Fisher last quarter, as his fund Viking Global disclosed a stake of 5.78 million shares of the company’s outstanding stock. So far, billionaire hedge fund managers were not wrong to invest in Thermo Fisher Scientific Inc. (NYSE:TMO), as the stock has gained more than 5% year-to-date, after growing by approximately 13% in 2014.
A total of 10 billionaires held a position in Ingersoll-Rand plc (NYSE:IR), including Daniel S. Och, Ken Griffin, and Andreas Halvorsen. Yet the most bullish billionaire hedge fund manager was Nelson Peltz. His fund Trian Partners held the stock amongst its top five picks last quarter, disclosing ownership of 12.82 million shares in the company in its last 13F filing, before slightly trimming its stake to 12.27 million shares in February. Steve Cohen is also betting on Ingersoll-Rand plc (NYSE:IR), which has already gained 8.55% year-to-date and is currently trading around its 52-week high of $ 69.01 per share.
TRW Automotive Holdings Corp. (NYSE:TRW) is an auto parts manufacturer and supplier that had the backing of 9 billionaire hedge fund managers at the end of the last quarter. The stock performed extremely well last year, gaining 38.7% throughout 2014. Year-to-date, share prices are up by 1.4%, as the equity’s value hovers near its 52-week high of $107.25 per share. Mario Gabelli is bullish regarding the company, holding a stake of 1.32 million shares through his fund GAMCO Investors. TRW Automotive Holdings Corp. (NYSE:TRW) was also held by Cliff Asness’ AQR Capital Management, which disclosed a position of 1.28 million shares in its latest13F filing.
Finally, Illumina, Inc. (NYSE:ILMN) completes the list of the five most popular capital goods stocks amongst billionaire hedge fund managers. The stock was held by 8 such investors and was amongst billionaire Andreas Halvorsen’s top 3 picks last quarter. Stanley Druckenmiller was also bullish regarding the stock with ownership of with 410,100 shares, which accounts for 7.4% of his fund Duquesne Capital’s equity portfolio. Thanks to the stock gaining a whopping 67% last year, and being up more than 8% year-to-date, it comes as no surprise to see Illumina, Inc. (NYSE:ILMN) amongst the favorite stock-picks of billionaire investors.
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