Have Billionaires Made the Right Call Betting on These Stocks?

There are a few investors on the Street today who can boast of performing well during their investing career, so well, that they have managed to become billionaires today. At Insider Monkey we pay special attention to the portfolios of the funds managed by these billionaire investors and the moves they make every quarter. Since the first quarter of 2016 has just ended, we thought of analyzing the performance of those stocks during the first three months of the year. Read further, to know how the top five stocks that billionaires covered in our database were collectively bullish on have performed so far this year.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 Pfizer Inc. (NYSE:PFE)

– Billionaires with Long Positions (as of December 31): 19

– Value of Billionaires’ Holdings (as of December 31): $4.2 billion

Pfizer Inc. (NYSE:PFE) saw a marked increase in its popularity during the fourth quarter among billionaire investors from our database with its ownership among them climbing up by four and the aggregate value of their holdings in it jumping by over 50%. A large part of that increase in popularity can be attributed to Pfizer Inc. (NYSE:PFE)’s announcement in November that it would merge with Allergan plc Ordinary Shares (NYSE:AGN) in a $160 billion deal. While both the companies mutually agreed to terminate the merger recently, Pfizer’s stock jumped on the back of this announcement. Pfizer’s stock ended the first quarter down by 7.2%, but owing to the rally it has seen this month it is now trading flat for 2016. On April 6, Pfizer said that it had agreed to reimburse $150 million for the merger-related expenses and said that it would decide on whether to split the company’s innovative and established businesses by the end of this year. Billionaire Barry Rosenstein‘s JANA Partners was one of the hedge funds that initiated a stake in the company during the fourth quarter; it bought nearly 9.17 million shares.

#4 Microsoft Corporation (NASDAQ:MSFT)

– Billionaires with Long Positions (as of December 31): 20

– Value of Billionaires’ Holdings (as of December 31): $8.03 billion

The last quarter of 2015 was one of the best periods for Microsoft Corporation (NASDAQ:MSFT)’s stock in a long time and that translated well for the company’s popularity among billionaire investors long the stock, whose number inched up by two and the aggregate value of their holdings advanced $558 million. Despite cutting its stake in the company by one-fourth to 56.62 million shares, Jeffrey Ubben‘s ValueAct Capital remained Microsoft Corporation (NASDAQ:MSFT)’s largest shareholder among funds tracked by us at the end of December. Shares of Microsoft Corporation broke below the technically important $50 mark temporarily during the fourth quarter, but managed to end the quarter on a flat note. The company is expected to declare its results for the third quarter of fiscal 2016 next week and analysts currently expect EPS of $0.64 on revenue of $22.11 billion, versus EPS of $0.61 on revenue of $21.73 billion it reported for the same quarter last year. More than the financial numbers, the Street is eagerly waiting for the company to release the growth numbers of Office 365 and its cloud platform Azure.

#3 Facebook Inc (NASDAQ:FB)

– Billionaires with Long Positions (as of December 31): 21

– Value of Billionaires’ Holdings (as of December 31): $3.6 billion

Though the ownership of Facebook, Inc (NASDAQ: FB) among billionaire investors that we track increased by three during the fourth quarter, their holdings in the company during the same period remained nearly constant. Notable investors that increased their stakes in the company during that period included billionaire Israel Englander‘s Millennium Management, which brought its holding up by 31% to 3.48 million shares. Facebook Inc (NASDAQ:FB)’s stock continued its upward journey during the first quarter and gained 9%. On April 6, the company launched a streaming video broadcast service called ‘Facebook Live’, which analysts see as another move by the company to reinforce its position as the go-to place on the Internet. On April 8, online digital news magazine Digiday published a report highlighting the research done by an analytics company which showed that Facebook’s traffic across clients saw a drop of 20% during the January-March period. If this research turns out to be accurate, it can have a notable impact on the company’s first quarter results. Currently the Street is expecting  Facebook to deliver EPS of $0.62 on revenue of $5.25 billion during the quarter, compared to EPS of $0.42 on revenue of $3.54 billion that it reported for the same quarter last year.

#2 Time Warner Cable Inc (NYSE:TWC)

– Billionaires with Long Positions (as of December 31): 23

– Value of Billionaires’ Holdings (as of December 31): $5.05 billion

Moving on, the number of billionaire investors covered by us with long positions in Time Warner Cable Inc (NYSE:TWC) remained constant during the fourth quarter, however, the aggregate value of their holdings in the company saw a marginal increase of 3.65% during the same period. Billionaire John Paulson‘s Paulson & Co. reduced its holding in the company by 28% to 5.87 million shares during the last three months of 2015. Time Warner Cable Inc (NYSE:TWC)’s stock registered significant gains in March after it started becoming clear that the company’s merger with Charter Communications, Inc. (NASDAQ:CHTR) will get approved. Owing largely to those gains, the stock ended the first quarter up by 10.65%. Though there were rumors last month that the Federal Communications Commission (FCC) was all set to issue a draft order approving the deal, the federal agency is yet to do so. On March 19, analysts at Buckingham Research reiterated their ‘Hold’ rating on Time Warner Cable’s stock, but upped their price target to $219 from $187, which represents a potential upside of 7% from the stock’s current trading price.

#1 Allergan plc Ordinary Shares (NYSE:AGN)

– Billionaires with Long Positions (as of December 31): 29

– Value of Billionaires’ Holdings (as of December 31): $9.53 billion

Allergan plc Ordinary Shares (NYSE:AGN) was the most popular stock among billionaire investors from our database at the beginning of 2016. However, the aggregate value of their position was down by 11.67% over the quarter, despite the fact that the number of funds went up by three. Among the investors that substantially increased their stake in the company during the fourth quarter was billionaire Dan Loeb‘s Third Point, which increased its holding by 48% to 5.4 million shares. Among the stocks covered in this list, Allergan plc Ordinary Shares (NYSE:AGN) was the worst performer during the first quarter, ending the quarter down by 14.2%. The recent mutual decision of Pfizer and Allergan to terminate their merger deal has caused Allergan’s stock to fall even further as it now trades down by over 25% year-to-date. Though Allergan has suffered a setback with the deal getting terminated, its CEO, Brent Saunders, is confident about the company’s future prospects. In a press release issued by the company on April 6, Mr Saunders stated:

“While we are disappointed that the Pfizer transaction will no longer move forward, Allergan is poised to deliver strong, sustainable growth built of a set of powerful attributes. Our pipeline is one of the strongest in the industry, loaded with 70 mid-to-late-stage programs, including 14 expected approvals and 16 regulatory submissions in 2016 alone.”

Disclosure: None