50 Top Stock Picks That Billionaires Love
These 50 companies, of various shapes and sizes, are among the top stock picks held by billionaire investors or high-asset hedge funds.
It's always interesting to see what billionaire investors are doing with their money. Sure, you can't match their gains simply by copying every single one of their stock picks, but it can still be helpful (and fruitful) to know what they've been up to.
Consider that the billionaires, hedge funds and big-time advisories listed below have a great deal at stake. And their resources for research, as well as their intimate connections to insiders and others, can give them unique insight into their stock picks.
Studying which stocks they're chasing with their capital (or which stocks the billionaires are selling off, for that matter) can be an edifying exercise for retail investors.
After all, there's a reason the rich get richer.
Here are 50 of the most recent top stock picks from the billionaire class. In each case, at least one billionaire – be it a person, hedge fund or advisory – has a substantial stake and/or added to its holdings. In most cases, these stocks are owned by multiple billionaire investors and billionaire investor firms. And while several of these investments are popular blue chips, others keep a much lower profile.
Either way, the smart money isn't kidding around when it comes to these stocks.
Prices are as of Dec. 3. Data is courtesy of S&P Global Market Intelligence, WhaleWisdom.com and regulatory filings made with the Securities and Exchange Commission. Stocks ranked in reverse order of their weight in the selected billionaire investor's equity portfolio.
- Market value: $186.4 billion
- Billionaire investor: Generation Investment Management
- Percent of portfolio: 3.9%
When it comes to Cisco Systems (CSCO, $44.11), Generation Investment Management isn't fooling around. The London-based advisory – which was co-founded by former Vice President Al Gore, who currently still serves as chairman – started a new position by purchasing more than 18 million shares of CSCO during the third quarter.
The position now accounts for 3.9% of the company's $18.8 billion in managed securities, putting it just outside its top 10 stock picks.
Although the technology conglomerate's stock has frequently been a market laggard over the past five years, it's having a strong Q4 so far. Since the beginning of October, CSCO shares have gained 12% to the S&P 500's 9%.
Analysts expect the company to generate average annual earnings growth of 6.7% over the next three to five years, according to S&P Global Market Intelligence. Their average recommendation stands at Buy.
Delta Air Lines
- Market value: $27.4 billion
- Billionaire investor: PAR Capital Management
- Percent of portfolio: 4.1%
If you're an investor looking for beaten-down stock picks, look no farther than the airline sector. After all, the global pandemic crushed air travel.
PAR Capital Management, a Boston-based advisory, sees value in this nook of the market. The firm not only added to several positions in airlines, including Delta Air Lines (DAL, $42.95), Southwest Airlines (LUV) and United Airlines (UAL), but it also more than tripled its position in travel site TripAdvisor (TRIP).
As for Delta Air Lines, PAR Capital Management made an incremental addition to its DAL holdings, adding 9,450 shares to bring its total to more than 3.5 million. That's good for a top-10 position at about 4.1% of assets.
All told, it looks like PAR is betting on a big rebound for the sector once the pandemic is gone sometime next year.
- Market value: $42.0 billion
- Billionaire investor: Platinum Investment Management
- Percent of portfolio: 4.2%
The best-known investor in Barrick Gold (GOLD, $23.61) at the moment is probably Warren Buffett's Berkshire Hathaway. The Oracle of Omaha initiated a position in the gold and copper miner in the second quarter of 2020, buying 20,918,701 shares worth $563.6 million.
The move had Buffett-watchers scratching their heads. After all, Warren Buffett is the farthest thing from a gold bug. Be that as it may, at least miners produce cash flow. In the case of Barrick, it even pays a small dividend.
Despite what its name might indicate, Sydney, Australia-based hedge fund Platinum Investment Management (AUM $16.2 billion) isn't exactly big on commodities, either. But they do allocate a notable portion of their portfolio (4.2%) to Barrick Gold.
Platinum Investment, which has owned shares in GOLD since 2012, raised its stake by 81%, or 2.7 million shares, in Q3. Prior to the latest investment, Barrick accounted for just 2% of its total portfolio value.
Johnson & Johnson
- Market value: $392.2 billion
- Billionaire investor: Levin Capital Strategies
- Percent of portfolio: 5.0%
Johnson & Johnson (JNJ, $149.00) operates in several different segments of the healthcare industry. In addition to pharmaceuticals, it makes over-the-counter consumer products such as Band-Aids, Neosporin and Listerine. It also manufactures medical devices used in surgery.
The stock hasn't done much this year, but long-term income investors know how valuable it can be. This Dow component is a stalwart dividend grower, having increased its payout for 58 consecutive years.
Levin Capital Strategies (AUM $1.3 billion), a New York-based hedge fund, is a believer in JNJ. The fund raised its stake in the healthcare giant by only 1% in Q3, but it accounts for 5% of a highly diversified portfolio, making it third largest among its top stock picks. Levin's top holding, Microsoft (MSFT), claims 6.5% of the total portfolio value.
Levin has stuck with JNJ through good times and bad, first buying shares way back in 2006.
- Market value: $32.1 billion
- Billionaire investor: HealthCor Management
- Percent of portfolio: 5.3%
IQVIA Holdings (IQV, $167.63), formerly known as Quintiles and IMS Health, brings technological solutions to healthcare problems. It helps life science, drug-development and even care-provider companies collect and analyze data, then use that data to bring new products to the market.
Bain Capital – the private equity firm founded by current senator and one-time presidential candidate Mitt Romney – used to be one of the company's largest shareholders, but it has been cutting down its position for some time.
One big investor that's loading up, however, is HealthCor Management (AUM $4.4 billion), which specializes in healthcare stocks. The New York hedge fund lifted its stake by 54% in Q3, adding 295,950 shares. The investment now accounts for 5.3% of the firm's total portfolio value, up from 3.2% in Q2.
IQV is the firm's sixth-largest position.
- Market value: $157.6 billion
- Billionaire investor: Capital Wealth Planning
- Percent of portfolio: 5.4%
Capital Wealth Planning, a large advisory firm with AUM of $1.8 billion, maintains a diversified portfolio of blue-chip stocks and other rock-solid brand names most investors will recognize. Indeed, the Naples, Florida-based firm's top 10 holdings are all members of the Dow Jones Industrial Average, led by Nike (NKE) at 6.1% and McDonald's (MCD, $211.51) at 5.4%.
The diversification should help clients sleep better at night. With the largest single position accounting for only 6% of the portfolio, one or two bad bets won't sink this slate of stock picks.
Capital Wealth Planning was bullish on its biggest bets in the third quarter, adding to nine of its 10 largest positions, including MCD, which is its second-largest holding. The advisory increased its holdings in the global hamburger flipper by 6% in Q3 after buying 29,163 shares.
- Market value: $251.4 billion
- Billionaire investor: Soma Equity Partners
- Percent of portfolio: 5.4%
Soma Equity Partners (AUM $2.6 billion) boosted its stake in PayPal Holdings (PYPL, $214.54) by 100,000 shares, or 13%, in Q3 and it's by no means a newcomer to the name. The San Francisco-based hedge fund has owned shares in the payments company since 2016.
It has been a wise investment. PayPal has been on a tear since splitting off of eBay (EBAY) in 2015. Shares are up more than 480% since it became a separate publicly traded company. For the sake of comparison, the S&P 500 gained 77% over the same time frame, and eBay returned just 93%.
PYPL accounts for 5.4% of the hedge fund's total portfolio value to make it one of Soma's top 10 stock picks. The Street certainly agrees with Soma's view. Analysts' average recommendation on the name stands at Buy, in part because it is forecast to generate average annual earnings growth of almost 22%, according to S&P Global Market Intelligence.
- Market value: $162.8 billion
- Billionaire investor: Egerton Capital (U.K.)
- Percent of portfolio: 5.4%
T-Mobile US (TMUS, $131.19) kind of got a new lease on life when it merged with Sprint last spring. While T-Mobile and Sprint couldn't hope to catch up individually in the brutally competitive wireless services industry, the combined company represents a true No. 3 competitor to entrenched behemoths Verizon (VZ) and AT&T (T).
And Egerton Capital (AUM $20.2 billion) is one notable investor that likes T-Mobile's chances now that it has beefed up. The London-based hedge fund first began building a position in TMUS in the second quarter, which is when the T-Mobile-Sprint merger closed. In the most recent quarter, the fund hiked its stake by 83%, or 3.5 million shares.
T-Mobile is now the fund's third largest holding at 5.4% of the total portfolio value, up from 3.3% in the prior quarter. TMUS shares are up a market-beating 30% over the past six months, and analysts' consensus recommendation remains at Buy.
- Market value: $158.7 billion
- Billionaire investor: Sandler Capital Management
- Percent of portfolio: 5.6%
Wall Street is very bullish on Danaher (DHR, $223.34). Among the 21 analysts covering the life sciences, diagnostics and environmental solutions company, 14 call it a Strong Buy and another four call it a Buy. That's good for a consensus Buy recommendation, according to S&P Global Market Intelligence.
That's good enough to put it among the best healthcare stocks for 2021.
Apparently the folks running Sandler Capital Management (AUM $2.6 billion) know a good thing when they see it. The New York-based hedge fund upped its stake in the company by 35% in the most recent quarter. DHR is now No. 2 among the fund's stock picks, accounting for 5.6% of the total portfolio value.
Danaher, which operates under brands such as Beckman Coulter and Cepheid, is delivering enviable returns this year, and its stock has jumped by more than a third in just the past six months.
- Market value: $151.3 billion
- Billionaire investor: HealthCor Management
- Percent of portfolio: 5.8%
One would expect HealthCor Management (AUM $4.4 billion) to own a nice chunk of Medtronic (MDT, $112.47). The New York-based hedge fund specializes in blue-chip healthcare stocks, and Medtronic certainly fits the description.
Not only is MDT one of the world's largest makers of medical devices, it is also an income machine. The company has raised its dividend annually for 43 years. Medtronic notes that its dividend per share has grown by 50% over the past half-decade and has increased at a 17% compounded annual growth rate over the past 43 years.
HealthCor, which first invested in MDT in 2017, raised its stake by 53%, or 486,720 shares, in Q3. The medical device maker now comprises 5.8% of the portfolio, up from 3.5% in the previous quarter. MDT is the fund's third-largest holding after Zimmer Biomet (ZBH) and UnitedHealth (UNH).
- Market value: $330.8 billion
- Billionaire investor: Sanders Capital
- Percent of portfolio: 6.0%
Fun fact: At nearly $350 a share, UnitedHealth Group (UNH, $348.68) is the most heavily weighted stock in the price-weighted Dow Jones Industrial Average.
That's not the only first place to which the company can lay a claim. With a market value of roughly $330 billion and a 2021 sales forecast of $278.3 billion, this blue-chip stock is the largest publicly traded health insurer by a wide margin.
New York hedge fund Sanders Capital (AUM $38.3 billion) is a big, long-time fan, having first invested in UNH in 2010. Most recently, it raised its stake by 3%, or 178,100 shares. The health insurer is one of the top five stock picks in the fund, comprising 6% of its total portfolio value.
- Market value: $92.9 billion
- Billionaire investor: Southeastern Asset Management
- Percent of portfolio: 6.0%
General Electric (GE, $10.60) isn't what it used to be, but that doesn't mean the industrial conglomerate can't be a remunerative value play. Southeastern Asset Management (AUM $12.7 billion), which has owned GE since 2017, is betting that the market will realize that it has been too hard on the iconic American company.
Recently, it looks like the market got the memo. Shares in GE gained nearly 70% over the past three months, beating the S&P 500 by about 60 percentage points. The Memphis, Tennessee-based hedge fund has to like that. General Electric is a top-five stock pick at 6% of Southeastern's total portfolio value.
Wall Street is beating the drum for GE, too. Of the 21 analysts covering GE tracked by S&P Global Market Intelligence, nine call it a Strong Buy, four say Buy and eight rate it at Hold. As for their consensus recommendation, it too stands at Buy.
- Market value: $39.0 billion
- Billionaire investor: Veritas Asset Management
- Percent of portfolio: 6.1%
Veritas Asset Management, a London-based hedge fund with AUM of $23.5 billion, sees value in healthcare stocks too. It raised its stakes in six of its healthcare holdings in Q3, and one of the bigger bets it made was on Baxter International (BAX, $76.32).
Veritas hiked its position in the medical supplies company by 22%, or a little more than 2 million shares, during the third quarter. The transactions left BAX accounting for 6.1% of the total portfolio, up from 5.6% in Q2. Baxter International has been a part of the Veritas portfolio since 2013.
BAX stock turned negative for the year-to-date in Q3, giving investors a chance to get shares at a better price. The stock is off almost 10% so far this year, hurt by COVID-19's impact on surgical procedures and other hospital admissions.
- Market value: $172.9 billion
- Billionaire investor: ACR Alpine Capital Research
- Percent of portfolio: 6.4%
ACR Alpine Capital Research hunts for value stocks. To get a sense of where they're coming from, just know that their top holding is Warren Buffett's Berkshire Hathaway (BRK.B).
One important aspect of being a value investor is to find names that are out of favor with the broader market. Chevron (CVX, $89.80), the only energy stock in the Dow Jones Industrial Average, fits the bill.
The Clayton, Missouri-based firm bought another 276,942 shares in the integrated oil major in Q3 – a 28% jump that brought its total up to 1.2 million shares. That's good for more than 6% of the firm's tightly concentrated portfolio, up from 5.7% in the previous quarter.
ACR initiated its Chevron position during the first quarter of 2020, when the stock was getting beaten down by low energy prices, sluggish demand and the COVID-19 market crash. Shares are up about 66% from their 2020 bottom.
- Market value: $38.0 billion
- Billionaire investor: SRS Investment Management
- Percent of portfolio: 6.4%
Shares in Twitter (TWTR, $47.49) have put up enviable gains of nearly 50% this year. Investors able to ride that performance got in at the right time, analysts say, as the valuation has gotten a bit stretched.
That's why the Street leans so heavily toward calling TWTR a Hold. Of the 39 analysts covering the stock tracked by S&P Global Market Intelligence, eight have it at Strong Buy, one says Buy, 26 call it a Hold, two say Sell and one rates it at Strong Sell.
But even if TWTR is a bit pricey these days, it has the kind of hot growth forecast that would allow it to grow into its valuation pretty quick.
SRS Investment Management (AUM $7.7 billion), a New York hedge fund, has been a TWTR bull since 2018, and it has paid off. Maybe that's why it doubled down on the stock in Q3. The fund extended its position in the social networking and microblogging site by 137%, or 4.5 million shares. TWTR, now among SRS's five top stock picks, now accounts for 6.4% of the portfolio, up from a measly 1.8% in Q2.
- Market value: $117.5 billion
- Billionaire investor: Magellan Asset Management
- Percent of portfolio: 6.5%
Magellan Asset Management (AUM $69.2 billion) has been a fan of Starbucks (SBUX, $100.11) since the fourth quarter of 2016, and it has proven to be a market-beating bet so far. Shares in the coffee chain are up 80% since the end of 2016 vs. a gain of 64% for the S&P 500.
The Sydney, Australia-based hedge fund lifted its Starbucks stake by 630,989 shares, or 2%, in the most recent quarter, lifting it to 6.5% of its total portfolio value. SBUX is a top-five holding at the fund.
Analysts remain bullish on the stock as chains like Starbucks navigate the later stages of the COVID-19 pandemic. Their consensus recommendation stands at Buy, although 19 of the 34 analysts covering the stock rate it at Hold.
- Market value: $139.6 billion
- Billionaire investor: Blue Rock Advisors
- Percent of portfolio: 6.6%
The pharmaceuticals industry is trailing the broader market in 2020, as the pandemic leads to fewer trips to the doctor and makes conducting clinical trials more difficult. But longer term, the outlook for the broader healthcare industry looks plenty bright.
Blue Rock Advisors, a hedge fund with AUM of $3.7 billion, is betting on healthcare in a big way. The firm, based in Wayzata, Minnesota, initiated a slew of new positions in the sector in Q3, upping its exposure to stock covering pharma, biotech and medical device makers.
One of Blue Rock's bigger buys was Bristol-Myers Squibb (BMY, $61.78). The hedge fund started a new investment in the pharma company, buying 126,737 shares with a market value of $7.6 million as of the end of the third quarter. In one fell swoop, BMY became the firm's second-largest holding, accounting for 6.6% of the total portfolio value.
Of course, a lot of stock picks suddenly became top Blue Rock holdings in one fell swoop. The hedge fund's 10 largest positions are all brand-new stakes.
- Market value: $288.7 billion
- Billionaire investor: Chilton Investment Company
- Percent of portfolio: 6.6%
Home Depot (HD, $268.14) shares are up 23% for the year-to-date, outpacing the S&P 500 by roughly 10 percentage points.
Chilton Investment Company has noticed.
The Stamford, Connecticut-based hedge fund (AUM $2.4 billion) upped its HD holdings by 5%, or 39,725 shares, during the third quarter. The stock now accounts for 6.6% of the fund's total portfolio value, which makes it a top-four holding.
Note well that Chilton's largest holding, at 8.5% of the portfolio, is Sherwin-Williams (SHW), which is another bet on the housing sector.
Richard Chilton Jr., the firm's CEO, chairman and chief investment officer, made the Forbes billionaires list in 2015 when his net worth hit $1.2 billion.
Procter & Gamble
- Market value: $339.2 billion
- Billionaire investor: Yacktman Asset Management
- Percent of portfolio: 6.7%
Procter & Gamble (PG, $137.34), a Dow stock, is a monster among companies that sell consumer staples. Its slew of brands – including Charmin toilet paper, Pampers diapers and Tide detergent – have flown off the shelves in 2020 thanks to the pandemic.
Shares in the ordinarily quiet dividend payer are up 16% over the past six months and appear to have more upside ahead. Yacktman Asset Management, with a portfolio value of $6.7 billion, certainly hopes so.
The Austin, Texas-based hedge fund, which has owned PG since early 2001, hiked its stake by 3% in the most recent quarter. PG now accounts for 6.7% of the fund's portfolio, up from 6.0% in the previous quarter.
The dividend stalwart is the fund's second-largest holding after PepsiCo (PEP).
- Market value: $562.5 billion
- Billionaire investor: Coatue Management
- Percent of portfolio: 6.8%
Founder and CEO Elon Musk is the first billionaire who comes to mind when talking about Tesla (TSLA, $593.38), but there are loads of other big-money bets being made on the electric vehicle maker.
Tesla's rocket ship ride in 2020 (shares are up 611%) has led a number of hedge funds to pull back. A hundred funds reduced their holdings in TSLA during the third quarter, versus only 67 funds that added more shares.
Coatue Management ($27.8 billion in AUM), a New York-based hedge fund, put itself firmly in the latter group.
Coatue neatly doubled its TSLA holdings by adding nearly 1.6 million shares in Q3. That vaulted Tesla up to the fund's No. 2 holding after PayPal, and it's close – TSLA accounts for 6.78% of assets, vs. 6.79% for PYPL.
Tesla accounted for just 2.9% of the total portfolio value in the previous quarter.
It has been a solid bet. Shares blasted off in Q3 and got a second-stage boost when S&P Dow Jones Indices said in November that Tesla would be added to the S&P 500.
Naturally, though, valuation is a bit of a worry at this point. TSLA shares currently carry an average recommendation of Hold among analysts who cover it.
- Market value: $277.4 billion
- Billionaire investor: Matrix Capital Management
- Percent of portfolio: 6.9%
Coronavirus took a huge bite out of some of Walt Disney's (DIS, $153.24) most important businesses: namely, its theme parks and studios. Happily, analysts are seeing the green shoots of a nascent recovery, and hedge funds are taking notice.
The number of increased positions in DIS rose 14% in Q3, while decreased positions fell 4%. Closed positions fell by half.
Matrix Capital Management (AUM $5.3 billion) is one of the funds betting on a Disney comeback in 2021. The Waltham, Mass.-based hedge fund more than doubled its stake in DIS by buying 2.2 million shares in Q3. That vaulted DIS within the ranks of Matrix's top stock picks, at 6.9% of the total portfolio value, up from 3.5% in the prior quarter.
That's some high conviction for a pretty new holding; Matrix first bought DIS in the second quarter of 2020.
- Market value: $77.1 billion
- Billionaire investor: Glenview Capital Management
- Percent of portfolio: 7.0%
It's rare to find someone who loves their health insurance company, unless that person is an investor. Cigna (CI, $213.39), which owns a score of subsidiaries ranging from Allegiance Life & Health Insurance Co. to Vielife, is well-liked by analysts and big investors alike.
That's in no small part due to CI having a long-term earnings growth forecast of more than 10% a year. As such, the stock gets an average recommendation of Buy from the 26 analysts tracked by S&P Global Market Intelligence.
Hedge fund Glenview Capital Management (AUM $13.3 billion) has long been sweet on CI. The New York-based firm added incrementally to its position, buying another 8,277 shares in Q3.
Glenview Capital, which has CI as its fourth-largest holding at 7% of its portfolio, is an old fan, having first invested in the company in 2007.
- Market value: $83.8 billion
- Billionaire investor: Verde Servicos Internacionais
- Percent of portfolio: 7.0%
Mondelez (MDLZ, $58.56) was born out of the 2012 spinoff of the North American grocery business called Kraft Foods Group. Kraft Foods Group later merged with H.J. Heinz in a 2015 deal backed by 3G Capital and Warren Buffett, to form Kraft Heinz (KHC).
Mondelez became a separate publicly traded company focused on snacks such as Oreo cookies and Triscuit crackers, but it hasn't always been a sweet deal for investors. MDLZ had a great first few years, but starting in 2015 it started trading sideways before finally getting some upside momentum in 2019.
Verde Servicos Internacionais (AUM $1.4 billion), a hedge fund in Sao Paulo, Brazil, first got involved in 2018. Since then, it has built up a position of 483,068 shares. That included the incremental addition of 7,026 shares to its position during the third quarter. MDLZ, among Verde's top five stock picks, accounts for 7% of the fund's equity portfolio value.
- Market value: $111.3 billion
- Billionaire investor: Soroban Capital Partners
- Percent of portfolio: 8.1%
Raytheon Technologies (RTX, $73.29), the defense contractor that bulked up with the acquisition of United Technologies earlier this year, lost some popularity with large investors in Q3.
The stock showed up as a top-10 holding in 20 investment funds, down from 24 funds in Q2. The number of funds holding shares dropped to 1,800 from 1,821. At the same time, reduced positions rose 11.1%.
One billionaire investment outfit that still finds plenty of value in RTX is Soroban Capital Partners (AUM $10.4 billion). The New York hedge fund increased its stake by 12%, or 1.6 million shares. RTX now accounts for 8.1% of the total portfolio value, making it the fund's No. 4 holding.
Shares in RTX are off about 22% so far this year – for the optimistic, that means an attractive entry point. Analysts' average recommendation comes to Buy, according to S&P Global Market Intelligence.
- Market value: $232.3 billion
- Billionaire investor: Suvretta Capital Management
- Percent of portfolio: 8.5%
Adobe (ADBE, $484.28) is the undisputed leader in making software for designers and other creative types. Its software arsenal includes Photoshop, Premiere Pro for video editing and Dreamweaver for website design, among others.
Analysts forecast average annual earnings growth of more than 15% over the next three to five years, and their consensus recommendation stands at Buy.
Given all that, there's nothing mysterious about Suvretta Capital Management's (AUM $5.8 billion) long-term commitment to the stock. The New York hedge fund, which has owned a stake in ADBE since 2013, added an incremental 1,300 shares to its position during the third quarter. It remains the fund's top holding at 8.5% of the equity portfolio.
- Market value: $111.4 billion
- Billionaire investor: Verde Servicos Internacionais
- Percent of portfolio: 8.6%
Lowe's (LOW, $151.97) often plays second fiddle to rival Home Depot, the nation's largest home improvement chain, but analysts are actually more bullish on LOW these days.
And income investors know the power of Lowe's over the longer haul. The retailer has paid a cash distribution every quarter since going public in 1961, and that dividend has increased annually for 58 years.
More recently, home improvement retailers and other housing market stocks have profited mightily during the pandemic. Lots of folks stuck at home or in big cities are refurbishing their dwellings or looking to move. That has helped propel LOW to a 27% year-to-date gain.
One billionaire investment outfit looking to ride the wave is the aforementioned Verde Servicos Internacionais (AUM $1.4 billion). The firm initiated a position in LOW during Q3, buying 205,361 shares. At 8.6% of the total portfolio value, LOW is the hedge fund's largest stock pick, but not by much – Microsoft is No. 2 at 8.5%.
- Market value: $170.0 billion
- Billionaire investor: Holowesko Partners
- Percent of portfolio: 9.3%
Exxon Mobil (XOM, $40.21), the integrated oil major that until recently was a component of the Dow Jones Industrial Average, is having a bad couple of years. Weak energy demand amid a slower pandemic-constrained global economy is doing it no favors.
With shares off 42% in 2020 – and down more than 50% over the past two years – hedge funds are fleeing in droves. The number of hedge funds initiating new positions dropped 23% in Q3. Funds increasing their extant positions declined 26%. And the number of closed positions rose 59% over the prior quarter.
Beaten-down, out-of-favor stocks are always worth a closer look as potential value plays, however. Holowesko Partners (AUM $4.3 billion), based in Nassau, Bermuda, certainly appears to see hidden worth in XOM shares.
The hedge fund lifted its stake in the energy company by 3% in the third quarter, or 61,000 shares. Exxon now accounts for 9.3% of the fund's total portfolio value, up from 8.3% in Q2, to put the stock among the fund's top five stock picks.
- Market value: $219.8 billion
- Billionaire investor: Tiff Advisory Services
- Percent of portfolio: 10.0%
Netflix (NFLX, $497.52) has done well as folks hunker down at home during the pandemic, but some investors think it's time to take profits from the volatile stock.
Tiff Advisory Services (AUM $5.8 billion) is not one of them.
The hedge fund, based in Radnor, Pennsylvania, first started building a position in the streaming media and production giant during the first quarter of 2020, and it continued to do so in Q3. The hedge fund upped its NFLX stake by 31%, which made it the third-largest holding with 10% of the total portfolio value.
New positions and increased positions in NFLX among hedge funds both declined last quarter. Reduced positions and closed positions rose.
However, like Tiff, analysts are standing behind the stock. Their consensus recommendation stands at Buy.
- Market value: $2.1 trillion
- Billionaire investor: Camden Capital
- Percent of portfolio: 10.4%
It's not difficult to find Apple (AAPL, $122.94) fanboys. There's a reason why the iPhone maker is the world's most valuable company, topping more than $2 trillion.
At any rate, you can count Camden Capital as an AAPL bull. The $2.2 billion hedge fund based in El Segundo, Calif., raised its stake by 10,916 shares, or 5%, in Q3. With a total of 226,388 shares, Apple accounts for 10.4% of the firm's portfolio value, making it the second-largest holding after the SPDR S&P 500 ETF Trust (SPY) exchange-traded fund.
Camden Capital first invested in Apple during the fourth quarter of 2019, which means the position is already paying off handsomely. AAPL is up about 85% over the past 52 weeks. Analysts expect the new iPhone 12 to set off a massive upgrade cycle that will further help boost the stock – and early supply checks suggest this might just be the case.
Lastly, any discussion about the "smart money" and Apple wouldn't be complete without a reminder that AAPL makes up 48% of Berkshire Hathaway's equity holdings.
- Market value: $334.1 billion
- Billionaire investor: Rivulet Capital
- Percent of portfolio: 10.8%
Mastercard (MA, $335.14), the world's No. 2 payments processor, has fans in high places. Warren Buffett's Berkshire Hathaway, for example, counts it among its holdings.
Less famous but no less bullish professional stock pickers were buying the name in Q3. One of them, Rivulet Capital (AUM $3.4 billion), raised its stake by 5%, or 30,900 shares. Rivulet first bought shares in MA in the first quarter of 2020. That position has quickly swelled to account for 10.8% of the New York hedge fund's total portfolio value, making it Rivulet's third-largest holding.
Apparently the fund buys into the idea that the relentless growth of digital mobile payments and other cashless transactions gives MA a bright outlook.
And well they should. Analysts, who rate shares at Buy, see MA generating average annual earnings growth of 17.5% over the next three to five years, according to S&P Global Market Intelligence.
- Market value: $134.0 billion
- Billionaire investor: Gladstone Capital Management
- Percent of portfolio: 10.9%
Charter Communications (CHTR, $670.43) markets cable TV, internet, telephone and other services under the Spectrum brand, which is America's second-largest cable operator behind Comcast (CMCSA). It greatly expanded its reach in 2016 when it acquired Time Warner Cable and sister company Bright House Networks.
Warren Buffett has been a shareholder since 2014, although Berkshire Hathaway has pared its position over the years. But that doesn't mean it's not right for every portfolio. And analysts have a consensus recommendation of Buy on the stock.
One big-money fund that's happily picking up shares is Gladstone Capital Management (AUM $1.3 billion). The London-based hedge fund increased its position by a massive 33% in the most recent quarter. At 10.9%, CHTR is now No. 4 among the fund's top stock picks.
- Market value: $51.7 billion
- Billionaire investor: Cryder Capital Partners
- Percent of portfolio: 11.0%
Cryder Capital Partners, a hedge fund based in London with AUM of $1 billion, has a couple of significant bets on the healthcare sector.
In Q3, it raised its stake in HCA Healthcare (HCA, $152.75) by 17%, or 144,607 shares. Cryder now owns a total of 952,090 shares in the operator of healthcare facilities, good for 11% of a tightly packed portfolio that has just nine holdings at present.
HCA is the hedge fund's sixth largest position. Coming in at No. 1 is Thermo Fisher Scientific (TMO), which has been called the Amazon of the healthcare field because of its broad set of capabilities.
A drop in visits to healthcare professionals has taken a toll on HCA's hospitals, urgent care centers and physician clinics. Shares are trailing the S&P 500 by about 10 percentage points so far this year. HCA sold off sharply at one point in Q3, offering a tempting entry point for investors.
- Market value: $199.6 billion
- Billionaire investor: Lindsell Train
- Percent of portfolio: 11.2%
Lindsell Train, with $28.7 billion in AUM, made PepsiCo (PEP, $144.45) one of its few buys in Q3. The London hedge fund pared down most of its top holdings during the quarter, but the fizzy drinks and snacks company was an exception.
Lindsell Train added 40,500 shares, bringing its total holdings up to almost 5 million. Between putting more money to work in PEP and the stock's gains in Q2, PepsiCo rose to 11.2% of the hedge fund's portfolio value, up from 10.9% in the prior quarter. The stock, which is Lindsell Train's fifth-largest holding, has been a part of the portfolio since 2015.
PEP shares are positive for the year-to-date, but they are lagging the broader market. Demand for its products is down because of the shutdown of bars, restaurants, cinemas, stadiums and other entertainment venues.
- Market value: $215.0 billion
- Billionaire investor: Gladstone Capital Management
- Percent of portfolio: 11.5%
Nike (NKE, $136.96) stock is sprinting this year. The athletic footwear and apparel company's shares are up 35% in 2020, and analysts remain bullish on the name.
It appears that Gladstone Capital Management (AUM $1.3 billion) is plenty bullish too. The London hedge fund boosted its stake by 15% in Q3 to make the Dow stock a top-three position accounting for 11.5% of the portfolio.
The hedge fund entered Nike almost two years ago and must surely be glad that it did. NKE has gained 85% since the beginning of 2019. Analysts rate shares at Buy, in part because this big guy of a stock can still run. Despite its size, with a market cap of $215 billion, the Street forecasts Nike to generate average annual earnings growth of almost 20% for the next three to five years.
- Market value: $236.0 billion
- Billionaire investor: Trian Fund Management
- Percent of portfolio: 11.6%
Comcast (CMCSA, $51.59), the nation's largest cable company, regularly makes the list of hedge funds' favorite stock picks. That's because its combination of content, broadband, pay TV, theme parks and movies is unparalleled by rivals, and gives this blue-chip stock a huge strategic advantage.
And Billionaire Nelson Peltz's Trian Fund Management (AUM $11.3 billion) made the cable giant its biggest buy during the third quarter. Peltz more than doubled his position in CMCSA after adding 8.5 million shares. That move vaulted the stock from 5.1% to 11.6% of Trian's total portfolio value.
Peltz is a well-known activist investor, and he can be a huge headache for management teams. After first buying shares in Q2, Trian said CMCSA is "undervalued" and that it is having "constructive discussions with Comcast's management team."
Fortunately, it's responsible for only a few headaches at the moment. The fund currently holds just nine stocks.
- Market value: $206.1 billion
- Billionaire investor: SRB Corp.
- Percent of portfolio: 12.9%
Pharmaceutical giant Merck's (MRK, $81.45) key growth engine is Keytruda, a blockbuster cancer drug approved for more than 20 indications. Investors can take comfort in the fact that Merck's patent on the drug runs for another eight years.
Warren Buffett's Berkshire Hathaway initiated a position in Q3, buying 22.4 million shares. But while the stake was worth $1.9 billion as of the end of the third quarter, that represented a mere sliver of BRK.B's portfolio.
SRB Corp. (AUM $2.9 billion), however, is far more committed to the Dow stock. The Boston-based advisory, a shareholder since 2011, made another incremental buy in Q3. Merck now accounts for almost 13% of the advisory's total portfolio, up from 11.7% in the previous quarter.
- Market value: $81.0 billion
- Billionaire investor: Greenhaven Associates
- Percent of portfolio: 13.1%
Count Greenhaven Associates ($6.7 billion in AUM) as a Goldman Sachs (GS, $235.47) bull. The large advisory service headquartered in Purchase, New York, continued to add to its second-largest holding in Q3.
Greenhaven, which bought another 26,750 shares to bring its holdings up to almost 3 million shares, has owned the Wall Street investment bank since 2014. At 13.1% of the total portfolio value, GS is the firm's second-largest position after homebuilder Lennar (LEN).
Goldman Sachs is trailing the S&P 500 by 11 percentage points so far in 2020, but analysts largely remain on its side. Their average recommendation comes to Buy, according to S&P Global Market Intelligence. Ten analysts call it a Strong Buy and six have it at Buy. Nine analysts rate the stock at Hold and one says Sell.
- Market value: $65.2 billion
- Billionaire investor: VGI Partners
- Percent of portfolio: 13.8%
VGI Partners is betting big on CME Group (CME, $181.71). The Sydney, Australia-based hedge fund (AUM $2.7 million), upped its already considerable bet on the exchange operator during the third quarter.
VGI bought an additional 11,505 shares to bring its holdings up to 625,550. With a market value of $104.7 million as of the end of Q3, the position accounts for 13.8% of the firm's holdings – up from 11.7% in the previous quarter – to make it the firm's third-largest investment after Amazon.com (AMZN) and Mastercard (MA).
VGI first bought shares in the operator of the Chicago Mercantile Exchange, Chicago Board of Trade and New York Mercantile Exchange in the first quarter of 2013, and you can't argue with the results. CME has outperformed the S&P 500 by about 100 percentage points since the beginning of 2013.
- Market value: $202.3 billion
- Billionaire investor: Kirkoswald Asset Management
- Percent of portfolio: 15.1%
Salesforce.com (CRM, $220.97) is having quite an eventful year. The software-as-a-service company (SaaS) was added to the Dow Jones Industrial Average two months ago and in early December announced a $27.7 billion deal to acquire Slack Technologies (WORK), a software-as-a-service (SaaS) company best-known for its communications platform.
The market wasn't exactly thrilled with the Slack deal, knocking about 9% off CRM's share price in two days following the announcement, but it still has been a fine holding this year. Shares are up about 37% in 2020 and have been more impressive as a longer-term holding. Indeed, over the past three years, CRM gained 112% vs. a 39% rise in the S&P 500.
Kirkoswald Asset Management (AUM $6.3 billion) is a New York hedge fund with a hyper-concentrated equity portfolio of just three positions. It must really believe in CRM to have made it the fund's second-largest holding in Q3. Its largest position, interestingly enough, is call options on the iShares Russell 2000 ETF (IWM), the largest exchange-traded fund that focuses on small-cap stocks; that position makes up 73% of the equity portfolio.
Bausch Health Companies
- Market value: $6.8 billion
- Billionaire investor: Permian Investment Partners
- Percent of portfolio: 15.7%
Bausch Health Companies (BHC, $19.24) used to be known as Valeant Pharmaceuticals, and it would be happy if investors forgot that. A massive debt load, allegations of improper accounting and other controversies caused the stock to collapse in 2015.
BHC has since undergone an overhaul, which has greatly improved its prospects. Although John Paulson, billionaire owner of hedge fund Paulson & Co., is probably the company's best known billionaire backer, he's far from the only one.
New York hedge fund Permian Investment Partners ($2.4 billion in AUM) is a big believer in the remade entity, too. The firm raised its stake in BHC by 775,000 shares, or 17%, during the third quarter. With a claim of 15.7% of the fund's portfolio value, BHC is Permian's No. 4 holding.
Permian first invested in the company during the second quarter of 2020.
SPDR Gold Shares
- Market value: $70.1 billion
- Billionaire investor: Arnhold
- Percent of portfolio: 16.1%
Gold hasn't always made a solid long-term investment, but it can be a great shorter-term trade. That's why it's common to see billionaires have SPDR Gold Shares (GLD, $172.81) among their top stock picks. The gold exchange-traded fund is a low-cost way to bet on the price of the precious metal.
New York-based Arnhold (AUM $4.4 billion) is certainly bullish on gold's prospects. GLD is its largest holding, comprising 16.1% of its total portfolio value. The hedge fund first invested in the ETF in 2018, and it keeps upping the ante.
During the third quarter, Arnhold lifted its stake by 4%, or 27,859 shares, to bring its total holdings up to more than 615,000 shares.
The hedge fund's gold bullishness doesn't end there: Its second-largest holding is the iShares Gold Trust (IAU) – yet another gold ETF.
- Market value: $186.4 billion
- Billionaire investor: Check Capital Management
- Percent of portfolio: 17.5%
If you can't beat them, join them. That's one way of looking at an investment in Berkshire Hathaway (BRK.B, $44.11). After all, few people can compete with Chairman and CEO Warren Buffett for generating market-beating returns over long periods of time.
So all due respect to Check Capital Management (AUM $1.4 billion). The hedge fund based in Costa Mesa, California, isn't afraid to ride the Oracle of Omaha's coat tails.
Check Capital increased its holding in BRK.B by 3%, or 43,987 shares in Q3. The firm now holds 1.3 million shares in the company, which is worth more than $300 million at current prices. At 17.5% of the portfolio, BRK.B is the hedge fund's second-largest holding, but that doesn't tell the whole story.
Its top holding, comprising 46% of its portfolio value, are call options in BRK.B. So if the hedge fund keeps adding to its Berkshire Hathaway stake in the quarters ahead, don't be too surprised. It's clearly a fan.
- Market value: $1.6 trillion
- Billionaire investor: Skye Global Management
- Percent of portfolio: 19.9%
Microsoft (MSFT, $214.24) is a natural stock pick for pretty much any institutional investor's portfolio. Its Windows operating system still is the most popular in the world, and the company has fully figured out how to drive recurring revenue by selling cloud-based services (including its Office productivity suite) to both enterprise and retail customers.
One noteworthy big investor is Skye Global Management, a New York-based hedge fund with $1.4 billion in AUM.
The fund, which specializes in tech stocks, counts MSFT as its top holding, comprising almost 20% of its total portfolio value. Skye upped its stake in the company by 66%, or 1.5 million shares, during the third quarter. That brought its total haul to 3.4 million shares. Skye first bought MSFT stock in 2017.
Other top holdings include Facebook (FB), Google parent Alphabet (GOOGL) and Amazon.com.
- Market value: $1.6 trillion
- Billionaire investor: Spark Investment Management
- Percent of portfolio: 20.0%
There was no shortage of billionaire investors taking a little off the top of their holdings in Amazon.com (AMZN, $3,186.73) during the third quarter. But for every seller there is a buyer, and one of those buyers was Spark Investment Management.
The New York hedge fund with $1.7 billion in AUM initiated a position of 4,559 shares with a market value of $14.4 million. Amazon, accounting for nearly 20% of assets under management, is now the hedge fund's second-largest equity investment after Facebook.
Facebook also was a new investment for the firm. Other fresh tech investments made by Spark in Q3 include Salesforce.com, Netflix and Square (SQ).
Amazon has been one of the beneficiaries of folks being stuck at home. Shares are up about 72% for the year-to-date.
- Market value: $1.2 trillion
- Billionaire investor: Altarock Partners
- Percent of portfolio: 25.0%
Google-parent Alphabet (GOOGL, $1,821.84) is one of the handful of tech and tech-related stocks that have helped drag the market higher in 2020. Analysts expect it to continue to do so.
The leader in search shares with Facebook a duopoly in digital advertising that is growing at an accelerating rate both at home and abroad. With a long-term growth forecast of almost 16% a year for the next three to five years, it's understandable that the Street's consensus call on the stock is Buy.
Not that any of this is news to Altarock Partners (AUM $2.1 billion), a hedge fund in Beverly, Mass. The fund first bought GOOGL in 2019 and has been faithful ever since. In Q3, Altarock added an incremental number of shares to its GOOGL stake, which now stands at a whopping 25% of its total portfolio value. At current prices, the stake has a market value of $656 million.
- Market value: $802.8 billion
- Billionaire investor: Himalaya Capital Management
- Percent of portfolio: 26.6%
Himalaya Capital Management (AUM $13.9 billion), a hedge fund in Seattle, maintains a concentrated portfolio of just four stocks. Thus, even though Facebook (FB, $281.85) claims 26.5% of the equity portfolio's assets, it's only No. 2 – Micron Technologies (MU) claims more than 40% of the total portfolio value. The two other holdings are Bank of America (BAC) and Alphabet Class C shares (GOOG).
But FB is where the fund really bulked up in Q3. Himalaya Capital bought another 722,100 shares to boost its holdings by 118%. The investment more than doubled FB's percentage of portfolio assets.
It's a defensible move. Facebook is up by more than a third in 2020, and analysts, who rate the stock at Buy, forecast average annual earnings growth of 19.5% a year for the next three to five years. That should support the rich valuation of nearly 28 times next year's earnings.
- Market value: $423.8 billion
- Billionaire investor: Cullinan Associates
- Percent of portfolio: 27.4%
Walmart (WMT, $149.30) has been one of the beneficiaries of the pandemic way of life, and that's good news for investors with a hefty exposure to the world's largest retailer. Cullinan Associates, an advisory firm based in Louisville, Kentucky, with assets under management (AUM) of $1.5 billion, was happy to keep adding to an already significant stake in WMT.
Cullinan Associates bought another 95,760 shares in the Dow stock, solidifying WMT's place as the firm's single-largest stock pick at 27.4% of the total equity portfolio – and it's not even close, with No. 2 Coca-Cola at just 4.3% of assets. Cullinan's stake of more than 3 million shares is worth $465 million at current prices.
So far it looks like a wise trade. Walmart's stock added about 17% in the third quarter and is up almost 30% for the year-to-date.
- Market value: $443.9 billion
- Billionaire investor: Odey Asset Management Group
- Percent of portfolio: 42.1%
Visa (V, $208.05) gets a lot of love from hedge funds, mutual funds, analysts and retail investors. Its appeal is easy to understand. As the world's largest payments processor, Visa is uniquely positioned to take advantage of the explosive global growth in digital mobile payments and other cashless transactions.
Warren Buffett is a big believer in the name, as well. Berkshire Hathaway has a $2 billion stake in the company. Less well-known is Odey Asset Management Group's (AUM $3.5 billion) high faith in Visa.
The London-based hedge fund allocates a whopping 42.1% of its portfolio to Visa. That would be a massive weight in even the most concentrated of portfolios, but Odey holds more than 110 stocks. Its next largest position, which is Barrick Gold, accounts for just 5.2% of its holdings.
What's remarkable is just how quickly Odey flipped the switch. In the prior quarter, Visa, which had only been part of the portfolio since 2018, made up just 0.5% of equity assets. The company added 1.5 million shares during Q3 to raise its stake by more than 9,000%.
- Market value: $25.0 billion
- Billionaire investor: Silver Point Capital
- Percent of portfolio: 46.3%
Utilities stocks are supposed to be poky dividend payers that help you sleep well at night.
PG&E (PCG, $12.60), however, is a little riskier.
If the name is familiar, that's likely because it was embroiled in massive legal battles after its equipment was linked to several fatal wildfires. Indeed, it only emerged from bankruptcy last summer – a necessity as it faced an estimated $30 billion in liabilities.
Nonetheless, Silver Point Capital (AUM $13.6 billion) has owned the utility since 2018, building up a sizable position along the way. In the most recent quarter, the Greenwich, Connecticut-based fund raised its stake by 3%, or 1.3 million shares. PCG now accounts for more than 46% of the fund's portfolio value.
Analysts are bullish on the name, giving it a consensus recommendation of Buy. And the share price performance has certainly been reassuring. PCG stock is up 37% over the past three months.
SPDR S&P 500 ETF Trust
- Assets under management: $326.5 billion
- Billionaire investor: Castle Hook Partners
- Percent of portfolio: 52.5%
Castle Hook Partners (AUM $2.2 billion) has 52.5% of its total portfolio value tied up in the SPDR S&P 500 ETF Trust (SPY, $366.69). The remainder of the New York hedge fund's portfolio is diversified over scores of stocks. Indeed, most of its stock picks are individually less than 1% of equity assets.
This exchange-traded fund is one of the best ways to track the performance of the most used benchmark for U.S. equities. It's a must-have for most retail investors, who have little hope of beating the market consistently year after year. Importantly, it's also cheap. Even Warren Buffett's Berkshire Hathaway holds a sliver of a position in the ETF.
Some investors might wonder why a high-fee hedge fund would dedicate more than half its portfolio to a cheap index fund. Well, there's nothing wrong with making a big bet on the U.S. stock market. And the fund doesn't have to worry that the position will lag the S&P 500 (past fees, of course).
Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
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