Thursday, April 12, 2012

The Top Five Stocks Billionaire Hedge Fund Mangers are Buying to Ride Bernanke's Money Printing Binge

It doesn't always make sense to chase the stocks that are owned in the funds of billionaire hedge fund managers, but with Ben Bernanke printing money like a mad man, more money is going to flow into stocks and into hedge funds and the top stocks held by these funds are likely to outperfrom

Meena Krishnamsetty brings us up to date on what the top five are:
Hedge funds have been able to outperform the market significantly over the past five years. Unfortunately, hedge fund managers took around 47% of their total returns as fees (read the details here ). Despite the huge hedge fund fees, investors were still able to outperform the market by 2.5 percentage points per year.

We like hedge funds. We believe hedge fund managers are talented and that they deserve billions of dollars in fees. However, we don't think it's a smart move to directly hand over your hard earned dollars to hedge fund managers. This will only help them to become billionaires before you can even think about retirement.

A better alternative is to imitate billionaire fund managers' top stock picks...

1. Apple  is the most popular stock among billionaire fund managers. Almost half of them had a large position in Apple at the end of December. Apple is also the most popular stock among other hedge fund managers (see the 10 most popular stocks ). The stock gained 57% this year as of April 9th. Apple has been an obvious value play for a very long time. At the beginning of last year, the market valued the stock as if it was a low-growth, utility stock.

By the end of the summer, low-growth utility stocks had even higher multiples than technology stocks like Apple and Microsoft . Investing in Apple was really a no-brainer. It is still very attractively priced. Billionaires Ken Griffin , David Einhorn , and Stephen Mandel are extremely bullish about the stock.

2. Google  is the second most popular stock among billionaire hedge fund managers. The stock lost 2.3% as of April 9th. We are optimistic about Google as well. The stock's 2013 forward P/E ratio is less than 13. It is slightly more expensive than Apple but the stock is the undisputed leader of the search business. It is expected to increase its earnings by nearly 20% per year over the next few years. We expect that Google will outperform the market over the next five years. David E. Shaw , Chase Coleman , and Ken Fisher have large positions in Google.

3. El Paso Corp is the third-most popular stock among billionaire hedge fund managers. Carl Icahn hit the jackpot by investing more than a $1 billion before its merger with Kinder Morgan was announced. He had $1.9 billion in the stock at the end of December. This is a merger arbitrage play that returned 13.9% since the beginning of this year.

4. News Corp  is the fourth popular stock among billionaire hedge fund managers. This is a conservative long-term play. The stock was a real bargain last summer. Billionaire fund managers were greedy when others were fearful. News Corp underperformed the market this year, returning 7.2% through April 9th. Steven Cohen and John Paulson are among News Corp investors (see John Paulson's stock picks ). News Corp. is the owner of Dow Jones, publisher of MarketWatch.

5. Medco Health Solutions is the fifth most popular stock. This is also a merger arbitrage play. The stock returned more than 25% this year until its merger with Express Scripts ESRX +1.02%  closed in early April.

1 comment:

  1. Any interest in the private funds that have gone public. Oaktree (OAK) or Apollo (APO) for instance?