[Our post on Bill Ackman, below, was one of our most widely read stories on Forbes and Yahoo Finance.]
Billionaire investor Bill Ackman 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.
Of course, if you invested in his fund back in 2004, you had to pony up a huge initial amount, likely $5 million or more. You had to agree to remain invested in the fund for a specific period of time, likely three years at minimum. And you had to pay Mr. Ackman a big cut of that handsome cumulative return. With that, after Ackman has taken his cut throughout the past decade, investors who have been in his fund since day one sit with a cumulative return of 627%. They put all the money up, but they share in just a little more than half of the total profits generated on their cash during the past 10 years. Still, no one would argue with a seven-fold return over a decade. It’s outstanding.
In his recent letter to investors, Ackman explained that there is no need to pay him fees. He admits that following his portfolio is easy. He says “free riders” can follow him “with none of the costs or the illiquidity, and with all of the upside.” In plain English, this means you can piggyback his investments without paying him fees, without putting up a multi-million dollar minimum investment in his fund and without having your money locked up for three years.
How is this possible, you might ask? When Ackman’s fund, Pershing Square Capital Management, takes a stake of 5% or more in a company, he is required to notify the SEC within 10 days, through a public disclosure filing called a Schedule 13D. And then, on a quarterly basis, Ackman is required to file form 13F with the SEC. This filing discloses all his fund’s positions. Ackman says, looking back, in 87% of the activist campaigns they’ve launched, the public could have bought the stocks at a “bargain price” even the day after he made his public filing.
While Ackman is one of the best-performing investors on the planet, his portfolio might be one of the easiest to replicate. His fund holds just six positions.
Here’s a look at the holdings of Ackman’s $12 billion Pershing Square fund as of its last filing:
Allergan AGN +0.33% (AGN) – AGN represents 39% of his portfolio. He has a nearly $5 billion stake in the company.
Air Products & Chemicals APD +0.89% (APD) – APD represents 21% of his portfolio. He has a $2.6 billion stake.
Canadian Pacific Rail (CP) – CP represents 20% of his portfolio. He has a $2.5 billion stake.
Burger King Worldwide (BKW) – BKW represents 8% of his portfolio. He has a stake worth $1 billion.
Platform Specialty Products Corp (PAH) – PAH represents 7% of his portfolio. He has a stake worth nearly $1 billion.
The Howard Hughes Corporation (HHC) – HHC represents 4% of his portfolio. He has a stake of $563 million.
Ackman has 80% of his fund’s money in just three stocks. 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.
Buffett’s Berkshire Hathaway (BRK-A, BRK-B) is back on top again; it has has returned 18.2% year to date in 2014, double the return of the S&P 500, and better than 99% of all domestic equity mutual funds on the planet.
What’s even more amazing is that, between 1980 and 2003, Buffett returned an incredible 40% a year.
That turns $10,000 into an incredible $32.1 million, and $100,000 into $320 million.
Buffett achieved this using a technique recently divulged in two academic papers. One came out of a major Ivy League university. Another was authored by two professors from a top public business school. In both papers, the researchers analyzed all of Warren Buffett’s holdings over the past 35 years.
These academic papers are very long, 50 pages each. But I have summarized the key points from each in simple enough terms that anyone, even a novice, could understand it.
Buffett, due to his incredible size now, will never be able to put up 40% years again. But an individual investor can, and should. Warren Buffett has said it himself. In an interview with BusinessWeek he said: “If I was running $1 million today, or $10 million for that matter….. I could make you 50% a year… No, I know I could. I guarantee that.”
The secret of the hedge fund industry is that the best-performing funds are nearly always the newest — and usually the smallest. These are great funds to piggyback, as they are structured to perform in any market condition, and they tend to put up big numbers.
Sure, everyone these days has heard of Carl Icahn, George Soros, even folks such as David Einhorn. But how many people have heard of Joseph Edelman? You may be surprised to hear he runs the best-performing hedge fund in the world today: Perceptive Advisors.
Perceptive has returned an incredible 42% annualized since 1999. That means $10,000 invested in this hedge fund at its inception would be worth an incredible $1.3 million dollars today.
You’re probably saying, “Sign me up!” Well, unfortunately, the SEC has made hedge funds such as this available only to the super rich. To invest in a fund such as Perceptive Advisors, you have to meet accredited investor criteria, which means you must have at least $1 million in investable assets or an earned income of more than $200,000 ($300,000 with a spouse) over the past two years. Even if you fit the profile of an accredited investor, funds like Perceptive tend to have very high minimums ($5 million or more). Furthermore, Perceptive charges a hefty 2% management fee and 25% performance fee to investors.
So what do you do?
This has been an issue facing the broad investing public for a long time. The deck is stacked squarely against the average investor. Rich investors have access to good strategies; average investors get stuck with dog-meat mutual funds and stock-tip hype perpetuated through the media.
But don’t worry: If you’re reading this note, you have an alternative. We are filling this void. We are pioneering a change to the one-sided model that has driven Wall Street forever. They’ve given you big losses in bad years, and only a fraction of the returns in good years. In short, the Wall Street model is set up to give you all the risk, and they get the lion’s share of the return.
Wealthy, sophisticated investors don’t accept that treatment. Nor should you.
That’s why my partner and I have used the power of the Internet to design a new model; we give average investors across the world access to sophisticated hedge fund strategies and analysis. Our Billionaire’s Portfolio is the only service in the world that gives the average person an opportunity to co-invest with the world’s greatest billionaire investors and hedge funds including Perceptive Advisors. It’s a concept we call piggyback investing. This has proven so groundbreaking that Barron’s recently ran a feature piece about us in their Electronic Investor Column.
Furthermore, we know this system works; in 2013 we piggybacked three different top-performing hedge funds to gains of 260%, 220% and 110%. Already this year we have piggybacked one of the best-performing hedge funds to a 72% gain, 10 times more than what the S&P has returned this year. Furthermore, this stock was the top-performing stock in all of the S&P 500 this year.
Perceptive Advisors is the perfect hedge fund to use our groundbreaking piggybacking concept on. Perceptive specializes in taking big positions in small-cap biotech stocks, which can double, triple or even go up 1,000% in a year. Joseph Edelman is one of the most seasoned biotech investors on the planet. He employs numerous analysts, all with life-science backgrounds and many with PhDs, from the world’s top schools, including Princeton and Harvard.
Perceptive is essentially a biotech “think tank,” and they spend millions of dollars on research before they make an investment in a stock. That is why they are so good, and why so many of the stocks they have owned in the history of their fund have returned 200%, 300%, even 1000% in less than a year.
Last year Perceptive returned 65%, doubling the S&P 500’s return; they owned four stocks in their portfolio that went up more than 500%.
Biotech stocks are event driven, meaning they move up or down on news, such as clinical trial data and FDA approvals. They have little correlation to the overall stock market or the economy, and that is why funds such as Perceptive made money in 2002 and 2011, when the stock market was down double digits.
After the recent biotech selloff, there may be no better time to piggyback one of Perceptive’s small-cap biotech stocks.
Bill Ackman, in his most recent quarterly letter to his investors, just divulged a secret we have been telling our subscribers for almost three years now: If you want to get rich, piggybacking the trades of the world’s best billionaire investors and hedge funds could help you attain this goal.
Ackman stated the following in his most recent quarterly letter to his investors: “In 26 out of 30 of our activist commitments, the day-after price was still a bargain versus the ultimate price achieved from our involvement with the company.”
This means if you bought every stock Bill Ackman bought the day after it was announced, you would have made money on 26 out of 30 stocks (87%). More important, you would have made 21 times your money. That turns $100,000 into $2.1 million, or $50,000 into more than $1 million.
Over the past week, I received hundreds of emails concerning Carl Icahn’s announcement that he took an 8% position in Hertz (HTZ). We know Icahn has already publicly stated he wants to actively engage with Hertz management and its CEO, but there has been no word about Icahn pushing Hertz to merge or sell itself.
Here is why: First, regulators would never approve a Hertz-Avis merger. The two entities represent too large a share of the industry. It would essentially be a monopoly. So a merger with Avis isn’t happening — at least in my opinion.
Though, given the quick 25% run up in Family Dollar (FDO) last month after Icahn forced a merger with Dollar Tree (DLTR), it’s easy to see why investors are hoping for a similar result. Clearly, people don’t want to miss out on the next FDO. On that note, you can read some great analysis of the Family Dollar deal, where my partner and I predicted the merger and picked the bottom in Family Dollar stock (read that here).
But again, this is not going to happen with Hertz. Icahn and numerous other investors are long Hertz. Hertz is actually one of the most popular stocks owned by top billionaire hedge fund managers, because it’s a pure play on the improving economy, and rental car companies have lagged airlines in terms of raising their prices.
So many hedge funds are betting on Hertz increasing its prices, like the airlines did last year, and they are betting that demand will continue to improve with the recovery in the economy. It’s that simple.
Also, this is not a classic Icahn play. He typically comes into a deeply depressed stock selling near its 52-week low or multi-year lows. Icahn purchased Hertz near the stock’s all-time high.
But what Icahn is doing is playing his “change” card. He has recently laid out his evidence, based on his history as an activist investor, of how replacing a CEO is a powerful catalyst for producing shareholder wealth creation. And one of his fellow shareholders in Hertz is already at work on that strategy: Fir Tree Partners is pressuring the board to oust the CEO.
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.
Fact #1: Carl Icahn has returned 27% annualized over the past 52 years.
Fact #2: Academic studies from Harvard, Duke and NYU have shown that activist investors like Carl Icahn have produced an excess annualized return of 20% on average (i.e., the return above the S&P 500). So these studies show activists doing 30% relative to 10% in the S&P (during the period analyzed).
With that, when you see a top activist like Carl Icahn down on a stock, and the stock is underperforming the S&P 500, it presents a very intriguing opportunity — perhaps even a time to back up the truck.
This is the core strategy we implement in our Billionaire’s Portfolio service. We want stocks owned by the world best billionaire activist investors — particularly when they are down on them, and these stocks present an asymmetric risk/reward (little downside, a lot of upside opportunity).
Icahn is down more than 20% on his 6% stake in Transocean, as his average cost for Transocean is around $50. Transocean is down 19% year-to-date and is underperforming the S&P 500 by 26%.
Based on Icahn’s track record and the academic studies on the performance of activism, if Transocean fell in line with that history, we could see at least a 45% move for RIG, and that is assuming the S&P 500 returns zero.
Even better, you get to buy Transocean at a cheaper price than what Carl Icahn paid, and the stock has just formed a double bottom. You could pick the bottom in this stock.
Transocean recently reported better than expected earnings, but the stock has been weak due to a correction in oil prices — a move that is bucking the trend of rising geopolitical tensions (for the moment). Transocean has also recently declared its dividend, which always causes a high-yielding stock to temporarily sell off.
For a higher-risk way to play it, buying the Feb 2015 $40 call options for $2 could net you as much as a 600% return if Transocean goes up 45% by the end of February 2015. That’s $1,200 for every $200.
Will Meade
President of The Billionaires Portfolio
A new ETF was launched today that has a very similar name to our website and research.
Of course we at Billionairesportfolio.com like the strategy of following the smart money (the world’s best billionaire hedge funds and managers). In fact, we developed this process back in 2003 through our research at one of the top independent research firms.
The problem we have with the iBillionaire ETF is that the founder, Raul Moreno, isn’t a market professional but instead is a serial entrepreneur: tech today, finance tomorrow. With that, I am highly skeptical of his ability to construct a study with integrity and robustness that would lead to his claims. What are those claims? He claims on CNBC yesterday were that his “index” has outperformed the S&P 500 by 500 basis points (annualized) over the past eight years. To my knowledge, he created this index recently and cannot possibly claim a “return” over an eight-year history. Unless it’s an auditable return within the context of a money-management program, the performance claims attached to this ETF should be taken with a grain of salt (i.e., beware).
Yet I would be most concerned with the following:
1) iBillionaire includes George Soros in their index. This is ludicrous. Soros has been retired for over 10 years. His family office, managed by his son, is highly complicated, with assets spread across a variety of markets and themes. To piggyback his stock picks is of little value.
2) iBillionaire includes Richard Chilton in their index. Chilton is a relatively unknown “seed manager” who allocates money to hedge fund managers; the performance of his funds are average at best, and they own hundreds of stocks.
3) iBillionaire includes Bruce Berkowitz, the ex-stock broker who runs a mutual fund out of sunny Miami. Berkowitz imploded in 2011, underperforming the S&P 500 by a whopping 34 percentage points. We’re not sure he’s a guy you want to follow either. Berkowitz is not a billionaire. Though if you like Berkowitz and his investing style so much, you can simply buy his mutual fund, which has almost the same expense ratio as the iBillionaire ETF.
4) iBillionaire is basically an S&P 500 index clone. It holds only large-cap S&P 500 stocks, such as Apple, IBM and Coke — stocks that pretty much everyone already has in their retirement portfolio. So there is a very good chance you probably already own these stocks in your retirement portfolio or 401K, and you would just be duplicating your holdings by purchasing this ETF.
5) Also, according to my statistics, the iBillionaire Index has almost a 95% percent correlation to the S&P 500, so, again, you are basically getting the same exposure as owning the S&P 500 ETF ($SPY), except $SPY is 75% cheaper.
6) Lastly, and perhaps most importantly, the iBillionaire ETF has no track record, nor does its manager. At best, the numbers they promote are just a hypothetical backtested return with very little statistics given to validate it. At worst, those numbers could be completely made up, given there is no regulatory and auditing scrutiny given to the attributes of a newly created index.
In conclusion, the iBillionaire ETF looks like a passive way to get exposure to the biggest stocks in the S&P 500, with the wrapper of a hot, sexy concept (billionaires).
Will Meade
President of The Billionaires Portfolio (the first ever documented service that piggybacked the world’s best billionaire hedge funds and managers).
Billionairesportfolio.com
Trulia jumped 35% today and is up more than 50% over the last 2 months on rumors that the two top online real estate websites, Zillow and Trulia are going to merge.
You won’t find merger situations like this looking at charts, fundamentals or research reports. The best way you to predict which stocks will be acquired is by following the smart money, the world’s best billionaire investors and hedge funds.
Billionaire Chase Coleman and his Tiger Global Fund, probably the best technology stock picking hedge fund on the planet, owned almost 5% of Trulia. You could have piggybacked Tiger Global and purchased Trulia for $27 a share this year. That would have given you a double in less than five months.
At BillionairesPortfolio.com not only do we track every stock pick of the worlds best billionaire investors and hedge funds, but we only recommend them when they are selling at the same price or less than what the billionaire investor or hedge fund paid.
We have 20 stocks in our Billionaires Portfolio all owned by the worlds best billionaire hedge fund managers, all of which could be acquired for a 50% to 100% premium on any given day. To get a list of these stocks in our portfolio just click here.
Will Meade
President of The Billionaires Portfolio
You will never beat the stock market, unless you listen to this.
Even with more than 15 years of hedge fund experience, and a decent education, I would never invest a dollar unless I knew for sure that one of the top billionaire investors or hedge funds owned the stock. It’s just that simple.
I’m sorry to break it to you, but you can’t beat the market trading on news, or your stock broker’s latest tips, or following the latest musings on CNBC. It’s a good way to lose a lot of money, though.
There are only about 35 truly great investors in the world, ones that have consistently outperformed the market over the past 10-15 years. Some of these names you may recognize, like Carl Icahn, David Tepper, Dan Loeb and Warren Buffett.
So why make investing so difficult? Just simply invest with the best!
That’s what I do. I don’t own a mutual fund or listen to a financial advisor. I just buy what Icahn, Loeb or Buffett buys.
And I go one step further. Since I have actually traded for a multi-billion dollar hedge fund, and I know how hard it is to buy a big position in a stock, and how long it takes, I know the world’s best investors are patient and accumulate stocks on corrections and dips. That means, many times, I have a chance to pay the same price or better than what these billionaire investors and hedge funds paid. I call it, “buying a billionaire on a dip.”
It just makes sense, doesn’t it?
For example, let’s say I know one of the top billion-dollar activist hedge funds, which has averaged 30% a year over the past 15 years, owns 10% of a stock and is down on that stock. And I know this particular fund’s average holding period is two years. Why wouldn’t I want to own that stock?
It’s simple. It’s a statistical bet that puts the odds in my favor. And that is the formula for making money over time. Plus it lets me sleep at night knowing a big, influential investor is working relentlessly on my behalf to create value.
So I don’t throw darts. I don’t try to predict the future. I just bet alongside those that have a lot of money on the line, the power and influence, and a record of making a lot of money.
At BillionairesPortfolio.com, all we do is track the 30 to 40 best billionaire stock pickers, activists and hedge funds. And we look to get involved in stocks where we can pay the same price or less than they pay. Pretty simple, right?
Our stock picks gained 34% in 2013. And my studies of “buying the best billionaire investors on a dip” have shown this strategy would have made 31% over the past 12 years. That compares to a 6% return in the S&P 500.
Will Meade
President of The Billionaires Portfolio
Billionairesportfolio.com
