If you are a frequent visitor of our website, you probably already know that we track the activity of more than 730 different investors as part of our small-cap strategy. Aside from smaller hedge funds, our database also includes around 70 funds that are controlled by billionaire investors. This group is of particular interest to us, because billionaires managed to build their fortunes over the years by applying their stock-picking skills. Therefore, let’s take a look at some of the most popular stocks among billionaires that we track. In this article, we will focus on energy stocks in which most billionaires preferred to invest their capital as disclosed in the latest round of 13F filings.
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The focus of our research at Insider Monkey is our small-cap strategy, which managed to post returns of more than 130% in the last 2.5 years and outperformed the S&P 500 ETF (SPY) by some 80 percentage points. Through empirical studies of equity portfolios of the funds from our database, we determined that generally, 50 most popular stocks among them, which are mostly large- and mega-cap companies, underperform the market by around 7.0 basis points per month. On the other hand, imitating a portfolio of 15 most popular small-cap ideas can generate a return of around 1.0 percentage points in excess of the S&P 500 Total Return Index. We also determined that the 45-day delay after the end of each quarter also does not offset the possibility of picking profits from imitating hedge fund moves’ in the small-cap space (learn more details about how to benefit from piggyback investing).
On the first spot is Sunedison Inc (NYSE:SUNE), which is not technically an energy stock, but it shows the general interest from investors in the renewable energy segment. A total of 13 billionaire investors disclosed holding around $2.15 billion worth of Sunedison’s stock, which represents around a quarter of the company. The company also gained popularity among “the general public” so to speak, as the number of funds holding the stock jumped to 94 at the end of the first quarter from 80 a quarter earlier. As the stock gained more than 54% since the beginning of the year, it seems that David Einhorn’s prediction regarding the renewable energy and Sunedison stock in particular has materialized. At the last year’s Robin Hood Conference, the manager of Greenlight Capital pitched two stocks, Sunedison Inc (NYSE:SUNE) and TerraForm Power Inc (NASDAQ:TERP), setting a price target of $32 per share.
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In its latest letter to investors, Greenlight stated that Sunedison will begin generating significant cash flow sooner than it has been expected and will exit the next year at a run rate of $3.0 of cash EPS. “The strong outlook was driven by rapid growth in dividends received from Terraform Power (TERP), the company’s renewable energy-focused affiliate, and a consequent acceleration in the timing of incentive distribution rights which SUNE expects to receive as TERP’s sponsor,” the fund added. Greenlight held 24.95 million shares of Sunedison at the end of March, which makes it one of the top shareholders of the company. Other billionaires with significant long positions in Sunedison Inc (NYSE:SUNE) include James Dinan, Larry Robbins, and Stephen Mandel.
Billionaires also backed Cheniere Energy, Inc. (NYSEMKT:LNG) during the first quarter and as of the end of March, 11 funds disclosed holding 4.10 billion worth of the company’s stock. However, it is important to mention that out of the aggregate amount of capital invested, two positions stand out in terms of value. Andreas Halvorsen‘s Viking Global and Seth Klarman’s Baupost Group disclosed holding 15.45 million shares and 13.81 million shares, respectively, the value of their stakes amounting to $1.20 billion and $1.07 billion. Moreover, Viking boosted its holding by 56% during the first quarter and has been piling money into the stock since the third quarter of 2014, when it initiated the position with 5.45 million shares. Things become even more interesting if we take into account that Cheniere Energy, Inc. (NYSEMKT:LNG) has not reported any profits for the last five years and has a price/sales ratio that is ridiculously high in comparison with the industry average. Therefore, investors are probably betting for the future of the company, expecting that Cheniere Energy, Inc. (NYSEMKT:LNG) will start generating profits once it completes its Corpus Christi liquefied natural gas (LNG) export project, alongside its Sabine Pass LNG export plant, which is expected to be operational by the end of this year.
On the third spot is Anadarko Petroleum Corporation (NYSE:APC), in which also 11 billionaire investors reported holding in aggregate $1.53 billion worth of stock, down from $1.63 billion a quarter earlier. Anadarko’s stock inched up by less than 5% since the beginning of the year, which is the smallest gain among three most popular energy stocks among billionaires. Nevertheless, it outperformed the Oil & Gas E&P industry, which has posted gains of around 2.50% year-to-date. For the first quarter, the company posted a loss of $0.72 per share on $2.32 billion in revenue, versus expectations of a loss of $0.65 per share on revenue of $2.45 billion. However, since Anadarko Petroleum Corporation (NYSE:APC) is one of the top players in the E&P industry, it is expected to have the financial strength to go through the lowest part of the commodity cycle, following which it will emerge better than many of its peers. Therefore, investors have something to look forward to. So far, billionaires Ken Griffin of Citadel Investment Group and Paul Singer of Elliott Management are among the largest shareholders of Anadarko Petroleum Corporation (NYSE:APC) from our database with 5.27 million shares and 4.25 million shares respectively. However, in Citadel’s equity portfolio the $436 million stake amasses around 0.50% of the total value, while Elliott holds more than 4.30% invested in the stock.
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