Today, shareholders of Keurig Green Mountain, (GMCR) woke up to a nice 75% pop in the value of their shares. A private equity firm is taking the company private for $13.9 billion or $92 a share. That’s made GMCR one of the biggest one day movers for an S&P 500 stock this year.

Most interesting, you could have participated in this huge winner.

Just last month, at “The Invest for Kids Chicago” hedge fund conference, Ricky Sandler of the $6.5 billion hedge fund, Eminence Capital, made a detailed presentation on why he thought Keurig Green Mountain was worth $85 to $100 a share. The stock was selling for around $50 at the time and Eminence owned $195,000,000 worth — the largest hedge fund owner of the stock.

Apparently the private equity firm JAB Capital agreed with Sandler. They paid a price at the mid-point of his valuation.

Now, if you were paying attention to this conference and bought the stock, clearly you could have made a lot of money. We attend or read the transcripts from every major hedge fund conference on the planet. These ideas are not often covered in the mainstream press or online media, and therefore are ripe for finding hidden investment gems like GMCR.

Today’s news is just one of many examples of stock takeovers that can be predicted by the presence of an influential investor. For example, just last month, at we predicted the takeover of MedAssets, thanks to the work and presence of activist investor Starboard Value (you can see those details here).

Of course, today’s star performer was Ricky Sandler and Eminence Capital. With that, here are the top 5 best ideas from Eminence Capital.

1) Zynga (ZNGA) – Another top idea Sadler presented at “The Invest for Kids Chicago” conference was Zynga. Sadler say Zynga is undervalued because it has $500 million in real estate (its San Francisco Headquarters) and a $1.15 in cash per share, meaning the market is valuing its underlying business for almost nothing. Sandler said if the stock were valued similar to its peer, King Digital, Zynga should be worth $5 a share or a double from its share price today.

2) AIG (AIG) – Another top idea of Eminence Capital is AIG. Eminence owns more than $350 million of AIG stock through a mix of shares and options, more than 5% of its portfolio. Billionaires Carl Icahn and John Paulson also own huge stakes in AIG and Icahn has said AIG could be worth as much as $100 a share or a 50% return from its share price today.

3) GNC (GNC) – GNC is the third largest position in Eminence Capital’s portfolio. It owns 6% of GNC. The stock is extremely undervalued as it has a forward P/E of 9, price to free cash flow of 11, and almost a 3% dividend. These valuation metrics put GNC in that “buyout candidate” territory, just like Keurig Green Mountain.

4) Men’s Wearhouse (MW) – Eminence Capital owns more than 8% of Men’s Wearhouse and has held onto the stock even as it’s been crushed. Men’s Wearhouse has dropped from $65 to $20 this year, making the stock very cheap. It has a price to sales of just .28. It sells below its book value. And it has a forward P/E of just 8 (about that of the S&P 500).

5) Autodesk (ADSK) – Eminence Capital’s top position is Autodesk. They own almost $300 million worth, making it nearly 5% of their portfolio. Autodesk is up 44% over the last 2 months, as it has been rumored to be another takeover candidate. A top $4 billion activist hedge fund, Sachem Head, owns 5.7% of the stock and launched an activist campaign on the company last month., run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors.

How Predicted the Big Pop In Sarepta Therapeutics

The Carl Icahn Effect & How It Can Work For You


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).

David Einhorn and Greenlight Capital

David Einhorn doubled his stake in Sunedison (SUNE) and now owns more than $500 million worth of this stock that we first recommended in The Billionaires Portfolio at $2.50. It sells for more than $20 today.

To sum up

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.

Will Meade