It’s widely known in the mutual fund community that poor performing stocks which are heavily owned by institutional money managers can be targets of ”window dressing” at the end of a quarter.
Window dressing is a tactic where portfolio managers sell their worst performing stocks and buy more of their best performing stocks into the end of the quarter. When they report the quarter-end holdings of their portfolios, after a little window dressing, they tend to look a little smarter when they have a book of nicely performing stocks, after purging the weaker performers.
At BillionairesPortfolio.com, what’s most interesting about this practice to us is that it can create an opportunity for us to buy billionaire-owned stocks at a price cheaper than what the billionaire paid for his shares.
Below is a list of four of the highest conviction stocks of four of the top billionaire investors in the world. Each of the stocks listed got a little cheaper in the past couple of weeks, likely due to some mutual fund window dressing, along with a dose of some broad market risk aversion:
1) Qualcomm (QCOM) – Billionaire Barry Rosenstein’s activist hedge fund Jana Partners owns $2 billion worth of Qualcomm. It’s the fund’s largest holding. Jana paid around $66 to $68 for their QCOM shares. That’s about 10 % higher than what it is selling for today. Qualcomm dropped six straight days into the end of June, typical behavior of window dressing selling. Qualcomm now has 3.05% dividend yield and sells for just 14 times earnings with one of the best balance sheets of any S&P 500 company.
2) Monsanto (MON)- Billionaire Larry Robbins of Glenview Capital was named the number one hedge fund manager by Barron’s with a 57% annualized return over the past 3 years. Monsanto is Glenview Capital’s largest position, and the fund’s average cost for Monsanto is around $112 a share. That’s 5% higher than what Monsanto sells for today. Robbins stated at hedge fund conference that Monsanto could be worth $220, or a double from its price today.
3) Chesapeake Energy (CHK) – Billionaire Carl Icahn owns 11% of Chesapeake at $17 a share, and recently added to his stake in March at $14. Chesapeake has been hammered ever since. The stock is down 25% over the past month and 10% this week alone. CHK now has a 3.2% dividend yield and sells at just two-thirds of its $15.50 book value.
4) Micron Technology (MU) – Micron is David Einhorn’s second largest position in his hedge fund Greenlight Capital. Einhorn paid around $21 a share for his nearly $1 billion position. The stock now sells for $18.78 – about 11% cheaper than what Einhorn paid. MU sells for just 6 times earnings and 4 times cash flow. Micron looks like the classic window dressing stock as it dropped 22% over the past week.
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 27% gain since 2012.
Stocks have been on a great run and with the European Central Bank and Bank of Japan pumping money into the global economy–picking up where the Fed left off–expect it to continue.
Given the low global inflationary environment and the ultra-easy global central bank activity, bond yields in the U.S. have remained subdued, despite the expectation that the Fed will be raising rates for the first time in nine years later this year. The 10-year note is yielding less than 1.9% this morning.
Meanwhile, we’re seeing a rare occurrence in stocks, and an extremely bullish one. For one of the few times in history, stock dividends are paying a yield greater than U.S. Treasurys. The yield on Dow stocks is 2.25% and the yield on S&P 500 stocks is 1.99%.
This positive yield differential for stocks has only happened five other times in history; each time stocks went up big one-month and three-months later.
If that’s not enough, April happens to be the single best month for Dow stocks over the past 50-years.
With this all in mind, here are a few ways to play it:
You could buy the Dow Jones Industrials Average ETF (DIA) or the three times leveraged Dow ETF (UDOW). Or, our favored way at BillionairesPortfolio.com is to invest alongside an influential investor that has huge skin in the game. This gives you an extra layer of protection, a fellow shareholder that has the power and influence to control his own destiny. With that, you could buy these four Dow component stocks, each controlled by one of the top billionaire investors in the world:
1) Apple: Billionaire activist legend Carl Icahnowns Apple. He says it’s worth $200, and he’s recently been adding to his position. Apple has multiple catalysts in April. The company is launching its watch. Apple reports earnings this month, where we could potentially see another stock buyback announcement and/or an increase its dividend.
2) Dupont: Billionaire activist investor Nelson Peltz has nearly 20% of his hedge fund’s assets in Dupont. He owns nearly 1.8% of the company and has asked Dupont to grant him and his team Board seats, as he wants DuPont broken up to unlock value.
3) Dow Chemical: Billionaire activist hedge fund manager Dan Loeb is also agitating for change at Dow. Loeb owns more than $1 billion of Dow shares and the company has just agreed to split off its chlorine business, a byproduct of Dan Loeb’s activist efforts.
4) Coke: Everyone knows Warren Buffett owns Coke. The interesting part is that Buffett has recently orchestrated a huge merger between two of the largest big-brand food companies, Heinz and Kraft. Kraft shareholders made a 35% premium on their shares overnight. Applying the same takeover multiple to Coke, Coke could be worth as much 40% on a private equity buyout.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012, beating even the great Carl Icahn’s record for the same period.
Billionaire investor, Bill Ackman, CEO of Pershing Square Capital Management, has one of the best investing track records in the world.
When you add back fees, Ackman has returned 1,199% since starting his fund in 2004. That compares to 119% in the S&P 500 for the same period. That’s ten times better than the S&P 500.
His short position on Herbalife has been very well documented. In his interview with Bloomberg on Thursday, he said “it will” go to zero, and he confidently said his fund is “very short.” This comes after the stock has halved since July of last year.
A billionaire face-off on Herbalife started early 2013, following a presentation by Ackman at the Ira Sohn investment conference in New York, where he made the case for his Herbalife short. It included the accusation that Herbalife was running a ponzi-scheme. At that time, the stock was trading the mid $30s. Months later, billionaires Dan Loeb and Carl Icahn both took shots at Ackman’s thesis, and took long positions in the stock, attempting to squeeze Ackman. It worked, for a while. The stock ultimately ran up to $81 in January of 2014.
Ackman says they “bought a lot of put options” on that run up, “in the $70s and $80s.” Now HLF shares are trading back in the $30s, and Ackman says it’s a race to the bottom. He thinks the stock will either hit zero or the government will step in before that, and shut them down.
At this point, Ackman’s campaign against Herbalife is looking quite good.
Love him or hate him, Ackman is one of the best performing investors on the planet, and for average investors, his portfolio might be one of the easiest to replicate. We know about his Herbalife position. Here’s a look at the seven publicly reported core holdings of Ackman’s $18+ billion Pershing Square fund, as of its recent SEC disclosures. These are positions where Pershing owns more than 5% of a company:
Allergan AGN NaN% (AGN) – AGN represents 34% of his portfolio. He has a $6 billion stake in the company.
Air Products & Chemicals APD +0.72% (APD) – APD represents 17% of his portfolio. He has a $3.1 billion stake.
Canadian Pacific Rail (CP) – CP represents a 14% of his portfolio. He has a $2.6 billion stake.
Burger King Worldwide, Inc. (BKW) – BKW represents 8.5% of his portfolio. He has a stake worth $1.1 billion.
Platform Specialty Products Corp (PAH) – PAH represents 5% of his portfolio. He has a stake worth about $940 million.
The Howard Hughes Corporation (HHC) – HHC represents 3% of his portfolio. He has a stake of $510 million.
Zoetis Inc. (ZTS) – ZTS is a relatively new addition to his portfolio. According Pershing’s recent 13d filing, it has a stake representing about 10% of the Pershing portfolio, or a position valued at about $1.8 billion.
Ackman’s Pershing Square fund also holds small stakes in Fannie and Freddie Mac, as well as at least two undisclosed small positions. But Ackman has more than 75% of his fund’s money in just four stocks – long positions. That shows extraordinary conviction, and it also means he can’t afford to lose. That conviction and confidence is present only because he has the ability to gain control of, and influence on, the companies he invests in.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012.
These days everyone is familiar with big-brand activism, led by billionaires Carl Icahn and Bill Ackman.
Icahn has often made a splash in the media in the past year, using his influence and voice to push for change in big companies. And it works. He has made a huge impact for shareholders in Apple and Netflix. But even though both Icahn and Ackman continue to produce tremendous returns, they have limitations on what activist campaigns they can pursue.
They have size constraints, too. Both run multi-billion dollar portfolios, which all but rules out their ability to participate in smaller company investments. And that’s where smaller funds have an advantage.
One of the best, smaller, and lesser-known activist hedge funds we follow in The Billionaires Portfolio is Becker Drapkin. Becker Drapkin is a $300 million small cap activist hedge fund with an outstanding record of selecting big winners. Their average activist campaign (i.e. stock investment) has returned 130%.
Below are the top four stocks in Becker Drapkin’s portfolio. In each case, the fund owns 5% or more of the stock, which gives them a controlling interest in the company. Plus, one of the biggest determinants of success in an activist campaign is the board seat, and Becker Drapkin has at least one seat on the board of directors at each of these companies.
1) Emcore (EMKR)- This is one of Becker Drapkin’ biggest positions. They own 10% of Emcore, with board seats.
2) Fuel Systems (FSYS)- Becker Drapkin owns more than 9% of FSYS, and has board seats.
3) Comverse (CNSI) – Becker Drapkin has more than 10% of their fund’s assets in this stock, with a board seat.
4) Intevac (IVAC)- Becker Drapkin owns more than 9% of this stock, and has board representation as well.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012, beating even Carl Icahn’s record for the same period.
In his quarterly investment letter recently, billionaire activist investor Bill Ackman gave us clues on selecting stocks that can become big winners.
In a world where many think stock prices are efficient, he argues quite the opposite. And in a world where many think good investing has to be sophisticated and only the domain of big, powerful hedge funds, he all but said, it wasn’t.
Here’s what he said: “Minority stakes in high quality businesses can be purchased in the public markets at a discount. These discounts principally arise because of two factors: shareholder disaffection with management,and the short term nature of large amounts of retail and institutional investor capital which can overreact to negative short-term corporate or macro factors.”
He’s telling all investors that there are stocks that are undervalued for all of the wrong reasons. And the average investor can buy them, just like he does.
At Billionairesportfolio.com, one of our favorite screens identifies stocks that are controlled by the world’s top activist hedge funds and have temporarily sold off for non-fundamental reasons.
This is how you find deeply undervalued stocks, with a catalyst at work to unlock value. And that can be a recipe for big winners. The catalyst in this case is a huge, influential, bulldog shareholder that is fighting everyday to ensure his investment is a profitable one.
With that, below is a list of four activist-owned stocks that have pulled back for non- fundamental reasons. And each has at least a 50% upside to the activist hedge fund’s target price. As a bonus, the fifth stock is also activist owned, but it sits near an all-time high. Still, the activist involved in this one thinks another 65% is ahead.
1) Hertz (HTZ) – Billionaires Carl Icahn and Barry Rosenstein own a combined 18% of Hertz. Hertz is down more than 17% over the last 6 months due to accounting issues. Yet billionaire Barry Rosenstein, head of the activist hedge fund Jana Partners, said that Hertz should triple, as they have plenty of cash flow to buy back as much as 25% of their outstanding stock. That’s a 300% return from Hertz’s current share price!
2) Twenty-First Century Fox (FOXA) – Billionaire activist hedge fund manager, Jeff Ubben of ValueAct Capital owns more than $1 billion of Fox. Ubben recently said in an interview that his firm purchased Fox when it sold off after its failed merger attempt, and that he thought the stock was worth $50, or a 50% return from its share price today.
3) NCR Corp. (NCR) – Marcato Capital, a $3 billion activist hedge fund run by Billionaire Bill Ackman’s protégé, Mick McGuire, owns more than 6% of NCR. NCR is down 22% over the past year, yet McGuire recently stated that NCR is worth more than $50 a share, or a 100% return from its share price today.
4) EMC Corp. (EMC) and Juniper Networks (JNPR) – Billionaire Paul Singer, head of the activist hedge fund Elliot Management, owns billion dollar plus stakes in EMC and Juniper. Singer and Elliot have a great track record of forcing companies to sell out at a huge premium. In their last eight activist campaigns in the technology sector, six of the companies were acquired for a significant premium. Elliot has publicly stated that EMC could be worth as much as $45 a share, or a 50% return from its share price today. And Juniper could be worth $35 a share, almost a 50% return from its share price today.
5) Finally, Apple Inc. (AAPL) — Billionaire Carl Icahn has been a very vocal shareholder in Apple. Since tweeting his stake a little more than a year ago, AAPL, the most widely held stock in the world, has more than doubled. Still, Icahn thinks it’s worth $200 a share. That’s 66% higher than its current price.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors, our exited stock investment recommendations have averaged a 31% gain since 2012 , beating even the great Carl Icahn’s record for the same period.
One of the most profitable ways to piggyback the world’s best billionaire investors and hedge funds is by following their newest positions.
Over the past two weeks there has been significant buying from billionaire investors and hedge funds, which is usually a bullish sign for stocks. Let’s take a look at some of the most recent transactions:
1) Chesapeake Energy (CHK) – Legendary billionaire activist Carl Icahn recently added to his already large position in Chesapeake last week, buying 6.6 million shares at average price of $14.15. That gives Icahn an 11% stake. Chesapeake looks cheap at 9 times earnings, with a dividend yield of 2.5%, and selling at just two thirds of its book value of $21 a share.
2) Valeant Pharmaceuticals (VRX) – Billionaire hedge fund manager Bill Ackman, of Pershing Square, recently upped his stake in Valeant from 4.9% to 5.7% — at an average price of $196.72. Valeant has been a high flyer. It’s up 38% in 2015 and 54% over the past year. It’s hard to argue with Ackman’s timing. Almost every stock he has purchased over the past 2 years has gone straight up.
3) Manitowoc Company Inc. (MTW) – Billionaire hedge fund manager Larry Robbins, of Glenview Capital Management, initiated a new 6.3% position in Manitowoc — at an average price of $20.41. Manitowoc also happens to be owned by billionaire Carl Icahn. Icahn recently forced the company to split into separate companies, which could potentially unlock $10 of hidden value in this stock according to many wall street analysts.
4) EXA Corporation (EXA) – Billionaire George Soros recently purchased 1.26 million shares of EXA, or 9% of the company, at an average price of $10.10. EXA is small cap software and services company to the automotive industry that has been rumored to be an acquisition target at $16 to $20 share. That would be a 30% to 60% premium from its share price today.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012, beating even the great Carl Icahn’s record for the same period.
