At Billionairesportfolio.com, we’ve been studying the buying patterns of the world’s greatest billionaire investors and hedge funds for the past 15 years. So when two of greatest billionaire investors in the world, Carl Icahn and Warren Buffett, purchased almost $7 billion worth of energy stocks over the past couple of weeks, we paid close attention.
We know two things about Buffett and Icahn: 1) they have made billions throughout their careers buying when everyone else is selling, and 2) they have a knack for picking the winners, the stocks and sectors, and marking the bottom when they enter.
Their respective records are especially remarkable in times when widespread fear and doubt is in the air. For example, Icahn marked the bottom in technology stocks in the fall of 2012 with his 10% position in Netflix. He made $2 billion in profits on the trade, a nearly 1,000% return. Buffett marked the bottom in bank stocks in the fall of 2011 when he initiated a $5 billion position in Bank of America. That investment has almost tripled in price since, producing nearly $10 billion in open profits for Buffett.
Now, it’s typical in market environments like this to hear from experts that warn against picking tops and bottoms. But contrary to the Wall Street adages against market timing, the two best investors of all-time have amassed two of the largest personal fortunes in the world by (as Buffett says) “being greedy while others are fearful.” And they are stepping in again, this time in the energy sector.
Let’s look at the newest energy investments from this billionaire duo:
1) Phillips 66 (PSX) – Buffett revealed last week he has taken a $4.5 billon position in the energy stock Phillips 66. This is a typical Buffett stock. It sells for just 10 times earnings, a huge discount to the S&P 500’s P/E of 17, and the stock pays nearly 3% in a dividend. Furthermore, the company has a pristine balance sheet, with very little debt – a classic Buffett stock, cheap and safe.
2) Freeport McMoran (FCX) – Carl Icahn bought nearly $1 billion of Freeport McMoran last week, at much higher prices than it’s selling for today. Icahn’s cost basis for FCX is roughly $12 a share, or more than a 20% discount from its current share price. Freeport McMoran is not only one of the world’s largest copper producers, but it also a huge reserves with almost 400 million barrels in oil equivalents. Freeport is one of the cheapest companies in the S&P 500, with a price-to-book of .80 and a forward price to earnings of just 6. It’s also one of a handful of S&P 500 constituents with a share price below $10.
3) Cheniere Energy (LNG) – Carl Icahn also initiated a $1.3 billion position in energy stock LNG just a couple of weeks ago. Cheniere is on track to become the first U.S. company able to export liquefied natural gas. This makes LNG a classic “wide moat” (no competition) stock. Icahn has already secured two board seats on Cheniere’s board. Icahn’s “board seat effect” has proven to be a huge predictor of success for the legendary activist. According to an essay Icahn penned last year, when he gets a board seat in a company, his stock returns averages 27.5%.
In the face of all of the fear and confusion surrounding China’s sharp stock market decline in June, and the recent moves by its central bank to weaken the Chinese currency, one billionaire has been using the opportunity to load up on Chinese stocks.
His name is Chase Coleman. He runs Tiger Global, a hedge fund that was seeded by billionaire Julian Robertson.
Few have had the performance over the past fifteen years that can compare to Coleman’s. According to an investor letter from Tiger Global, his hedge fund has returned 21% annualized on long positions since 2001. That compares to a 4.5% annualized return for the S&P 500. This run has made Coleman a billionaire before the age of 40.
Not only does Coleman have more than 20% of his hedge fund invested in Chinese companies, but he has been aggressively building those big stakes over the past two months as China’s stock market slid.
At Billionairesportfolio.com, our strategy is rooted in following the moves of the world’s best billionaire investors. This strategy can be even more powerful when we are able to “buy the billionaire on a dip.” In all of five of the stocks listed below, we can follow the wunderkind billionaire hedge funder, Chase Coleman’s lead, into his plays on China. In three of the stocks, we can buy them cheaper than the price Coleman paid for his shares.
1) JD.Com (JD)- JD.com is currently Chase Coleman’s biggest position in his hedge fund, making up nearly 7% of the fund. This stock has been slammed recently, which offers an attractive entry point into one of the fastest growing e-commerce stocks in China.
2) Alibaba (BABA) – Coleman has 6% of his hedge fund invested in Alibaba. Alibaba was hit hard on a weaker earnings report today, but is a dominant company in China, with huge potential growth. Baba shares are 40% off of the highs of just nine months ago, and trading cheaper than where Coleman bought his shares.
3) Vipshop Holding (VIPS) – This is Coleman’s third largest position in China and he is down on his investment. VIPS also happens to be one of billionaire hedge fund manager John Burbank’s top positions at his fund Passport Capital. VIPS has been a highly volatile stock, going from $19 to $30 this year and back to $19 today.
4) 58.com (WUBA)- In recent weeks, while the rest of the world was panicking about China’s stock market volatility, Chase Coleman added to his positon of the Chinese internet company, 58.com, and now owns more than 6.3% of the company. WUBA sold for $83 just months ago, and now trades at $51, offering huge upside if the stock bottoms here.
5) eHi Car Services (EHIC)- In June, Coleman and Tiger Global initiated a brand new position, (21.5% ownership) in EHIC, the “Uber of China.” He is now down on this position, so you are able to buy eHi at a cheaper price than one of the best hedge fund managers on the planet.
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 27% gain since 2012.
Overnight, China openly devalued its currency. And it may be only the first step in a return to the “weak currency” policies that catapulted its economy to one of the biggest in the world. Such a policy reversal would have huge implications for Chinese stocks, and the geopolitical landscape.
China has slowly and modestly appreciated its currency (vis a vis the dollar) over the past decade, in compliance with the pressures from major trading partners and global economic leaders (namely the U.S.). As a result, China’s economy has slowed, its exports have fallen in competitiveness and Chinese leadership is under pressure.
Additionally, since late 2012, Japan has delivered a massive blow to China through its outright devaluation of the Japanese yen. Japanese goods have become 40% cheaper than Chinese goods, on a relative currency basis, since Japan first telegraphed its massive QE and yen devaluation plans. Japanese growth in exports have nearly doubled that of China over the past three years.
With that, it’s no surprise that China is beginning to fight back.
Longer term, a return to weaker currency, in an effort to reclaim its global export dominance, would create major political turbulence with its leading trading partners. But short term, it could give China’s economy and its stock market a huge shot in the arm.
At BillionairesPortfolio.com, we like to follow the lead of billionaire investors that have large stakes in companies and, as such, the ability to influence outcomes.
Below are five U.S. exchange traded Chinese stocks, each owned by top U.S. billionaire investors:
1) eHI Car Services (EHIC) – Billionaire Chase Coleman of Tiger Global recently initiated a 21.5% stake in EHIC in June. eHi Car is considered the “Uber” of China. The stock hit a high of $19 this year and currently trades at $11.45. A return to its 2015 highs from here would mean a 65% return.
2) JD.Com (JD) – Billionaire Steven Mandel, who runs the hedge fund Lone Pine Capital, owns nearly 3% of JD.com, or almost $900 million worth. JD.com has been called the “Ebay” of China.
3) Alibaba (BABA) – Alibaba is a billionaire hedge fund hotel. Billionaires’ Julian Robertson, Chase Coleman and George Soros all own Alibaba. BABA is billionaire Julian Robertson’s second largest position. The stock’s 52-week high is $120 or 53% higher than its share price today. Alibaba reports its highly anticipated earnings on Wednesday, August 12th.
4) Baidu (BIDU) – Baidu is another stock that is a Billionaire hedge fund hotel. Billionaires Stephen Mandel, Julian Robertson and George Soros all own Baidu. Baidu sold as high as $251.99 over the past year — about 50% higher than current levels.
5) iShares China Large Cap ETF (FXI) – Billionaire Louis Bacon who runs the top performing global macro hedge fund, Moore Capital, recently added to his nearly $200 million position in FXI. The exchange traded fund, FXI, is one of the most liquid and diverse ways to get exposure to Chinese stocks.
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 27% gain since 2012.
With the overhang of Greece finally lifting, there are several reasons to be optimistic about the potential for a nice run in stocks through the second half.
For the quarter ending in June, the S&P 500 posted its worst quarter since 2010. It just so happens that the pressure on stocks back in the first half of that year, like this year, was due to the potential default of Greece. As we know, Greece was bailed out by the IMF, ECB and Euro partners in 2010. And in the second half of that year, the S&P 500 rallied from down 7% to up 15% by year end.
The Russell 2000 was down 6% for the year through July of 2010. Over the next five months it rallied 34 percentage points to finish UP 27% on the year.
What about energy? Another drag on sentiment in 2010 was the Gulf Oil Spill. Energy stocks were smashed. After being down 12% in the first half of 2010, the
XLE (the energy ETF tied to a basket of energy stocks) returned 34% off the bottom and 22% for the year.
Also consider this: According to research done by Guggenheim Partners, in the five months leading up to a Fed tightening cycle, stocks have historically rallied 9%. We’re well behind on that timeline at this point. That creates a scenario where we could see a very sharp rally to catch up.
What about valuations?
The consensus earnings forecast for the S&P 500 for 2016 is $126. At the current P/E multiple for stocks, it projects a move to 2,709 in the S&P by next year (P/E of 21 x earnings of $126 = 2,646). That’s 26% higher than current levels.
What if the economy sours?
The best predictor of recessions historically has been the spread (the difference) between the 10-year Treasury bond rate and the 3-month T-bill rate. That measure is showing the probability of a recession next year at around three percent — virtually nil.
So we have some very compelling reasons to be excited about the backdrop for stocks into the second half of the year, especially when we consider that central banks need stocks to continue higher. With that said, the Fed remains extremely accommodative, even if they do make their first rate hike in nine years in the coming months. The ECB and BOJ continue to provide fuel for global stocks through their massive QE programs.
It’s widely known in the mutual fund community that poor performing stocks which are heavily owned by institutional money managers can be targets of ”window dressing” at the end of a quarter.
Window dressing is a tactic where portfolio managers sell their worst performing stocks and buy more of their best performing stocks into the end of the quarter. When they report the quarter-end holdings of their portfolios, after a little window dressing, they tend to look a little smarter when they have a book of nicely performing stocks, after purging the weaker performers.
At BillionairesPortfolio.com, what’s most interesting about this practice to us is that it can create an opportunity for us to buy billionaire-owned stocks at a price cheaper than what the billionaire paid for his shares.
Below is a list of four of the highest conviction stocks of four of the top billionaire investors in the world. Each of the stocks listed got a little cheaper in the past couple of weeks, likely due to some mutual fund window dressing, along with a dose of some broad market risk aversion:
1) Qualcomm (QCOM) – Billionaire Barry Rosenstein’s activist hedge fund Jana Partners owns $2 billion worth of Qualcomm. It’s the fund’s largest holding. Jana paid around $66 to $68 for their QCOM shares. That’s about 10 % higher than what it is selling for today. Qualcomm dropped six straight days into the end of June, typical behavior of window dressing selling. Qualcomm now has 3.05% dividend yield and sells for just 14 times earnings with one of the best balance sheets of any S&P 500 company.
2) Monsanto (MON)- Billionaire Larry Robbins of Glenview Capital was named the number one hedge fund manager by Barron’s with a 57% annualized return over the past 3 years. Monsanto is Glenview Capital’s largest position, and the fund’s average cost for Monsanto is around $112 a share. That’s 5% higher than what Monsanto sells for today. Robbins stated at hedge fund conference that Monsanto could be worth $220, or a double from its price today.
3) Chesapeake Energy (CHK) – Billionaire Carl Icahn owns 11% of Chesapeake at $17 a share, and recently added to his stake in March at $14. Chesapeake has been hammered ever since. The stock is down 25% over the past month and 10% this week alone. CHK now has a 3.2% dividend yield and sells at just two-thirds of its $15.50 book value.
4) Micron Technology (MU) – Micron is David Einhorn’s second largest position in his hedge fund Greenlight Capital. Einhorn paid around $21 a share for his nearly $1 billion position. The stock now sells for $18.78 – about 11% cheaper than what Einhorn paid. MU sells for just 6 times earnings and 4 times cash flow. Micron looks like the classic window dressing stock as it dropped 22% over the past week.
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.
According to the Rob Copeland of the Wall Street Journal today, top hedge fund managers are beating the S&P by a huge margin this year.
The article notes that three billionaire hedge fund managers, David Tepper, Larry Robbins and John Paulson, are all up 10% or more after fees in 2015. That compares to a 3% return for the S&P 500.
Of that trio, Paulson is up an eye popping 19% year-to-date. That’s more than six times the return of the S&P 500. He’s done it by betting correctly on stocks like Time Warner Cable and Salix Pharmaceuticals, both of which were acquired for large premiums.
At Billionairesportfolio.com we have been piggybacking the highest conviction stocks, ETFs and options of the world’s best billionaire hedge fund managers since 2012, and we’ve witnessed first-hand, the power of following the best ideas of the world’s greatest billionaire investors. Earlier this year, we followed Perceptive Advisors, a multi-billion dollar biotech specialist hedge fund, into Sarepta Therapeutics (SRPT). That stock is up 155% since early February.
Given the value of following the biggest and best, and given the hot hand that billionaires Tepper, Robbins and Paulson have had this year, let’s take a look at their most recent stocks picks:
1) Billionaire Larry Robbins of Glenview Capital has made huge returns on healthcare stocks this year, including a $200 million gain in one day when Humana announced that it was exploring a possible sale, and subsequently exploded higher in value. Robbins has two new healthcare picks, both of which he has said could double, Abbvie (ABBV) and Brookdale Senior Living (BKD).
2) Billionaire John Paulson, an M&A specialist with an incredible track record of buying stocks right before they get acquired, has initiated a new stake in AIG (AIG). He also recently added to his position in T-Mobile (TMUS), a stock that has constantly been rumored as a takeover target.
3) Billionaire David Tepper who recently made a bold bet on the broad stock market, buying a billion dollar worth of call options on the Nasdaq 100 (QQQ) and the S&P 500 (SPY), has added two new notable stocks to his portfolio recently, Micron Technology (MU) and Jet Blue Airways (JBLU).
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At BillionairesPortfolio.com, we’ve studied the track records of hundreds of billionaire investors and billion-dollar hedge funds. And one man stands above the rest, as the best investor of all-time.
I’m sure most would consider Warren Buffett to be the best investor ever. But the numbers tell a different story. In fact, the greatest investor of all-time is billionaire activist investor Carl Icahn.
Incredibly, both Icahn and Buffett have been building their respective investment empires for close to five decades. And more incredibly, they remain at the top of their profession.
Icahn has, unequivocally, shown superior skill as an investor.
Consider this: Icahn has returned 31% annualized since 1968. That would turn every $1,000 invested with Icahn into $325 million today – an incredible number. Buffett, on the other hand, returned 19.5% annualized during virtually the same time period. Buffett’s growth rate over that length of time is indeed amazing too. But due to the power of compounding, the wealth creation of Buffett, from pure investment returns, pales in comparison to that of Icahn. Icahn’s investment skill has created $65 to every $1 created by Buffett.
So how has Icahn been able to outperform Warren Buffett (and the broad stock market) by so much and for so long?
Of course, Icahn is a dogged shareholder activist and often an agitator of corporate management. Key to his playbook is using power and influence to control his own destiny on stocks he invests in.
When we look strictly across the stocks in his portfolio, without necessarily the story-lines, we can see some portfolio traits that have made Carl Icahn the world’s greatest investor.
Trait #1: The media, mutual funds, CNBC, finance books — they all say having a high win rate is paramount to good investing. They tell you that the most important thing is being right. Like many widely accepted adages, it happens to be dead wrong. Billionaire iconic hedge fund investor, George Soros, says “it’s not whether you’re right or wrong, but how much money you make when you’re right and how much money you lose when you’re wrong.”
Over the past 20 years, the stocks in Icahn’s portfolio have a win rate only a tad bit better than a coin toss. But he puts himself in position, so that when he wins, he has the chance to win big! This is the concept of asymmetrical risk to return, a concept often found in the wealth creation of billionaires. They like to invest in opportunities with limited risk and huge potential return.
Among Icahn’s stocks, his winners were almost twice that of his losers.
Trait #2: Icahn became rich by taking concentrated bets throughout his career. As Buffett has famously said, “you only need one or two great ideas a year to get rich.” This is exemplified in Icahn’s portfolio. His big win on Netflix garnered a 463% return in just 12 months, between 2012 and 2013.
Trait #3: Patience is king. You don’t have to go to Harvard or have a Goldman Sachs investing pedigree to have patience. And many times, that can be the difference between making money and losing money in investing. Icahn has an average holding period of over two years.
Trait #4: Risk! When you hunt for big returns, you must be willing to accept drawdowns and losers. Icahn has multiple stocks over the past 20 years that have been full losers (i.e. they went to zero). But when you have a portfolio full of stocks with big potential, in the end the big winners can more than pay for the losers.
With these key themes in his portfolio, Icahn has achieved the greatest track record of any investor alive, and a net worth in excess of $25 billion along the way. And he has done it with a portfolio of stocks that most investors would likely run away from.
Want to invest like the greatest investor of all-time? According to his most recent 13F filings, Icahn’s five biggest stock positions (aside from his holding company) are Apple (AAPL), CVR Energy (CVI), eBAY (EBAY), Federal Modul Holdings (FDML) and Hologic (HOLX).
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 31% gain since 2012.
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.
This past Friday was the deadline for the biggest-most influential investors in the world to publicly disclose their first quarter portfolio holdings to the SEC.
At BillionairesPortfolio.com, this quarterly event is our bread and butter. We scour through hosts of filings to uncover the best ideas from the world’s best investors. We want to know what they like and how convicted they are in their opinions. High conviction typically equals a very large stake. And just like stakeholders in companies tend to make good employees, large shareholders in companies tend to make good investors. They tend to fight relentlessly to get what they want, and need, from management, to turn their investment into a profitable one.
For insight into some of the highest conviction individual stocks owned right now, by the most powerful investors in the world, see my Nasdaq.com piece from last week (here). Today, I want to talk about the massive positions that have been taken by billionaire investors in ETFs and Options. As some of these investors have become so large, and as the investing environment has become so dependent on the macro picture, we have found that more and more of the biggest investors in the world are utilizing ETFs and options, in addition to individual stocks.
With that, here are the five biggest ETF and/or option positions we found at the top of our billionaire investor and hedge fund list.
1) One of the biggest and boldest option trades of the first quarter was made by billionaire hedge fund manager David Tepper. Tepper has perhaps the best track record over the past 20 years, returning close to 40% annualized, before fees. According to his recent filing, he initiated a more than $1.3 billion call option on stocks, via both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ). The notional value of this option position represents about one third of Tepper’s equity assets under management. This is no surprise, given he recently said he thinks the S&P 500 is still cheap and should return 15% this year. That’s another 11% from current levels.
2) Billionaire hedge fund manager Stephen Mandel of Lone Pine Capital took a $2 billion bearish option position (puts) on the euro ETF (FXE). The European Central Bank is in the early innings of a massive QE campaign, which, as the ECB chief Mario Draghi has explicitly said, tends to result in a falling exchange rate.
3) Billionaire global macro hedge fund manager Louis Bacon of Moore Capital Management reported a $1 billion+ call option on the S&P 500 ETF (SPY). This is another example of a top billionaire hedge fund manager taking a levered bet that the stock market will resume climbing.
4) Billionaire John Paulson, who is having an excellent 2015, reported a $1.1 billion call option on gold through the SPDR Gold Shares ETF (GLD). Paulson has been a long-term bull on gold.
5) Hedge fund manager Michael Masters of The Marlin Fund, reported two huge option positions according to his SEC filing. Masters was recently named by Barron’s as one of the top three performing hedge funds over the past three years, returning 42% annualized. According to his recent SEC filing, The Marlin Fund has a nearly $600 million call option in Citi (C), and a $193 million call option on UPS (UPS). Masters is very bullish on stocks. He also had $105 million call option on the Nasdaq 100 ETF (QQQ).
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.
