I found that if I took a basket of the biggest and best billionaire activist investors and hedge funds (many of the names we follow in our service, The Billionaires Portfolio) and bought just the stocks they owned, whereby they had initiated an activist campaign against a company, that basket returned 31% annualized over the past 12 years. The S&P 500 returned just 6.1% in the same period.
This means a $20,000 investment 12-years ago, would be worth over $500,000 dollars today. The same investment in the S&P 500 would just be worth $40,000 today..
More importantly, the stock picks of these top activists had only one losing year during the period and that was of course 2008.
In 2008, the stocks in this basket of the top activists lost 18.2% versus a loss of 37% in the S&P 500. So in our study, these activist investors beat the stock market by more than 4 times on an annualized basis or nearly 23 percentage points. But they lost significantly less than the stock market in a losing year (in fact, a terrible year).
To put this return in perspective, no other mutual fund, ETF or private money manager on the entire planet has a returned anywhere close to 31% annualized over the period. The best performing mutual fund in the world returned 14.5%, which is not even half of the annualized performance of our basket. And that same mutual fund lost more than 45% in 2008!
Bottom line: By just following my Activist Select Strategy, you would have outperformed over 20,000 mutual funds, 5,000 money managers and 1,000 ETFs. And you would probably be considered the best investor on the planet.
Yet my next study has even better news. In my next study I took the same top Activist Billionaire Investors and Hedge Funds but this time I only tracked the performance of the activist stocks that fit the following criteria: 1) They had to be a small cap, meaning a market cap under $2 Billion and or 2) had to have a low share price under $15 combined with a market cap of at least $500 million and the results were astonishing.
The average annualized 12 year return for, what I call the Activist Small Cap Strategy, was an amazing 52% annualized over the last 10 years. Again this compares to only a 6.1% annualized return in the S&P 500.
Therefore a $20,000 investment in the activist small cap strategy would now be worth more than $3,000,000 million dollars today!
Let me repeat that, because I know it sounds too good to be true, but by only selecting the lowest priced and smallest cap stocks owned by the best activist investors and hedge funds $20,000 investment in 2002 would be worth more than $3,000,000 million dollars today. Of course these huge returns come with a more volatility, yet this activist small cap strategy still had only one down year (2008) over the last 12 years, another amazing statistic.
So there a couple of conclusions you should come away with from this study. First as I have told you before there is no more powerful strategy in the world from a risk reward perspective than piggybacking the stock picks of the world’s best activist investors and hedge funds. Secondly Activist investors do not need the stock market to produce these huge annual returns as proven above, even when the market went through a 10 and 12 year period of low to medium single digit returns, the stock picks of these activists still produced huge market beating returns of 31% to 52% a year!!
Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
Warren Buffett once famously said in a BusinessWeek interview that he could return 50% a year if he was managing less than $10 million. Moreover, he guaranteed he could do it.
So if you are not returning at least half of what Buffett said he could do on average, then you are failing as an investor – or your financial advisor/broker is failing you.
With that in mind, here’s my rant/advice. Make 2014 different …
First, fire your financial advisor, stock broker, financial planner or whatever they call themselves nowadays! Yes, I know it’s your golfing buddy, your neighbor, the dad of your kid’s friend, etc…
But let’s be honest, he lost you 40% to 50% of your money in 2008. And even more offensive, in one of the best bull market runs in decades from 2009-2013, I’m willing to bet he only returned you single digit annual returns. Consider this: Even the most basic low cost stock market index funds returned 14% a year annualized over the past five years.
How about 2013? A low cost stock market index fund returned more than 25% in 2013. Your account returned only 9% to 10%, right? Why? Because your broker/advisor diversified you into bonds and gold, which both produced negative returns last year. Worse, they had you in cash, all of which substantially ate away at your portfolios returns.
So quit paying thousands of dollars every year in fees on your account to someone who has failed you.
You paid this so called financial expert to help you beat the market and instead he just siphoned huge fees and commissions out of your pocket, while exposing you to above average risk.
Bottom line, no one deserves to get paid if they can’t perform. I don’t care what industry or profession you are in, when you don’t perform, you get fired. It’s that simple. I’ll let you in on a little secret. It’s not even their fault. It’s a business model that has been set up to use and abuse you. He is just there to sign up accounts. It’s highly likely he knows nothing more about investing than anyone else you pass on the street everyday. So get rid of your financial advisor and save yourself $3,000-$6,000 every year per $100k in assets.
Okay, so what do you do? Take control of your money. Open up an online brokerage account. You will pay cheap commissions — $5 a trade or less. Folks, it’s 2014! No one who has a computer, smartphone, iPad or laptop needs a guy down the street or a guy sitting in some call center milking them for fees and huge commissions on their investable assets. It’s not 1980, where you have to call your broker for a stock quote. Now you can watch your portfolio, get all of the information possible, and even buy or sell a stock right from your phone. Wake up and use modern day technology. Save yourself a bunch of money.
Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
What do Apple, Office Depot and Facebook have in common? I’ve used all three of these stocks in my stock replacement strategy.
My stock replacement strategy is a technique I use to get maximum leverage, while owning some of the greatest and highest potential stocks in the world. It allows me to purchase stocks like Facebook and Apple at 1/10 or 1/20 the price. That leverage makes gains of 100% or even 1000% possible.
Now, for those readers of my blog, you’ll remember this technique was taught to me early in my career by a former Goldman Sachs Partner and Harvard MBA, during my days trading for a top billion dollar hedge fund.
I just recently used this strategy to make a 90% gain in less than 5 months on Office Depot Call Options for my subscribers in my premium trading service, The Billionaire’s Portfolio.
We created The Billionaire’s Portfolio as a way for the everyday investor to use the same technique and strategies that the greatest and richest billionaire hedge funds and investors in the world use. And it has been a great success.
Why people fail trading options
Ninety-five percent of people who trade options lose money. This is not my statistic. This is an actual number from the option exchanges. This remarkably high losing rate comes as a result of people who do not understand how options work. You should only trade options when you have an edge. If you don’t have an edge, you are throwing your money away.
My stock replacement strategy gives you an edge every time you trade an option. Here’s how: I only take a position when I know that there is an event or an influential investor positioned to reprice the stock. I am not throwing darts. I am betting on highly probable events. Normally, I want to see several events/catalysts lined up, with the chance of altering the course of the stock, before my option expires.
When you combine my stock replacement strategy with event driven- activist investing, you greatly improve the success rate on an option. Just ask the customers of my Billionaires Portfolio service. If you want to learn how to trade options and stocks like the best and richest hedge funds/ Billionaire investors in the world, and if you want to learn about my stock replacement strategy, click here The Billionaire’s Portfolio.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
12/23/13
U.S. stocks continue to print higher record highs. Yet one of the most widely held stocks in the world, Apple Inc. (NASDAQ:AAPL) remains significantly off of its peak value of $705 per share, reached in late 2012.
I have been an outspoken analyst on Apple. I’ve followed Apple closely since its revival in the early 2000s, when the large hedge fund I worked for as an analyst owned Apple shares under $10.
For those of you that don’t know me, my online portfolio, called The Billionaire’s Portfolio, is made available for subscribers to piggy-back the world’s greatest billionaire investors. The portfolio has beaten the stock market in 2013 and has produced three triple digit winners this year.”
Now, more on Apple …
I was very bearish on Apple in late February of this year, an unpopular view. Apple went on to drop 25% in the following two months. I then flipped the switch a month later and said the bottom was in. Apple shares were trading $433.
Now Apple shares trade back above $500 and despite the persistent strength in the broad stock market, investors seem to lack similar exuberance for one of the leading brands in the world. Of course, Apple leadership has changed, and it’s highly anticipated product roll-out reportedly failed to impress investors. So for the first time in a long time, there is growing scrutiny surrounding the future for the company and the outlook of its stock.
Contrary to that scrutiny, I have become quite bullish on the stock and below are eleven reasons why I think Apple will reach $700 in 2014.
1) “Apple is cheap relative to its historical valuation. Apple’s average 10 year P/E ratio is 17.5 times earnings. At 17.5 times earnings this would put the stock around $700 a share.
2) Technically, Apple just completed a major trend break on a weekly chart which projects a price target for Apple of $680 to $700.
3) Apple has a higher dividend (2.27%) than both the S&P 500 Index (NYSEARCA:SPY) (1.93%) and Dow Jones Industrial Average (NYSEARCA:DIA) (2.25%). Therefore Apple is not only a value stock but also an income stock as well.
4) The world’s greatest investor and activist, Carl Icahn owns 3.9 million shares of Apple, and will continue to push the company to create shareholder value by forcing Apple to buy more of its stock back or pay out a special dividend.
5) According to Research firm Bernstein: Value based mutual funds have been buying Apple at a record pace. Now 36% of value based mutual funds with assets over a $1 billion have a position in Apple. That’s a 40% increase from a year ago.
6) Wall Street loves Apple. Of the analysts that cover Apple, 72% have a strong buy on the stock.
7) 75% of Wall Street analysts are projecting Apple to beat earnings expectations in December. That tends to kick-start momentum in a stock.
8) Apple is significantly cheaper than the S&P 500 Index. Apple sells for 13 times trailing earnings and 10.9 times next year’s earnings. The S&P 500 trades at 18.7 times trailing earnings and 15.9 times next year’s earnings.
9) Apple is the most loved stock by the “smart money.” According to Citigroup, Apple is the most owned stock by hedge funds.
10) Apple represents more than 12% of the Nasdaq 100, yet is lagging the Nasdaq 100 by more than 28% year-to-date. Expect hedge funds to buy Apple and sell the Nasdaq 100 Index in search for this gap to close.”
11) Tapping into emerging growth markets, Apple with its announcement of its China Mobile deal today, will now have access to billions of new customers which should help the stock grow its revenues and earnings over the next year.
We have been telling our readers since November of 2012 to sell gold on every rally and buy stocks on every dip. And I called the bottom in Apple as well. Furthermore, our process of buying the dips on the world’s best billionaire investors and hedge funds stocks picks has rewarded our investors with stocks that have doubled and tripled, including one stock that we booked a 240% profit on in less than 7 months.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
Looking for high potential stocks to put in your portfolio stocking for Christmas? Look no further than the retail sector.
In our research at billionairesportfolio.com we follow the moves of billionaire investors, and we tend to find them frequently involved in stocks that are beaten down and in need of a turnaround
Why do they like these stocks? Because these situations tend to have the following attributes: 1) the potential to return 100% or more inside of one year, 2) a catalyst present that can spark momentum in a stock, and 3) Wall Street sponsorship. And given the track records of the rich, influential investors that we follow, that proves to be a formula for consistent, market-beating success.
For the first time in a long time, expectations are for solid economic growth in the coming year (close to 3%). Right now, we are finding more and more names hitting our radar screen from the retail sector. Plus, given the trend of better data in the U.S., there’s a good chance we could see a positive surprise to that 3% growth number. Faster growth will improve the job market, improve confidence and bolster consumer spending. In this scenario, retail stocks will be among the biggest beneficiaries.
With this in mind, we ran the following screen on stocks in the retail sector, to find stocks that analysts think can double in the price in the next year. This screen can give us a starting point for identifying a situation where a billionaire investor is involved and pushing for a turnaround.
Here they are:
1) Wet Seal (WTSL) has a current share price of $2.58. The consensus analyst target price is $5.50. That gives us a “street projected return” of 113%.
2) Pacific Sunwear of California
(PSUN) has a current share price of $3.20. The consensus analyst target price is $6.50. That gives us a “street projected return” of 103%.
3) J.C. Penney (JCP) has a current share price of $8.32. The consensus analyst target price is $18. That gives us a “street projected return” of 116%.
4) Francesca’s Holdings (FRAN) has a current share price of $17.64. The consensus analyst target price is $36. That gives us a “street projected return” of 104%.
5) American Apparel (APP) has a current share price of $1.05. The consensus analyst target price is $2.50. That gives us a “street projected return” of 138%.
To learn more about high potential stocks owned by billionaire investors you can follow us at billionairesportfolio.com.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
12/2/13
Did you realize that Warren Buffett returned 81% a year from 1980 to 2003?
Guess what? He didn’t do it by buying Wall Street darlings like an Apple Inc. (NASDAQ:AAPL) or a Facebook Inc (NASDAQ:FB). Buffett accomplished this amazing feat by using a strategy called “takeover speculation.” He bet big, and with leverage, on stocks he thought had a very high likelihood of being acquired.
The average person on the street thinks Warren Buffett is a safe value investor who holds stocks forever. This is only partially true. The other half of his portfolio, and the part of his strategy that has juiced the biggest returns for him, was takeover speculation, where he used significant leverage and options to produce 80+% annualized for 24-years.
Buffett said in a New York Times interview that he made the greatest returns ever in his portfolio employing this takeover speculation strategy.
But Buffett ran into a problem. He became too big. He had to stop using this strategy because the assets he was managing, which in 2003 reached $50 billion, were too big to successfully execute it.
He said in a BusinessWeek article that he guaranteed he could make at least 50% a year if he were managing smaller assets. And he can back it up. We have documented proof from Berkshire Hathaway letters, and from an academic paper on Buffett, which showed that he produced an 81% annualized return over a 24 year stretch.
For those who are interested in what 81% annualized compounds to over 24-years here are some scenarios:
1) A $1,000 account compounded at 81% for 24-years would turn into $1 billion.
2) A $10,000 account compounded at 81% for 24-years would turn into $15.2 billion.
3) A $20,000 account compounded at 81% for 24-years would turn into $30.2 billion.
Learn more about me and how we follow Billionaire Investors into stocks by visiting the Billionaires Portfolio.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
The world’s greatest investor is not Warren Buffett. Sure, Buffett is one of the richest men in the world. But there is a man who will overtake Buffett as the richest investor. His name is David Tepper.
David Tepper has the best track record of any investor in the world. Over the last 20 years he has averaged a 40% annual return.
Let me repeat that again because it’s a staggering number. David Tepper has averaged 40% a year over the last 20 years.
Let me put this in perspective for you. If you would have invested $10,000 with David Tepper in 1993 you would now have an incredible $8.3 million. Now, that highlights the two keys to building wealth as an investor. You need big returns. But also, consistent returns. And you need to compound those returns overtime.
That is why David Tepper is the world’s greatest investor. He has done it for a long time. And continues to do it. In what has been considered a tough market.
That is why David Tepper is worth over $7 Billion dollars at only 55 years old.
Now, here is where it should be particularly interesting to you.
David Tepper is just like you!
David Tepper is the true American Dream. He is the stereotypical average American male. He is a little overweight. He is balding. He is average height. And believe it or not, he is not some hot shot Ivy League grad or rocket scientist with a PHD from MIT.
David Tepper is just a graduate of a state school, the University of Pittsburgh. I say this not to disparage his education. I say this because it doesn’t really matter if you went to Harvard or Yale or Pittsburgh. I have a pretty fancy degree. But I can tell you this: It learned nothing about becoming a good investor. I’m a good investor because I have common sense. And because I know how the system works.
The masses will always lose money or, at best, underperform. And that creates an opportunity for me and those like me.
I say all of this to emphasize that you can be, and should, be returning 40% a year like David Tepper.
I have told you numerous times in my blog that if you are not fully invested in stocks and if you not returning 30% to 50% a year then you are failing at investing. If you were in school you would get an F.
But look it’s not your fault. You have been suckered and sold by Wall Street. You’re invested in mutual funds that will never ever make you anything more than 6% to 7% returns on average.
You probably have your money with a stock broker, who is ripping you off by charging you large commissions, spreads, sales fees, plus another 2% to 3% management fees while giving you 5% annual returns – while putting your money at risk of being halved.
So I don’t blame you. But I will blame you if you do not change your investing strategy. If David Tepper, the stereotypical average American male can return 40% a year simply buying stocks, then so should you.
But you need a game plan to do this. And I can help you. My blog and my premium research service The Billionaires Portfolio is built on the same philosophy that David Tepper uses. I like buying cheap undervalued stocks with catalysts and holding them to make triple digit returns. My goal is just like Mr.Tepper’s: To make all of us multi-millionaires by compounding our money at 30% to 50% returns annually.
So fire your broker. Sell your mutual funds. And learn from the world’s greatest investors how to compound your money at 30% to 50% a year.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
Finding stocks with asymmetrical risk-reward characteristics is at the core of successful deep value investing. And it’s a key ingredient in the success of our Billionaire’s Portfolio service.
Another important ingredient in our process is identifying stocks with these characteristics that also have the presence of an influential investor. When we have a deeply distressed stock, and a bulldog investor that owns a huge stake in the stock, our chances of a positive outcome increases dramatically.
With that said, in addition to searching through SEC filings for investors that are building controlling
interests in companies, we like to run a series screens to search for stocks that have a 100% to 200% potential upside, combined with limited downside risk. Many times, when we find stocks that fit the bill, we will find a big investor already involved.
In running our screens for the first week of November, the following five stocks have hit our radar as high potential, deep value candidates. Plus they all have the presence of a huge private equity firm:
1) Dice Holdings, Inc. (NYSE:DHX) has a current share price $7.49. The $15 billion dollar private equity firm General Atlantic, LLC owns more than 15% of this stock.
2) Noranda Aluminum Holding Corp (NYSE:NOR) has a current share price $3.04. Apollo Global Management, the $22 billion dollar private equity firm, owns more than 48% of NOR.
3) Red Lion Hotels Corporation (NYSE:RLH) has a current share price of $6.00. The private equity firm Columbia Pacific Advisors owns more than 28% of this stock.
4) Sun Bancorp Inc. (NASDAQ:SNBC) has a current share price $3.20. The private equity firm Invesco Private Capital owns more than 24%.
5) Exco Resources Inc. (NYSE:XCO) has a current share price $5.41. The $15 billion dollar private equity firm Oaktree Capital Management owns more than 16% of this stock.
This gives us a great starting point to identify a stock that may be deeply undervalued with the added kicker of an influential shareholder on board.
To receive our weekly email of top value stocks that hedge funds, private equity firm and/or billionaire investors own, email us at info@billionairesportfolio.com.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
1) A study out of Citigroup’s quantitative research group showed one of the best predictors of an earnings beat is a stock’s prior one-month performance going into the earnings report. Apple is up more than 10% over the past month, versus a 3.5% move in the S&P 500.
2) Technically, Apple has just broken out of an intraday bullish flag pattern. And it’s just broken the neckline of a bullish inverse head and shoulders pattern projecting a near term price target for Apple of $570. That out-performance indicates smart money is jumping into this stock before Apple reports earnings on Monday.
3) Analysts have raised their target price over the past week on Apple. Ed Parker with Lazard Capital raised his price target to $570 and reiterated a buy rating on Apple. Cantor Fitzgerald’s Brian White upped his Apple price target to $577 and believes the stock could surprise on the upside. And Goldman Sachs’s Bill Shope reiterated a Buy rating on the stockand a $560 price target last week. These analyst moves are usually a good predictor of a stock set to beat earnings expectations.
4) Apple now has a billionaire activist, Carl Icahn, who is hell-bent on forcing the company to deploy its cash to buy a huge chunk of stock back. Don’t be surprised if Apple on Monday announces another huge stock buyback or increase in its dividend payout.
5) Apple finally has price momentum and product momentum. After Apple’s Media day this week, people were excited for the first time in over a year about Apple’s new products, especially their new more powerful mini iPad. All of this shows that Apple is getting its buzz back. And this means the company will probably forecast better sales and earnings in 2014.
If you want to know what the world’s best Billionaire Investors and Hedge funds are buying, then you can visit The Billionaire’s Portfolio.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
With the stock market tracking back toward record highs, Apple back above $500 and Facebook working on a double for the year, finding value can be more challenging than finding the latest hot stock.
As I’ve shared in recent weeks, at billionairesportfolio.com we constantly scour the universe of stocks, through our many proprietary screens, to uncover undervalued stocks that have the potential to produce multiples on our investment. And despite the run-up in broader stocks, we continue to find great opportunities.
One of our favorite “deep value screens” not only identifies cheap stocks, but also situations where a rich, influential investor has taken a significant stake. As a shareholder, the presence of this type of investor can mean you have a partner on your side, working everyday to push management to unlock value in the company.
Selecting deep value stocks, with the presence of an influential investor that is hell-bent on unlocking value, is a very powerful formula. It’s especially powerful when we find situations where the big investor is down 10% or more on their investment. That tends to raise their sense of urgency and their aggressiveness with management. And that tends to result in bigger winners.
With all of that being said, here are five stocks that some top hedge funds and billionaire investors are down on, by 10% or more:
1) Transocean (RIG) – Billionaire Carl Icahn owns almost 6% of this oil and gas exploration company. Icahn’s average cost is $49. The stock currently sells for $45. This means you are getting a 10% discount to what Icahn paid for this stock. To even sweeten the deal RIG currently pays a 5% dividend.
2) J. C. Penney Company, Inc. (JCP) – Four different hedge funds own this stock, and all four paid a much higher price than where JCP currently trades. Glenview Capital, Perry Capital, Tiger Consumer and Soros Fund Management together own more than 15% of this stock. The average price that these hedge funds paid for JC Penney is more than $13 a share. If you bought JC Penney today you are getting a 41% discount to what these top hedge funds paid for their shares. Moreover, JC Penney is selling at distressed valuation levels. It has a price-to-sales of 0.13 and price-to-book of 0.68.
3) Dynavax Technologies Corporation (DVAX) – Two top hedge funds that own more than 8% of this biotech stock. The two funds, Orbimed Advisors and RA Capital Management, are both biotech focused hedge funds run by MDs and PhDs. They paid an average cost of $3.10 for Dynavax. That means if you buy Dynavax today you are buying it at 61% discount to what these top biotech hedge funds paid for their shares.
4) RadioShack Corp (RSH) – Three top hedge funds own Radioshack at much higher prices that what the stock is selling for today. Highfields Capital Management, top private equity firm Blackstone Group and Donald Smith & Company Inc. own more than 15% of RadioShack. The average cost these three hedge funds paid for RadioShack is $4.25. That is more than 20% above what RadioShack is selling for today. If you piggyback these top funds into Radioshack today you are paying a 20% discount to what these top investors paid for this stock.
Will Meade
President of The Billionaires Portfolio Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor
