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.
Billionaire investor Carl Icahn made news again this week, with an open letter to Apple’s CEO, Tim Cook. As most know, the “Icahn Effect” has been a powerful one for Apple shareholders. Since he first announced a stake in Apple in August of 2013, the stock has more than doubled. In fact, each time Icahn publicly talks about Apple, the stock tends to go up.
But this time, instead of following Icahn into Apple, there is a another Icahn-owned stock that offers more upside. Plus, it comes with an added bonus: You can buy it at a cheaper price than what Icahn paid for his shares.
Icahn initiated a position in Manitowoc (symbol MTW) in late 2014 at $20.03 a share. He then added to his position in early 2015 at $20.69 a share. The stock now sells for $19.75. So the world’s best investor just did all the work for you. By his actions, he’s telling us that he thinks Manitowoc is cheap at $20.40. And that’s almost a $1 more than where the stock trades today.
Icahn owns almost 8% of Manitowoc now. And in February the company agreed to Icahn’s demand to separate its two businesses into two different companies, one for its crane business and the other for its food service business. According to analysts, this separation will create value for shareholders and could reprice the stock to $30 a share — or 50% return from its share price today. In addition to the potential revaluation of MTW shares from the split of its business lines, MTW is cheap on its current valuation. The stock trades at just 14 times forward earnings.
So today, you can get an edge on the world’s best investor by buying Manitowoc at a cheaper price than he did. And he is working for you, as a vocal shareholder, to unlock potentially 50% more value in the stock. Not a bad deal.
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.
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.
The magic formula for investing is “risking a little, to make a lot.” When you do this, and spread your risk, you only have to be right a handful of times to make outsized returns.
With this in mind, let’s take a look at two stocks that are among the most widely traded in the world, Facebook and Apple.
The average consensus analyst target price target on Facebook is $90. That’s only 12% higher than current levels. By purchasing Facebook today you are risking a lot to make a 12% potential return. Facebook is trading at 75 times trailing earnings and 37 times forward earnings. High P/E stocks tend to underperform in rising interest rate environments. And that’s precisely where we are headed in the coming months.
What about Apple?
The average consensus analyst price target on Apple is $140, just 10% higher than Apple’s current share price. At best, buying Apple today you will get a potential 10% return. Apple trades at 18 times trailing earnings, and 15 times next year’s earnings estimate. While it’s a stock that is far more fairly valued than Facebook, a 10% upside doesn’t compensate for the downside risk.
So, while Apple and Facebook are the darlings of the stock market, neither offer a potential reward great enough to compensate for the risk to your capital.
On the other hand, here is an example of a stock that does: Chicago Bridge & Iron, symbol CBI.
Chicago Bridge & Iron Company is a Warren Buffett-owned stock. It has an average consensus analyst target price of $72. That’s more than 52% higher than its current share price. The stock trades for just 9 times trailing earnings, and 7 times forward earnings. A low P/E ratio is what Buffett calls a “margin of safety” — it gives him limited downside with potential for big upside. Buffett owns more than 8% of Chicago Bridge and Iron.
Billionairesportfolio.com gives self-directed investors the opportunity to piggy-back an actively managed portfolio of low risk-high reward stocks — all owned by the world’s best billionaire investors.
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, political stalemates, perceived asset bubbles — you name it. As it relates to stocks, they’ve all been dead wrong.
The S&P 500 is now more than 200% higher than it was at its crisis-induced 2009 lows, and 34% higher than its all-time highs. Meanwhile, the Nasdaq 100 is still shy of its March 2000 high of 4816. That creates a scenario for an explosive rise still to come for the Nasdaq.
For those that have been cautious about the level of stocks, many have argued that the economy is fragile. The bond market disagrees. 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 yield curve analysis, the Cleveland Fed puts the current recession risk at just 5.97% — a level more consistent with economic boom times.
With this economic backdrop in mind, our research at BillionairesPortoflio.com shows that stocks will continue to march higher, likely a lot higher.
Consider this: 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 2,917 by the end of this year, when the Fed is expected to start a slow process toward normalizing rates. That’s 38% higher than current levels. Below you can see the table of the S&P 500, projecting this “normal” growth rate to stocks.
In addition to the above, consider this: The P/E on next year’s S&P 500 earnings estimate is just 17.1, 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. A P/E at 20 on next year’s earnings consensus estimate from Wall Street would put the S&P 500 at 2,454, or 16% higher than current levels for stocks.
What about the impending end to zero interest rates in the United States? Well, guess what? Asset prices are driven by capital flows. Barron’s reports a $1.63 trillion spread between bond-fund inflows and equity-fund outflows from January 2007 to January 2013, said to be the widest spread ever. Over that period, $1.23 trillion flowed into bond funds and $409 billion exited equity funds. This means, an official end to zero interest rates should mean a flood of capital leaving bond markets and entering equity markets.
Now, how might all of this bode for the Nasdaq? In March 2000 when the Nasdaq traded at its all-time highs, the index traded at well over 100 times earnings. And the ten year yield was 6.66%. As an investor, you could exit a market with record high valuations and get a risk free, nearly 7% return on your money in Treasuries. Today, the Nasdaq has a price/earnings multiple of just 21. And the ten year yield is a paltry 2%. This dynamic continues to underpin demand and capital flows favoring stocks.
With that said, here are the top four constituents in the Nasdaq 100, their current valuation and the equivalent investment option in the year 2000, when the Nasdaq last peaked.
1) Apple (AAPL) – Apple trades at just 15 times next year’s earnings estimates. Back in 2000, Microsoft (MSFT), the biggest constituent company of the Nasdaq traded 57 times forward earnings.
2) Google (GOOG) – Google trades at 19 times next year’s earnings estimates. Back in 2000, Cisco (CSCO), the second biggest constituent company of the Nasdaq traded 127 times forward earnings.
3) Microsoft (MSFT) – Microsoft trades at just 16 times next year’s earnings estimates. Back in 2000, Intel (INTC), the third biggest constituent company of the Nasdaq traded 43 times forward earnings.
4) Facebook (FB) – Facebook trades at 39 times next year’s earnings estimates. Back in 2000, Oracle (ORCL), the fourth biggest constituent company of the Nasdaq traded 103 times forward earnings.
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.
This morning the Swiss National Bank (SNB) surprised the world by abandoning its managed Swiss franc floor against the euro. The SNB said as recently as Monday that they remained committed to the 1.20 minimum EUR/CHF rate, a floor they have maintained for three years. They also announced a further reduction to an already negative deposit rate. Swiss bank account holders will now be paying 0.75% for the privilege of having funds on deposit in the Swiss banking system.
The move by the SNB created a violent 28% collapse in EUR/CHF.
And, as you can see in the chart below, there was an equally violent collapse in USD/CHF.
After the initial massive gap in CHF pairs, the CHF is now trading well off of its strongest levels of the day. SNB chief Jordan said in his postpartum press conference that the Swiss franc dramatically overshot and that he expected it to ultimately reflect the fundamentals of a soft Swiss economy with negative deposit rates. This statement acknowledges the huge dislocation in USD/CHF that has resulted from the SNB’s actions.
The Fed and the SNB remain on divergent monetary policy paths. The Fed is exiting emergency policies, while the SNB is going further down the path of aggressive, extraordinary easing policies. This fundamentally drives capital out of Switzerland and into U.S. assets. The Swiss can now buy 10% more U.S. treasuries and U.S. stocks than they could yesterday at this time.
Why did the SNB do it?
Why did they reverse course on a policy they’ve held steadfastly for three years, and to which they have promised to remain committed? It’s likely because they are expecting big and bold actions from the ECB next week. The ECB has been explicitly devaluing the euro through their policies and policy guidance. Meanwhile, the Swiss National Bank has been persistently gobbling up euros in defense of their EUR/CHF exchange rate floor. That euro stockpile has been persistently losing value, and all evidence points to much larger losses ahead. With that, it appears most likely that the SNB decided to step out of the way of the downhill freight train, the euro.
For global markets, attention continues to be squarely on Europe. And today’s events highlight that point. Stocks, interest rates and currencies have been swinging around, driven primarily by fears that the deflationary problems in Europe are a deeper signal of weak global demand. But weak global demand isn’t a new problem. It has been a clear problem from the outset of the 7+ year global financial and economic crisis. That dynamic has been improving, not worsening. Europe, however, is facing deflationary pressures and no growth due to other factors, most importantly, while they should have been rolling out policies to promote growth in 2010, they further strangled growth by tightening the fiscal belt.
We will hear from the ECB on January 22. European officials have been on a media assault in recent days in an attempt to manage expectations on the ECB decision. With today’s SNB actions, an announcement of outright purchases of sovereign debt by the ECB are expected, and likely more to go along with it (like a further cut in the deposit rate).
On January 25th we get results on the Greek elections, which will determine whether or not a new administration takes the reins. The anti-euro, anti-bailout, Syriza party is favored to take control. This poses a risk to the Eurozone and the euro. This party is expected to, at best, demand softer conditions on their bailout and reform program. At worst, they are a threat to take Greece out of the European Monetary Union altogether.
But if we look at yields in the weak countries in the EMU (including Greece), those markets tell us that Greece isn’t a threat to euro zone stability.
Instead of yields in the troubled euro zone countries trading at unsustainable/default levels, yields in Italy and Spain are now trading below that of U.S. 10 year yields (well below 2%). Greek 10 year yields were trading over 40% at the peak of the European sovereign debt crisis. Now, Greek yields are well below 10%. So again, for those looking for smoke before fire, the European sovereign debt markets are giving you no signals.
For now, it’s about how big and how bold Draghi and company will be. Big action should be very good for the global economy and very good for global markets.
The theme of the year has been divergent policies, with the Fed positioned to exit emergency policies this year, while the ECB and BOJ are positioned to do more aggressive QE. When you step back from the day to day noise, that theme continues to play out, and it is good for global stocks, good for the dollar and good for global growth.
If you are managing more than $100 million, you are required to report to your holdings to the SEC within 45 days of the end of the quarter. And tonight we began to see those disclosures hit, for a peek into the activities of the world’s best billionaire hedge fund managers.
Now, 13-F filings provide a ton of information, but you have to know exactly what to look for to make them useful.
With that being said, here is what caught my eye tonight from the quarterly holdings of the world’s best billionaire hedge fund managers.
Apple ($AAPL)
Every top hedge fund seemed to either buy or increase their position in Apple (AAPL), including billionaire Leon Cooperman. Cooperman initiated a brand new position in the stock, buying more than 1 million shares in Apple last quarter (before it split). We said almost two months ago on this blog that Apple’s 7-for-1 stock split in June would be a positive catalyst to push the stock higher. In an instant, it would make the most widely held stock in the world affordable again for the retail investor. Apple is up almost 25% over since announcing the split, and is currently trading near a significant psychological round number of $100.
Expect a big fuss to be made about the activity in Apple shown in these filings, but this one looks old and tired. Apple was a good buy after its June stock split and was an even better buy when I called the bottom in the stock more than a year ago (see it here). And that was well before Carl Icahn or any major hedge fund owned the stock. Bottom line, I would not buy Apple here and would actually sell it when it hits $100.
Facebook ($FB)
The world’s best-performing hedge fund manager, David Tepper, added to his position in Facebook, but again Facebook had a nice run last quarter and is now up more than 40%. So piggybacking Tepper on Facebbook (which usually is a can’t-miss trade) today is again a stale trade. I don’t like it.
Zynga ($ZNGA)
Now here is a trade that could be compelling. Patrick McCormack, a Tiger Cub and head of Tiger Consumer Management, initiated a new position in Zynga last quarter at prices much higher than what Zynga is selling for today. By my estimates, Tiger Consumer purchased its new 18 million share stake in Zynga at $4, or 28% above its current price.
After selling off after a bad earnings report, the stock looks like it has found support and a double bottom at the $2.85 area. So Zynga could be a good trade to piggyback from Tiger Consumer.
Warren Buffett and Verizon ($VZ)
Buffett sold his entire position in Starz ($STRZA) and Conoco Phillips ($COP), and initiated a new $365 million position in Charter Comunications (CHTR).
Plus, as we predicted in February in our Forbes piece, he increased his position in Verizon. He now owns more than $700 million dollars worth of Verizon Stock ($VZ) after adding an additional 4 million shares.
The fact that Buffett increased an already huge stake in Verizon, and the stock has been flat over the past four months, makes VZ a very compelling trade to piggyback.
Billionaire Hedge Fund Manager John Paulson, Gold and Biotech
John Paulson initiated and added to positions that were heavily weighted in the biotech and healthcare sectors. Paulson initiated new positions in Allergan ($AGN) and Questcor Pharmaceuticals ($QCOR). And he added to his stake in Vanda Pharmaceuticals (a stock we owned almost two years ago in our Billionaire’s Portfolio service, at $4.50).
As for his gold position, no change. But he doubled his position in Dollar General (DG), and this could be the trade to piggyback. The stock has traded flat over the past four months, it’s rumored to be a merger or takeover candidate, and we have a big influential investor that has upped his stake, dramatically. That’s a good formula for success.
Tiger Global, Viking Global and Netflix ($NFLX)
Tiger Global initiated a nearly $200 million dollar position in Netflix (NFLX), a savvy move given Netflix is up almost 40% over the past four months. Billionaire Andreas Halvorsen of Viking Global also initiated a new position in Netflix, buying almost $600 million worth of the stock last quarter.
Billionaire Dan Loeb of Third Point
Billionaire Dan Loeb of Third point purchased new positions in Rackspace (RAX), IAC/Interactive Corp (IACI), and Ally Financial (ALLY). Third Point owns almost 10% of Ally, which recently started trading in April as a spinoff. Of all these new positions to piggyback, I like Rackspace (RAX) the best. Rackspace is down almost 20% year-to-date and has been rumored to be a takeover candidate.
Bill Ackman and Pershing Square
Ackman trimmed most of his real estate holdings, including Home Properties ($HME) and Apartment Investment and Manangement ($AIV), perhaps signaling that he believes REITs and real estate stocks have topped out. Ackman also increased his already large stake in Allergan ($AGN), showing that many of the top billionaire hedge fund managers are still very bullish on healthcare-biotech stocks, as well as M&A. John Paulson also took a large position in Allergan (AGN), a healthcare stock that is in the process of being acquired.
Billionaire Seth Klarman of Baupost Group
Seth Klarman is probably one of the worst hedge fund managers to piggyback. He prefers to hold a significant amount of cash and prefers illiquid, private investments to pubic ones. Klarman did purchase a new stake in EBAY (EBAY) and Theravanace Biopharma (TBPH), a stock that recently went public and is up more than 30% over the past three months. Klarman sold his entire stake in BP Plc (BP).
Here are the takeaways from the Q2 filings of the world’s best billionaire hedge funds: First, the best hedge fund managers are still bullish on technology, healthcare and biotech stocks, but are turning bearish on energy stocks.
The top billionaire hedge funds took advantage of the mini crash in technology stocks during the second quarter to add to or initiate positions in some of the best names in technology: Apple, Facebook and Netflix. This bet paid off huge for many of these managers, as all three of these stocks greatly outperformed the S&P 500 over the past few months.
Lastly, many of these investors own the same stocks, the most popular being Family Dollar, Dollar General, EBAY and Apple.
