According to Institutional Investor, nearly half of the entire hedge fund industry lost money in 2015 and some funds managed by billionaires, such as Daniel Loeb’s Third Point LLC were among losers. By no means are billionaire asset managers faultless in their investment strategy and philosophy, but they are much better at investing than most hedge fund managers out there. For that reason, investors should keep track of what money managers with ten-figure fortunes are buying and selling to get tips on how to adjust their own portfolio. However, one should keep in mind that six of the top eight highest-earning hedge fund managers in 2015 are employing so-called quant investment strategies, which most probably explains the stability of their strong performance. Some billionaires, including David Einhorn of Greenlight Capital, voiced their discontent with the masses closely following and mimicking their moves, but as long as these successful money managers do not want anyone following their footsteps it does make sense to do what Mr. Einhorn opposes. Kidding aside, Insider Monkey decided to lay out a list of five stocks billionaire asset managers were running away from during the first quarter of 2016.
At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5 Dow Chemical Co (NYSE:DOW)
– Billionaires with long positions as of March 31: 9
– Aggregate value of billionaires’ holdings as of March 31: $2.51 Billion
There were nine billionaire-led funds followed by Insider Monkey with long positions in Dow Chemical Co (NYSE:DOW) at the end of the March quarter, down from 13 registered at the end of the previous quarter. Correspondingly, the aggregate value of their holdings fell by 25% quarter-over-quarter to $2.51 billion. Chemical industry bigwigs Dow Chemical and E. I. Du Pont De Nemours and Co (NYSE:DD), which announced an all-stock merger last year, plan to hold separate shareholder meetings in late July to vote on the proposed merger. The combined chemical behemoth, to be called DowDuPont, plans to achieve $3 billion in cost synergies before splitting into three separate companies focused on agriculture, material science and specialty products. The merger is anticipated to close in the second half of 2016. Dow Chemical shares are up 1% so far in 2016. Dan Loeb’s Third Point LLC held 25.00 million shares of Dow Chemical Co (NYSE:DOW) at the end of March.