August 7, 2017, 4:00 pm EST Invest Alongside Billionaires For $297/Qtr
| James Bullard, the President of the St. Louis Fed, said today that even if unemployment went to 3% it would have little impact on the current low inflationevironment. That’s quite a statement. And with that, he argued no need to do anything with rates at this stage.And he said the low growth environment seems to be well intact too — even though we well exceeded the target the Fed put on employment years ago. In the Bernanke Fed, they slapped a target on unemployment at 6.5% back in 2012, which, if reached, they said they would start removing accomodation, including raising rates. The assumption was that the recovery in jobs to that point would stoke inflation to the point it would warrant normalization policy. Yet, here we are in the mid 4%s on unemployment and the Fed’s favored inflation guage has not only fallen short of their 2% target, its trending the other way (lower).
As I’ve said before, what gets little attention in this “lack of inflation” confoundment, is the impact of the internet. With the internet has come transparency, low barriers-to-entry into businesses (and therefore increased competition), and reduced overhead. And with that, I’ve always thought the Internet to be massively deflationary. When you can stand in a store and make a salesman compete on best price anywhere in the country–if not world–prices go down.
And this Internet 2.0 phase has been all about attacking industries that have been built upon overcharging and underdelivering to consumers. The power is shifting to the consumer and it’s resulting in cheaper stuff and cheaper services. And we’re just in the early stages of the proliferation of consumer to consumer (C2C) business — where neighbors are selling products and services to other neighbors, swapping or just giving things away. It all extracts demand from the mainstream business and forces them to compete on price and improve service. So we get lower inflation. But maybe the most misunderstood piece is how it all impacts GDP. Is it all being accounted for, or is it possible that we’re in a world with better growth than the numbers would suggest, yet accompanied by very low inflation?
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The dollar has come into the crosshairs of the new president in recent weeks.
Let’s talk about what’s happening and why it matters.
First, it’s highly unusual for the U.S. President to comment on the dollar. The Fed doesn’t even comment. If they do it’s in an indirect way. It has always been a topic deferred to the Treasury Secretary. And the consistent message there has been, for a long time, that we are for a strong dollar.
Things have changed. Or have they? In mid-January, President Trump told the Wall Street Journal that the dollar was “too strong.”
The markets have had a hard time trying to reconcile this comment and stance taken by the administration. But we have to keep in mind: The new president has been a bit less than measured in his words.
When the Fed is in a hiking cycle and other major central banks are still in QE mode, capital will continue to flow into the U.S., and you’re going to get a stronger dollar. When you incentivize U.S. corporates to repatriate a couple trillion dollars they have offshore, you’re going to get a stronger dollar. When/if you pop growth to 4%, you’re going to get higher rates, faster, and you’re going to get a stronger dollar (especially when that growth will lead the rest of the world).
So what is this jawboning on the dollar all about?
As we know, Trump has had an early focus on trade. And he’s used displeasure with trade deficits with countries as a bargaining chip to start conversations about more fair trade terms. But while many have been pulled into the fray over the past few weeks (like Canada, Mexico, the euro zone, etc), this is all about China. My guess is he’s using Mexico as an example for China.
We’ve heard a lot about the $60 billion trade deficit Mexico. It is our third largest trading partner. But that deficit is peanuts when compared to China. Same can be said for Japan, Germany and Canada, three of our other largest trading partners. With China, however, we buy about $483 billion worth of goods. And we sell them only about $116 billion. That’s a $367 billion deficit.
The problem is, it never corrects. It continues, and will continue, unless dealt with. Currencies are the natural trade rebalancer. And with China, it doesn’t happen because they outright dictate the exchange rate. The cheap currency has been/and continues to be its economic driver–and it’s the unfair competitive advantage that has crippled the global economy over time.
Consider this: Over the past 20 years, China’s economy has grown more than fourteen-fold! … to $10 trillion. It’s now the second largest economy in the world. During the same period, the U.S. economy has grown just 2.5x in size. And in the process a global credit bubble was formed. China sells us goods. We give them dollars. China takes our dollars and buys U.S. Treasuries, which suppresses U.S. interest rates and incentivizes borrowing, which fuels more consumption. And the cycle continues.
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11/16/15
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.
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9/16/15
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.
8/11/15
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.
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