5 Under-the-Radar Stocks That Billionaires Were Buying in Q1

Several investors make their investment decisions based on which stock or sector is ‘hot’ or in the limelight. While this approach might work for a few investors, especially those who are chasing growth, for most it backfires. The reason behind that being that by the time a stock starts getting attention, for whatsoever reason, the smart money has already made its move and there is almost nothing on the table for the little guy to take home. That’s why it’s always better to search for companies that have solid fundamentals over those whose stocks are in fashion. This simple strategy has helped many investors beat the market year after year and continues to do so. Its success can be gauged from the fact that several investors who have been using it for a long-time rank as billionaires today. Since it’s not possible for small active investors with limited resources to search for the hidden gems among the thousands of publicly-traded companies, we at Insider Monkey try to make that job easy. In this post, we will be revealing five under-the-radar companies that saw a significant jump in their popularity during the first quarter among the 58 billionaire investors in our database.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Ingredion Inc (NYSE:INGR)

 – Billionaires with long positions (as of March 31) : 7

 – Aggregate value of Billionaires’ holdings (as of March 31): $293.73 million

Let’s start with Ingredion Inc (NYSE:INGR), which saw its ownership among billionaire investors rise by four and the aggregate value of their holdings in it more than double during the first quarter. Billionaires’ firms that initiated a state in Ingredion Inc (NYSE:INGR) during the first quarter include D E Shaw, founded by David E. Shaw, which bought 110,574 shares of the company. Shares of the global ingredients solution provider have been rallying since July of last year and have appreciated by over 21% so far in 2016. The company has been consistently beating analysts’ earnings estimates for the past five quarters, which explains the rally in its stock. For the first quarter, Ingredion declared EPS of $1.74 on revenue of $1.36 billion, easily beating EPS estimates of $1.39 and coming slightly ahead of revenue estimates of $1.34 billion.

Progressive Corp (NYSE:PGR)

 – Billionaires with long positions (as of March 31) : 8

 – Aggregate value of Billionaires’ holdings (as of March 31): $331.09 million

Shares of Progressive Corp (NYSE:PGR) have also been rallying for quite awhile. However, this quarter they have given up most of the 13.75% gains they made during the first quarter, pushing their year-to-date gains down to 3%. This recent correction could be a result of the insurance company’s stock trying to catch some breath after making its lifetime high of $35.54 in April. Progressive Corp (NYSE:PGR) currently pays a quarterly dividend of $0.89 per share, which translates into a respectable annual dividend yield of 2.67%. During the January-to-March period, the number of billionaire investors in our database which held a stake in Progressive Corp increased by five and the aggregate value of their holdings in it jumped by nearly six-times. Billionaire Jim Simons‘ Renaissance Technologies made a five-fold increase to its stake in Progressive Corp (NYSE:PGR) during the first quarter.

Three more under-the-radar stocks that were favored by the wealthiest investors in the world are detailed on the next page.

Philip Morris International Inc. (NYSE:PM)

 – Billionaires with long positions (as of March 31) : 7

 – Aggregate value of Billionaires’ holdings (as of March 31): $414.68 million

Though Philip Morris International Inc. (NYSE:PM) is not a company that needs much introduction, its stock has surely been under-the-radar for a long time. It was only in April that the stock gained some limelight after it broke above the $100 mark for the first time. It seems that billionaire investors were already expecting this, as their ownership of the company increased by five and the aggregate value of their holdings in it appreciated by 178% during the first quarter. Despite the rally in its stock, the $1.02 per share quarterly dividend that Philip Morris International Inc. (NYSE:PM) pays out still translates into an attractive annual dividend yield of over 4%. On April 21, analysts at Societe Generale upgraded the stock to ‘Hold’ from ‘Sell’ and also raised their price target on it to $99 from $77. During the first quarter, billionaire Cliff Asness‘ AQR Capital Management inched up its stake in the company by 3% to 1.34 million shares.

Energen Corporation (NYSE:EGN)

 – Billionaires with long positions (as of March 31) : 6

 – Aggregate value of Billionaires’ holdings (as of March 31): $216.72 million

The almost 50% rise in crude oil prices since mid-February has greatly helped the stock of several oil companies like Energen Corporation (NYSE:EGN). This rise has also raised the popularity of oil stocks among hedge funds and billionaire investors. With ownership of 1.59 million shares of the company, Israel Englander‘s Millennium Management was the only billionaire-led fund among those we track that had a stake in Energen Corporation (NYSE:EGN) at the end of 2015. Though the number of billionaires long Energen increased by five during the first quarter, Millennium Management continued to remain its largest shareholder among them, having increased its stake by 92% to 3.04 million shares during the period. On May 13, analysts at JPMorgan Chase & Co. upgraded the stock to ‘Overweight’ from ‘Neutral’ and also raised their price target on it to $51 from $43, citing the company’s robust balance sheet.

AMETEK, Inc. (NYSE:AME)

 – Billionaires with long positions (as of March 31) : 8

 – Aggregate value of Billionaires’ holdings (as of March 31): $385.24 million

Finally, AMETEK, Inc. (NYSE:AME) was the top under-the-radar stock in terms of its increase in popularity during the first quarter among the billionaire investors in our system. Its ownership among those billionaires rose by seven while the aggregate value of their holdings in it increased by nearly 180% during the first quarter. Though it lands atop this list, it’s also the only stock that is currently trading in the red in 2016, being down by 12%. For the first quarter, the company reported EPS of $0.57, which was in-line with analysts’ expectations, on revenue of $944.40 million, which missed estimates by $20.86 million. Following the earnings release, several analysts downgraded the stock, including analysts at Atlantic Securities, who lowered their rating to ‘Neutral’ from ‘Overweight’ while maintaining their $51 price target on it on April 29. Billionaire Ken Griffin‘s Citadel Investment Group upped its stake in the company by 861% to 1.3 million shares during the first quarter.

Disclosure: None