In August, billionaire David Einhorn’s Greenlight Capital and billionaire George Soros’s Soros Fund Management filed their 13Fs for the second quarter of 2013 with the SEC, disclosing many of their long equity positions as of the end of June. Despite the inherent delay in 13Fs- which sometimes causes market watchers to claim they have little utility for most investors- we’ve actually found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year, and we think that more strategies are possible as well. Our own small cap portfolio based on our monkeying strategy outperformed the S&P 500 by 33 percentage points since inception in August 2012. Learn more about our small cap strategy.
While imitating individual funds’ picks is not necessarily as profitable, we think that 13Fs can serve as sources of initial investment ideas in a number of categories. Investors can then do further research on any interesting names. Read on for our quick take on stocks which both Greenlight and Soros Fund Management reported owning, or see the full list of picks from Soros Fund Management and from Greenlight Capital.
Greenlight’s largest 13F position as of the end of Q2 was its 2.4 million shares of Apple Inc. (NASDAQ:AAPL), and Soros’s fund had a position as well. While the fund did not change its position in the stock, other hedge funds were selling the consumer technology company causing Apple Inc. (NASDAQ:AAPL) to fall to third on our list of the most popular stocks among hedge funds (check out the top ten list). Currently Apple Inc. (NASDAQ:AAPL)’s stock price is down 27% in the last year, as the company’s net income has decreased by a similar amount on weaker margins. Its trailing earnings multiple is 12, and investors should note that cash and marketable securities are a large portion of the market cap.
Another common pick between the two funds was General Motors Company (NYSE:GM), which was also one of Einhorn’s favorite stocks per the filing. GM trades at 13 times its trailing earnings with a number of market watchers- including these two bulls, apparently- believing that the automaker has high upside potential as the U.S. consumer auto fleet is quite old in historical terms. Einhorn has also stated that he believes that conditions in Europe will improve over the next several years, removing what has been a hindrance to the company’s profits. Analyst expectations imply a forward P/E of only 8 and a five-year PEG ratio of 0.6. Warren Buffett’s Berkshire Hathaway is another major shareholder in GM (find Buffett’s favorite stocks).
Soros’s fund owned 1.4 million Class A shares of LIBERTY GLOBAL PLC (NASDAQ:LBTYA) and has been buying the international cable company’s Class C shares as well. Greenlight had initiated a position in the company last quarter. On a trailing basis, both reported profits and EBITDA are fairly low compared to the stock’s valuation but Liberty Global has been recording significant growth in revenue. It is valued at 29 times forward earnings estimates, which does seem a bit high but cable companies are good businesses and if Liberty Global can continue its recent performance it could probe a good growth stock. Tiger Cubs such as Tiger Global Management and Blue Ridge Capital also have large positions in Liberty Global.
Rounding out our list of stocks both Einhorn’s and Soros’s investment teams like is Delphi Automotive PLC (NYSE:DLPH). The $18 billion market cap auto parts company, similarly to GM, is expected to grow its earnings considerably over the next few years as the global economy (and auto market) continue to recover. The trailing and forward earnings multiples are 17 and 11, respectively, with continued projections showing a five-year PEG ratio just below 1. Last quarter revenue grew 6% compared to the second quarter of 2012, contributing to an 11% rise in profits. Billionaire Paul Singer’s Elliott Management owned nearly 18 million shares (research more stocks Elliott owns).
Disclosure: I own no shares of any stocks mentioned in this article.
