Once hedge fund managers reach billionaire status, a larger portion of their invested capital is poured into large-cap stocks, since only so much money can be put into equities of promising small-cap companies. Naturally, this makes it a lot harder for billionaire hedge funds to beat the market by a wide margin, due to the smaller returns on average they achieve from picking large-cap stocks; they’re much more efficient on picking small-caps. In addition, the high fees charged by these institutional investors often does not justify the returns they offer, despite their enduring (and increasing) appeal as investment vehicles.
Although hedge funds don’t always deliver the best returns, it is helpful to know what stocks billionaire hedge fund managers are bullish on, especially when it comes to small-cap companies. According to our research, the top 30 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 decision, paying close attention to their stock moves is certainly recommended.
When it comes to the public utilities industry, the most popular stock picks amongst billionaire hedge fund managers at the close of the last quarter were: T-Mobile US Inc (NYSE:TMUS), Cheniere Energy, Inc. (NYSE:LNG), Kinder Morgan Inc (NYSE:KMI), Dynegy Inc. (NYSE:DYN), and Williams Companies Inc (NYSE:WMB).
T-Mobile US Inc (NYSE:TMUS) was the most popular public utilities stock, with a total of 11 billionaire hedge fund managers disclosing a position in the company at the end of the fourth quarter. Amongst the funds we track, John Paulson’s Paulson & Co was the largest hedge fund betting on the telecommunications firm, with a stake of 15.34 million shares. The billionaire has been betting on T-Mobile since the second quarter of 2013, when his investment fund acquired an initial stake of 16.67 million shares. Another billionaire holding a position in the company is Ken Griffin, whose hedge fund Citadel Investment Group increased its exposure to the stock by 74% last quarter to 4.58 million shares. Larry Robbins, Rob Citrone, Steve Cohen, and George Soros also hold a significant amount of T-Mobile US Inc (NYSE:TMUS) shares.
Ten billionaire hedge fund managers included shares of Cheniere Energy, Inc. (NYSE:LNG) in their equity portfolios last quarter. Seth Klarman was particularly bullish regarding the company, disclosing ownership of 13.81 million shares at the end of the year, which made the stock his fund’s top pick, replacing Micron Technology, Inc. (NASDAQ:MU), which had been his top pick for the past year. Klarman then revealed greatly increasing his stake to 24.81 million shares early in 2015. Andreas Halvorsen has also been betting on Cheniere Energy and increased his stake in the company to 9.95 million shares at the close of the year. Like Klarman, Halvorsen also greatly added to his position in early 2015, increasing his position by more than 50% to 15.38 million shares.
Year-to-date the stock has already gained 8.25%, on top of a gain of almost 61% last year. Cheniere Energy, Inc. (NYSE:LNG) is a $17.09 billion market cap energy company operating in the liquefied natural gas segment.
Kinder Morgan Inc (NYSE:KMI) also had the backing of ten billionaire hedge fund managers, including Ken Griffin and David E. Shaw. Last year, the stock gained around 17%, while shares have remained relatively flat year-to-date, down slightly. Although Adage Capital Management trimmed its stake in the company, the fund, managed by Phillip Gross and Robert Atchinson continues to hold a stake of 1.34 million shares. Kinder Morgan Inc (NYSE:KMI) has been expanding its energy infrastructure assets consistently since 1997. A few weeks ago, the company announced a $3 billion deal for the acquisition of oil terminal assets as well as the purchase of a private pipeline firm, Hiland Partners, operating in the Bakken shale in North Dakota.
Out of the 59 billionaire hedge fund managers we track, nine held a position in Dynegy Inc. (NYSE:DYN). Howard Marks owns the largest stake in the company with 10.15 million shares and held Dynegy amongst its top five picks last quarter. Ken Griffin is also betting on the stock, with ownership of 1.48 million shares according to his fund’s last 13F filing. Other billionaires holding Dynegy Inc. (NYSE:DYN) in their equity portfolios include Steve Cohen, Jim Simons, and Daniel S. Och. After gaining 40.5% in 2014, the stock has dropped around 3% year-to-date, following financial results that did not meet Wall Street expectations.
With a stake of 41.68 million shares, Keith Meister’s Corvex Capital is Williams Companies Inc (NYSE:WMB)’s largest institutional investor. However, Mr. Meister is just one of eight billionaire hedge fund managers holding a position in the company. Daniel S. Och is also bullish regarding the stock, disclosing a stake of 9.82 milion shares in his fund’s last 13F Filing. Dan Loeb is also betting on Williams Companies Inc (NYSE:WMB), which has gained almost 9% year-to-date as of Wednesday.
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