Basic industries are a requisite for most any type of manufacturing activity, being the ones that provide raw material for others to craft, pound, and shape into planes, trains, and automobiles (among other things). The sector includes companies operating in the chemical, mining, forestry, agriculture, and petroleum industries. Investing in these industries could be a difficult job without having an understanding of various factors that affect them as well as the industries they themselves serve and are thus reliant on. At Insider Monkey, we analyze over 700 hedge funds and track their 13F holdings every quarter. It allows us to identify the most popular stock choices of the best investment managers in the world and find out what they’re investing in (and then try to figure out why). We’ll be doing just that in this article as we look at Air Products & Chemicals, Inc. (NYSE:APD), Procter & Gamble Co (NYSE:PG), CF Industries Holdings, Inc. (NYSE:CF), LyondellBasell Industries NV (NYSE:LYB), and Dow Chemical Co (NYSE:DOW), the top five stock picks in the basic industries sector among the funds in our database.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered 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. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. 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 best growth opportunities in the market by concentrating on small-cap stocks.
Air Products & Chemicals, Inc. (NYSE:APD) is the most popular stock choice among basic industries stocks. As per our records, 83 investment managers reported investments in the company totaling an aggregate amount of $9.94 billion. These figures represented an increase from the 82 fund managers which held investments totaling $8.92 billion at the end of 2014. The basic services company met the quarterly earnings expectation of it by the market, posting non-GAAP earnings of $1.55, which was 17% higher year-over-year. However, the company did fall short on quarterly revenue expectations with revenues of $2.42 billion against estimates of $2.61 billion. Bill Ackman‘s Pershing Square as well as Viking Global hold major positions in Air Products & Chemicals, Inc. (NYSE:APD).
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Procter & Gamble Co (NYSE:PG) is the second most popular basic industries stocks for the filing period of March 31, with the consumer goods packaging company attracting investments from 64 fund managers in our database, and with aggregate investments of $10.04 billion. The investment amount dipped by 7.55% during between the previous and current reporting period, though the company had a few more fund managers holding positions in it. The health and beauty products manufacturer has faced some difficulties in the past few years, especially in terms of both revenue and profit growth. In 2007, Procter & Gamble Co (NYSE:PG) reported revenues of $76 billion, while it is likely to report revenues of just $77 billion this year. On the other hand, its profit was $12 billion in 2008 and the company is in-line to report profits of $11.5 billion this year, a slight decline. Unsurprisingly, shares have mostly flat-lined over the past decade, gaining just 42% during that time, and have dropped by 14.08% year-to-date. On the brighter side, increasing dividend payments over the years have lifted the company’s dividend yield to a solid 3.34%. Warren Buffett’s Berkshire Hathaway has a $4.33 billion position in Procter & Gamble consisting of 52.79 million shares.
With 60 shareholders owning holdings totaling $2.54 billion, CF Industries Holdings, Inc. (NYSE:CF) is another major basic industry stock to gain popularity among investment managers tracked by Insider Monkey. The aggregate investments have shrunk from $2.90 billion, but the number of fund managers has increased from 56. It has been a wise stock choice for investors of CF Industries Holdings, Inc. (NYSE:CF), with its stock growing 16.81% year-to-date. As per a recent decision from the board of directors of the fertilizer company, CF Industries Holdings, Inc. (NYSE:CF) will initiate a five-for-one split of its common shares, with every stockholder of the company getting four additional shares of common stock on June 17, 2015 for each owned share. It is the first time that the company has announced a stock split since its IPO in 2005. D E Shaw and Passport Capital are among the primary investors of CF Industries Holdings, Inc. (NYSE:CF).
LyondellBasell Industries NV (NYSE:LYB) is another basic industries stock that offers a solid dividend yield, of 3.08%, while the shares of the global chemical company have grown 25.62% year-to-date. LyondellBasell Industries NV (NYSE:LYB) witnessed growth in aggregate investments to $3.73 billion from $3.00 billion, though fund ownership dropped to 57 from 66. The chemical company, which completed five years as a publicly traded company in April 2015, announced first quarter 2015 financial results that were satisfactory in terms of growth in diluted earnings per share of $2.42, though revenue declined sharply to $8.19 billion against year-over-year revenue of $11.14 billion. Andreas Halvorsen‘s Viking Global and Zach Schreiber’s Point State Capital hold large positions in LyondellBasell Industries NV (NYSE:LYB).
Dow Chemical Co (NYSE:DOW) rounds out our list of the most popular companies in the basic industries sector. The 120-year-old raw material manufacturer was held in the portfolios of 56 fund managers, with their aggregate investments amounting to $4.09 billion, with fund ownership up from 48 but aggregate investments down from $4.21 billion. Dow Chemical Co (NYSE:DOW) is another strong dividend stock pick, sporting a yield of 3.28%. Dan Loeb’s Third Point and Daniel Och‘s OZ Management are among the top investors of Dow Chemical Co (NYSE:DOW).
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