At Billionaire’s Portfolio we study the buying patterns of the world’s greatest billionaire investors and hedge funds. So when two of greatest billionaire investors in the world, Carl Icahn and Warren Buffett, are adding more to their large, beaten down stakes in energy companies, we pay close attention.
We know two things about Buffett and Icahn: 1) they have made billions throughout their careers buying when everyone else is selling, and 2) they have a knack for picking the winners, the stocks and sectors, and marking the bottom when they enter.
Their respective records are especially remarkable in times when widespread fear and doubt is in the air. For example, Icahn marked the bottom in technology stocks in the fall of 2012 with his 10% position in Netflix. He made $2 billion in profits on the trade, a nearly 1,000% return. Buffett marked the bottom in bank stocks in the fall of 2011 when he initiated a $5 billion position in Bank of America. That investment has almost tripled in price since, producing nearly $10 billion in open profits for Buffett.
Now, it’s typical in market environments like this to hear from experts that warn against picking tops and bottoms. But contrary to the Wall Street adages against market timing, the two best investors of all-time have amassed two of the largest personal fortunes in the world by (as Buffett says) “being greedy while others are fearful.” And they are using the new lows in oil and energy markets to add more to their stakes. Historically, that tends to be a profitable signal. There is a Harvard study that shows when hedge funds “double down” on losing positions, on average those tend to be their biggest winners.
Let’s look at the investments from this billionaire duo where they have been adding to their losers:
1) Phillips 66 (PSX) – Buffett revealed last September he had taken a $4.5 billon position in the energy stock Phillips 66. This is a typical Buffett stock. It sells for just 9 times earnings, a huge discount to the S&P 500’s P/E of 21, and the stock pays nearly 3% in a dividend. Furthermore, the company has a pristine balance sheet, with very little debt – a classic Buffett stock, cheap and safe. Buffett has added another $700 million to this stock just in the past two weeks. He’s the largest shareholder.
2) Chesapeake Energy (CHK) – Carl Icahn owns doubled his stake last spring when he bought 6.6 million shares of CHK for about $14. Icahn now owns 11% of Chesapeake. If the stock returns to the price where Icahn doubled down it would represent an almost 300% return for today’s levels. With the sharp fall in the stock price this past week, I wouldn’t be surprised if we find in the coming days that Icahn added more into the recent slide.
3) Cheniere Energy (LNG) – Carl Icahn also initiated a $1.3 billion position in energy stock LNG in August of last year, taking an 8% ownership in the company. Cheniere is on track to become the first U.S. company able to export liquefied natural gas. This makes LNG a classic “wide moat” (no competition) stock. Icahn has already secured two board seats on Cheniere’s board. Icahn’s “board seat effect” has proven to be a huge predictor of success for the legendary activist. According to an essay Icahn penned last year, when he gets a board seat in a company, his stock returns averages 27.5%. Since his initial stake in August, Icahn has added to his stake several times into the end of the year. He now owns 13.8% of LNG — the largest shareholder.
Global financial markets have opened the year with selling and elevated fear. And it’s been led, again, by China. This brings back very fresh memories of August of last year, when a Chinese devaluation set off confusion in markets, sharp selling in Chinese stocks, which spilled over to global markets.
This actually plays in perfectly to what we expect to be the biggest theme of the year for markets – a surprisingly aggressive action from China to stimulate their economy and, in turn, fuel the global economy and a recovery in commodities. The behavior in Chinese stocks and the Chinese currency in the past few days underpin that investment thesis, and likely put policymakers in China in position (under pressure) to act sooner rather than later.
Billionaire investor David Tepper, the man that bought the bottom in banking stocks in 2009, and later completely changed broad stock market sentiment in 2010 by interpreting the Fed actions as a green light to buy stocks, has predicted that the Chinese central bank will give global growth and global demand a shot in the arm this year, by aggressively cutting rates and stimulating their economy through a variety of measures that will surprise the consensus view.
If Chinese policymakers do indeed act, and aggressively, this chart on commodities could represent one of the great trades of the decade. Remember, when China rolled out aggressive stimulus in 2009, they began stockpiling commodities that were trading at dirt cheap prices in the depths in the global financial crisis. Further, devaluations of the yuan help the Chinese rebuild currency reserves. What have they done with those reserves historically? They buy a lot of U.S. Treasuries. They buy a lot of commodities.
The chart above shows the Goldman Sachs Composite Commodities Index trading into a triple bottom and 16-year trendline support.
Goldman Sachs just released its most loved stocks list among the hedge fund community. Goldman narrows the thousands of stocks represented in the most recent quarterly 13F filings down to their “most important” 25. At Billionairesportfolio.com, we’ve narrowed that list down to the five stocks owned by billionaire hedge fund managers with the most potential upside.
Below are the five stocks:
1) Charter Communications (CHTR) – Charter is one of the top ten most owned stocks by hedge funds. Billionaire hedge fund managers Stephen Mandel of Lone Pine Capital and John Paulson own large stakes in Charter. Mandel owns more than $1 billion worth of Charter. At the recent Robin Hood Investment Conference, one of Paulson’s portfolio managers said Charter could be worth as much as $325 a share, nearly 75% higher than current levels.
2) Yahoo (YHOO) – Yahoo is another popular stock owned by billionaire hedge fund managers. Billionaire David Einhorn and Starboard Value, a top $5 billion activist hedge fund, both own big stakes in Yahoo. The average analyst price target for Yahoo is $49 or a 50% potential return from its current share price.
3) General Motors (GM) – Another popular billionaire owned stock in the Goldman Sachs VIP (very important position) list is GM. Billionaire hedge fund manager David Tepper owns GM. If fact, GM is David Tepper’s largest equity position in his hedge fund. The average analyst price target for GM is $50 or almost a 50% return from its current share price.
4) AIG (AIG) – Billionaires Carl Icahn and John Paulson are two of the largest holders of AIG. Both billionaires have pushed for AIG to break up and spin off business units. Icahn recently said that if AIG breaks into three companies the company could be worth more than $100 a share. That would be a 56% return from its current share price.
5) Apple (AAPL) – Billionaires Carl Icahn and David Einhorn both hold Apple as their largest position. Icahn owns almost $6 billion of Apple. Piper Jaffrey recently put a $179 target price on Apple or a 51% return from its current share price.
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors.
It’s a busy week for following the moves of the world’s richest and most influential investors. We have the Robin Hood Investors Conference in New York, which normally produces some investing nuggets from billionaire investors. And the deadline for their quarterly public disclosures to the SEC on their stock holdings is today (13f filings).
Remember, in the second quarter, the world was in the cross hairs of the calamity in Europe, surrounding the threat of a Greek default and exit from the euro. As Greece brought the world to the edge of disaster, the world’s biggest investors showed some fear, as they began shuffling their portfolios. While the turnover was much more subdued in the third quarter, there are a number of interesting buys and sells from the world’s top investors.
1) Billionaire hedge fund manager, David Tepper, who probably has the best 20 year track record of any investor alive, made quite a few interesting moves last quarter. Tepper slashed his holdings in large cap tech: Apple (AAPL) Google, (GOOG) and sold all of his Alibaba (BABA) stake. Tepper initiated new positions in Nike (NKE), Allstate (ALL) and Southwest Airlines (LUV).
2) Billionaire value investor Seth Klarman initiated a new 52 million share position in Alcoa, making him the second largest shareholder in this beaten down S&P 500 stock. Alcoa sells for just $8 a share but has a book value of almost $10. Alcoa is down almost 50% YTD, so Klarman is trying to pick a bottom in this aluminum stock.
3) Warren Buffett initiated a new positon in AT&T (T) and Kraft Heinz (KFC). Buffett now owns an incredible $22 billion of Kraft Heinz making his second largest position or 18% of his portfolio. Buffett also purchased more IBM (IBM) and trimmed his stakes in Goldman Sachs (GS) and Wal-Mart (WMT).
4) Billionaire hedge fund manager Dan Loeb of Third Point also took a new position in Kraft Heinz as well, almost $600 million. Loeb also took new stakes in Time Warner Cable (TWC) and Avago Technologies (AVGO). Loeb sold all of his SunEdison (SUNE) and Perrigo (PRGO) positions.
5) At the Robin Hood investment conference this morning, billionaire hedge fund manager, David Einhorn of Greenlight Capital said his “Best Idea” was Consol Energy (CNX), a coal and natural gas stock. The fund owns almost 23 million shares of Consol making it one its largest holdings. Einhorn first purchased the stock at $37.58 in late 2014, today it sells for $7.76. If Consol goes back to Einhorn’s purchase price it would mean a 350% return.
6) In an interview at the Robin Hood Investors Conference, Jamie Dimon, the CEO of JP Morgan, gave a rare glimpse into his billion dollar portfolio. Dimon said that he owns 3 stocks: Yum Brands (YUM), Boeing (BA) and Union Pacific (UNP).
7) Billionaire Leon Cooperman initiated a new almost $100 million stake in Valeant Pharmaceuticals (VRX) at prices between $155 and $260. Cooperman also initiated new stakes in Pfizer and Amazon. That reiterates our view that billionaire investors hedge funds continue to buy more healthcare and biotech stocks, even as the rest of the world is running from the sector.
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors.
Everyone has read news in the past about a big buyout in the stock market. And often the news will report that the stock in the company that is being acquired skyrocketed on the day. Envy tends to follow.
Generally, companies that are bought, are bought for a significant premium. Otherwise, shareholders would likely reject the offer. So when you hear of a big takeover, it’s not unusual to hear of a 20%,30%, even a 100% pop for shareholders on the day of the announcement.
So how to you identify the next big takeover? One of the easiest ways is to follow big, influential shareholders into stocks where they are pushing companies to sell themselves.
This week, we owned a stock in our Billionaire’s Portfolio, MedAssets (MDAS), that was taken over for a 33% premium. We held this stock for only two months, following the lead of one of our favorite activist investors, Starboard Value.
Starboard is one of the best at articulating recommendations for management and helping them execute on it. We followed Starboard Value into Office Depot and doubled our money. Starboard is run by the Wharton educated Jeff Smith, who is a tenacious and detailed activist investor. He has one of the best activist track records in the business. Since inception almost 13 years ago, Smith’s fund has made money on 82% of their activist campaigns (prior to MDAS). That’s one of the highest win rates in the industry.
Starboard took a huge activist stake in MedAssets in August and wrote a detailed letter to the company, outlining a plan to unlock value, which included strategic alternatives (such as the sale of the company).
Fast foward just two months: MedAssets was the second biggest winner in the entire stock market on Monday.
There has been a lot written about billionaire investing and activism over the past couple of years. It’s become a very hot topic. And the investors themselves, which once coveted anonymity, now utilize the spotlight to their advantage. Twitter, the internet and the media obsession with their wealth gives them the platform to spread their message about underperforming companies, and garner support from fellow shareholders. Still, finding the right investors to follow, and identifying the right opportunities is paramount.
Out of the 29 campaigns we’ve exited in our Billionaire’s Portfolio since the inception of our service, in August of 2012, five of the stocks were acquired.
That’s 17% of the stocks we’ve selected, and exited, that have been taken over for big premiums – so, strong anecdotal evidence that following influential shareholders that are pushing for a sale works!
The S&P 500 is now more than 200% higher than at its crisis-induced 2009 lows. Despite the powerful recovery in stocks, the rally has had few believers. All along the way, skeptics have pointed to threats in Europe, domestic debt issues, central bank meddling, political stalemates, perceived asset bubbles — you name it. As it relates to stocks, they’ve all been dead wrong.
The truth is, global central banks are in control. They have been coordinating since 2009 to save the worldwide economy from an apocalyptic spiral. Because the crisis was global, and the structural problems remain highly intertwined globally, the only hope toward achieving a return to sustainable growth was through a coordinated effort to restore stability and confidence. And with that backdrop, they had to create incentives for people to take risk again. It has worked! With the Fed moving closer to exiting emergency policies, this past year, the QE baton has been passed from the Fed to the ECB and the BOJ.
As part of the massive QE programs in Europe and Japan, the Bank of Japan has been outright buying stocks and the ECB might be next. After doubling the value of the Nikkei with his economic stimulus program, the architect of Abenomics, Prime Minister Abe, has said they are only “half way to its goals.” With the tail-winds of central bank influence to continue (Reason #1 to buy stocks). Here are three more simple reasons you should be buying, not selling, stocks:
1) History
If we applied the long-run annualized return for stocks (8%) to the pre-crisis highs of 1,576 on the S&P 500, we get 3,150 by the end of next year, when the Fed is expected to begin the slow process toward normalizing rates. That’s nearly 52% higher than current levels. Below you can see the table of the S&P 500, projecting this “normal” growth rate to stocks.
2) Valuation
In addition to the above, consider this: The P/E on next year’s S&P 500 earnings estimate is just 16.2, in line with the long-term average (16). But we are not just in a low-interest-rate environment, we are in the mother of all low-interest-rate environments (ZERO). With that, when the 10-year yield runs on the low side, historically, the P/E on the S&P 500 runs closer to 20, if not north of it. If we multiply next year’s consensus earnings estimate for the S&P 500 of $126.77 by 20 (where stocks to be valued in low rate environments), we get 2,535 for the S&P 500 by next year — 23% higher.
3) Recession Risk
For those who argue the economy is fragile, the bond market disagrees with you. The yield curve may be the best predictor of recessions historically. Yield curve inversions (where short rates move above longer-term rates) have preceded each of the last seven recessions. Based on this analysis, the below chart from the Cleveland Fed shows the current recession risk at 3.66% — virtually nil.
What about the impact on stocks of a rate hiking cycle? Historically, through the past six rate hiking cycles stocks have performed well, contrary to popular belief. Still, there is an important distinction this time: The Fed moving away from emergency policies is a celebratory event for stocks and the economy. After nine years of crisis, and a near global apocalypse, the Fed thinks the economy is robust enough take down the “high alert” flag.
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors.
If we look back at some of the great investors of our time, for many of them you can attribute timing to their success. For example, if Warren Buffett and Carl Icahn started their careers in a different era, they would not have likely achieved the same level of success they have in investing. Warren Buffett has said it himself.
Of course, given the right time and the right place, you still have to act, have skill, take smart risk and be good at what you do.
Though rare, we have these “right times and right places” throughout history. And I think we are standing right in the middle of one, right now.
First, if we think about the long term performance, opportunities and risks of the U.S. Stock market, first we should acknowledge that the U.S. stock market is unmatched. It represents the largest, most sophisticated capital markets in the world, in the largest and leading economy in the world, one with advanced corporate governance, investor protections and fueled by a relationship with the economy that is self-reinforcing.
Now, let’s consider that stocks over the past 15 years have produced just 3.8% annualized returns for investors, an extreme weak level compared to historical rolling 15-year periods (see chart below). That’s an even weaker 15-year period than that of the bear market that ended in 1974. With that, the next 15-years are likely well above average returns for stocks. You can see in this chart from Barron’s below, the rolling 15-year periods that followed that ’74 bear market were in the mid to high teens, roughly doubling the long-term average return of the S&P 500. This argues for very good times for stocks in the years ahead.
Additionally, there are a slew of fundamental reasons that support this scenario. To name a few, U.S. stocks have global capital flows working in their favor. The Fed is on a path to remove emergency policies (rates higher), the ECB and BOJ continue to be well entrenched in aggressive QE programs (rates lower). That creates weaker currencies in QE countries, which creates capital exit, and the best home for that capital is the U.S. — an economy performing better on a relative basis, and with prospects for rising rates (a primary driver of currency appreciation and capital flows). Add to that, given the record low base rates will be moving from, there is no incentive to put capital into bond markets — the bond market alternative is stocks (winner stocks).
From a historical perspective, the record cash levels sitting in the coffers of institutional money managers argue for much higher stocks to come, as that cash gets put to work. The go-to valuation metric for Wall Street, P/E, is very low on next year’s earnings, especially when you consider what valuation tends to look like in historically low interest rate environments. In those cases, it tends to trade north of 20. Of course, we are in the mother of all low interest rates environment (ZERO). The P/E on next year’s earnings is now 15.1. That’s on earnings estimates of $127.62. If we multiply next year’s earnings estimate of $127.62 by 20 (where stocks tend to be valued in low rate environments), we get 2,552 for the S&P 500 by next year – almost 30% higher than current levels. We did this analysis last year and early this year, when P/E was closer to 17 and sure enough, given low rates, and given weak alternatives, stock valuations gravitated toward and above 20x on trailing 12 month earnings.
Add to this that we are at 15-year lows in market sentiment (a contrarian indicator). So we digest all of this within the framework of an environment where the central banks continue to promote growth, and respond to any shocks that can knock the global economic recovery off path.
With that, remember back in the middle of 2012, when Europe was on the brink of collapse and global markets were quaking because of the potential of European debt defaults and a break-up of the euro. The head of the European Central Bank, Mario Draghi, stepped in, and in a prepared speech said that they will do “whatever it takes” to preserve the euro. That comment turned the sentiment tide, not only for Europe, but for global markets that day. If you bought German stocks on that comment, you never saw a day in the red – the DAX rose 20% by the end of the year and has risen at a 45 degree angle ever since, nearly doubling those “pre-comment” levels earlier this year.
Same can be said for U.S. Stocks. If you woke up and bought stocks on the back of the Draghi comment, you never saw a down day and enjoyed as much as a 60% run since.
Throughout the entire global economic crisis, there has been no better example of the impact of sentiment on markets and the global economic outlook, and no better example of how that sentiment can successfully be managed.
With this in mind, there was a very symbolic stand made last week by the very important figure heads of the developed world, all standing in front of podiums and speaking. We’ve seen Yellen attempting to temper the uncertainty about the Fed rate path and their view on the economy. Japan’s Prime Minister Abe (the orchestrator of Japan’s big stimulus policies) spoke in NY on Tuesday of last week and said some very magic words … he vowed that he and the BOJ would do “whatever it takes” to return Japan to robust sustainable growth. And this past Thursday night, the head of the ECB, Mario Draghi, also spoke in the U.S. He emphasized the importance of the return to health of the European economy, saying “it’s in our interest, in your interest, and that of everybody, everywhere.” And he said “we will not rest until our monetary union is complete.” So we have the two major central banks/administrations that have taken the QE torch from the Fed, standing up and telling us that they will continue to do what it takes to fuel growth and promote stability. To top it off, Bernanke, the ex-Fed Chairman and architect of the global economic recovery, did a one hour interview this morning to kick off the new week on CNBC, has done an Op-Ed in the Wall Street Journal and is scheduled to do Bloomberg tomorrow. Under the guise of a book promotion, he has spoken very candidly about current monetary policy, something ex-Fed heads don’t typically do, as it can draw attention away from the current Fed and potentially muddy and already muddied picture. Clearly, global policymakers are stepping up communications, which is key in curbing fear and uncertainty — and the ex-Fed Chair seems to be part of it.
Looking back, we could see this simple coordinated PR campaign to be enough to turn the tide of sentiment. And from there, the fundamentals take over.
When we consider this “rare opportunity” where we are in the right place at the right time, what comes to mind is the meteoric rise of billionaire Bill Ackman, and how he took advantage of the financial crisis to kick off one of the best 10-year runs of any investor in the world.
Back in late 2008, at the depths of the global economic crisis, Bill Ackman, one of the great billionaire investors we follow, stepped in and bought 25% of one of the largest real estate companies in the country. It was General Growth Properties (GGP). The stock was trading between 25 and 50 cents. And it was teetering on the brink of bankruptcy.
So why was the company nearing bankruptcy, and why would Ackman step in and buy it?
Well, as with many companies at that time, in a literal credit freeze, the company was in need of money. Their access to liquidity had been cut off. This was a risk that companies as large as Wal-Mart were facing at the time. From an investor’s standpoint, one that has cash and access to cash, this represented an opportunity. The company had more assets than liabilities. The company was well run. The core business was solid. They needed liquidity. If they don’t get money, they go bankrupt and fire sale assets. Stockholders get wiped out. Debt holders get pennies on the dollar from the fire sale. If they do get capital, not only do they have a very good chance of surviving, but they have the opportunity to dominate coming out of the economic crisis, as their competition (those not as well run and those that can’t access capital) get decimated. That means, a bigger market opportunity. With that, Ackman rode the stock through bankruptcy, helped convince debt holders of the opportunity and helped negotiate a debt restructuring and helped fund and raise the needed liquidity. Not only did shareholders remain in tact, out of bankruptcy, but all stakeholders made a killing.
Ackman sold General Growth Properties in late 2013, early 2014, turning his initial $60 million investment into $1.6 billion. That’s an eye-popping return, but when you look through the history of the portfolios of the billionaires we follow, it’s common to see the presence of huge winners. Take Icahn and Netflix: As we know, there is no better investor in the world than Icahn, but his performance of the past few years has been highly attributed to one huge winner: Netflix. He turned roughly $300 million into nearly $2 billion in three years.
This demonstrates the importance of taking good, calculated risks, spread across enough opportunities, and in situations that can be influenced by a big investor.
With energy and commodity stocks selling at 20-year lows, many at all-time lows, I think we will see another General Growth Properties in this environment – one of those right place/right time opportunities to make 10X, 20X or 50X on your money. The great thing is, we know how to spot these huge winners like GGP by following the best billionaire investors and activists into deeply distressed stocks, where they can influence the fundamentals, and where the potential upside is unlimited and the downside is limited. A number of billionaires have been bottom picking energy stocks in recent months, including legendary investors Carl Icahn, George Soros and Stanley Druckenmiller.
We currently hold a stock in our Billionaire’s Portfolio that represents one of these “right place/right time” opportunities. And it has all of the trappings to be the next billionaire-maker. Consider this: There is a pioneer activist investor that has 100% of his fund in this stock, he controls 100% of the board, he has his hand-picked CEO running the company, and he has a price target on the stock that is 1800% higher than current prices. Join our Billionaire’s Portfolio service now and we will send you all of the details on this high potential activist-owned stock immediately.
It’s not often that you get an opportunity to buy Apple stock, the world’s most widely held stock, at a discount. But given the broad market declines of the past month, Apple has given the world a nice dip to buy.
As the great billionaire investor Bill Ackman puts it, there are times when “high quality businesses can be purchased at a discount” due to investors that “overreact to negative short term corporate and macro factors.” With all of the skittishness about China and the Fed in recent weeks, nothing sounds more relevant to the moment.
But while Apple is a widely loved company and widely loved stock, at BillionairesPortfolio.com we only have interest when we get to invest alongside an influential billionaire investor, and only when there is a catalyst at work that can reprice a stock higher. Apple ticks those boxes, most notably with the very public presence of the greatest billionaire investor of all-time, Carl Icahn.
We know the power of the Icahn Effect on stocks, and he’s proven that in Apple. But additionally, we have three other top billionaire investors and hedge fund managers that initiated a new and significant position in Apple last quarter.
1) Billionaire hedge fund manager David Tepper initiated a new $315 million position in Apple last quarter. It’s now his third largest position representing almost 8% of his hedge fund. Tepper also said last week that Apple is “a cheap stock.”
2) Billionaire Barry Rosenstein, head of the activist hedge fund Jana Partners purchased $31 million in Apple call options last quarter, a highly leveraged bet that Apple will rebound by the end of the year.
3) Philippe Laffont, head of the $10 billion technology focused hedge fund Coatue Management, added 860,000 shares to his already huge Apple position. Apple is now Laffont’s biggest position, more than $1 billion dollars (or 10% of his fund’s assets). Laffont is former “tiger cub” and is considered one of the best technology stock pickers in the hedge fund world.
All three of these hedge fund managers paid a higher prices for their stock, as Apple traded between $120 and $133 last quarter. Today you can buy these billionaires on a dip – Apple sells for $116.
So what’s the catalyst?
Of course, today, the company rolls out new product, and a new phone upgrade plan that is said to result in more revenue and more profit per phone. This new iPhone leasing program should improve Apple’s margins which would value the company at a higher multiple and reprice the stock higher.
Barron’s quotes a top mutual fund manager that is targeting a 50% rise in Apple stock near term and $200-$250 in three to four years.
At Billionairesportfolio.com, we follow the “best ideas” of the world’s top billionaire investors. You don’t have to be rich to take part. You don’t have to pay the hefty 2% management fee and 20% profit share to a hedge fund. You can follow the lead of powerful billionaire investors by simply buying the same stocks they do, in your own brokerage account.
In the face of all of the fear and confusion surrounding China’s sharp stock market decline in June, and the recent moves by its central bank to weaken the Chinese currency, one billionaire has been using the opportunity to load up on Chinese stocks.
His name is Chase Coleman. He runs Tiger Global, a hedge fund that was seeded by billionaire Julian Robertson.
Few have had the performance over the past fifteen years that can compare to Coleman’s. According to an investor letter from Tiger Global, his hedge fund has returned 21% annualized on long positions since 2001. That compares to a 4.5% annualized return for the S&P 500. This run has made Coleman a billionaire before the age of 40.
Not only does Coleman have more than 20% of his hedge fund invested in Chinese companies, but he has been aggressively building those big stakes over the past two months as China’s stock market slid.
At Billionairesportfolio.com, our strategy is rooted in following the moves of the world’s best billionaire investors. This strategy can be even more powerful when we are able to “buy the billionaire on a dip.” In all of five of the stocks listed below, we can follow the wunderkind billionaire hedge funder, Chase Coleman’s lead, into his plays on China. In three of the stocks, we can buy them cheaper than the price Coleman paid for his shares.
1) JD.Com (JD)- JD.com is currently Chase Coleman’s biggest position in his hedge fund, making up nearly 7% of the fund. This stock has been slammed recently, which offers an attractive entry point into one of the fastest growing e-commerce stocks in China.
2) Alibaba (BABA) – Coleman has 6% of his hedge fund invested in Alibaba. Alibaba was hit hard on a weaker earnings report today, but is a dominant company in China, with huge potential growth. Baba shares are 40% off of the highs of just nine months ago, and trading cheaper than where Coleman bought his shares.
3) Vipshop Holding (VIPS) – This is Coleman’s third largest position in China and he is down on his investment. VIPS also happens to be one of billionaire hedge fund manager John Burbank’s top positions at his fund Passport Capital. VIPS has been a highly volatile stock, going from $19 to $30 this year and back to $19 today.
4) 58.com (WUBA)- In recent weeks, while the rest of the world was panicking about China’s stock market volatility, Chase Coleman added to his positon of the Chinese internet company, 58.com, and now owns more than 6.3% of the company. WUBA sold for $83 just months ago, and now trades at $51, offering huge upside if the stock bottoms here.
5) eHi Car Services (EHIC)- In June, Coleman and Tiger Global initiated a brand new position, (21.5% ownership) in EHIC, the “Uber of China.” He is now down on this position, so you are able to buy eHi at a cheaper price than one of the best hedge fund managers on the planet.
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.
Overnight, China openly devalued its currency. And it may be only the first step in a return to the “weak currency” policies that catapulted its economy to one of the biggest in the world. Such a policy reversal would have huge implications for Chinese stocks, and the geopolitical landscape.
China has slowly and modestly appreciated its currency (vis a vis the dollar) over the past decade, in compliance with the pressures from major trading partners and global economic leaders (namely the U.S.). As a result, China’s economy has slowed, its exports have fallen in competitiveness and Chinese leadership is under pressure.
Additionally, since late 2012, Japan has delivered a massive blow to China through its outright devaluation of the Japanese yen. Japanese goods have become 40% cheaper than Chinese goods, on a relative currency basis, since Japan first telegraphed its massive QE and yen devaluation plans. Japanese growth in exports have nearly doubled that of China over the past three years.
With that, it’s no surprise that China is beginning to fight back.
Longer term, a return to weaker currency, in an effort to reclaim its global export dominance, would create major political turbulence with its leading trading partners. But short term, it could give China’s economy and its stock market a huge shot in the arm.
At BillionairesPortfolio.com, we like to follow the lead of billionaire investors that have large stakes in companies and, as such, the ability to influence outcomes.
Below are five U.S. exchange traded Chinese stocks, each owned by top U.S. billionaire investors:
1) eHI Car Services (EHIC) – Billionaire Chase Coleman of Tiger Global recently initiated a 21.5% stake in EHIC in June. eHi Car is considered the “Uber” of China. The stock hit a high of $19 this year and currently trades at $11.45. A return to its 2015 highs from here would mean a 65% return.
2) JD.Com (JD) – Billionaire Steven Mandel, who runs the hedge fund Lone Pine Capital, owns nearly 3% of JD.com, or almost $900 million worth. JD.com has been called the “Ebay” of China.
3) Alibaba (BABA) – Alibaba is a billionaire hedge fund hotel. Billionaires’ Julian Robertson, Chase Coleman and George Soros all own Alibaba. BABA is billionaire Julian Robertson’s second largest position. The stock’s 52-week high is $120 or 53% higher than its share price today. Alibaba reports its highly anticipated earnings on Wednesday, August 12th.
4) Baidu (BIDU) – Baidu is another stock that is a Billionaire hedge fund hotel. Billionaires Stephen Mandel, Julian Robertson and George Soros all own Baidu. Baidu sold as high as $251.99 over the past year — about 50% higher than current levels.
5) iShares China Large Cap ETF (FXI) – Billionaire Louis Bacon who runs the top performing global macro hedge fund, Moore Capital, recently added to his nearly $200 million position in FXI. The exchange traded fund, FXI, is one of the most liquid and diverse ways to get exposure to Chinese stocks.
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.
