Financial stocks have had a volatile year, as the market has constantly speculated about the timing of an interest rate hike out of the Federal Reserve and mulled over the implications of the Presidential election results. Despite the unpredictability, institutional investors continued to accumulate large positions in the sector, assuming that even the worst-case scenario would imply healthy equity returns and generous dividends.
In this article we’ll take a look at the five most popular finance stocks among the 64 billionaire money managers that we keep track of at Insider Monkey.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Bank of New York Mellon Corp (NYSE:BK)
Number of Billionaires Long The Stock (as of September 30): 10
Total Value of Their Long Positions (as of September 30): $2.78 billion
Let’s start with Bank of New York Mellon Corp (NYSE:BK), in which the number of billionaires long its stock surged by 25% over the third quarter. The list included Mario Gabelli (GAMCO Investors), whose fund held more than 5.94 million shares worth $237 million on September 30, and Warren Buffett (Berkshire Hathaway), which disclosed ownership of 21.13 million shares as of September 30.
Bank of New York Mellon Corp (NYSE:BK) returned almost 5% in the third quarter, and has managed far greater gains in the current quarter, spiking by more than 20.6%, helped by robust quarterly results and speculation about the timing of an interest rate hike. A few weeks ago, the bank reported third-quarter EPS of $0.90 on revenue of $3.94 billion, beating the Street’s consensus targets by $0.09 and $80 million, correspondingly. Last week, experts at Buckingham Research downgraded the stock’s rating to ‘Neutral’ from ‘Buy’.
American International Group Inc (NYSE:AIG)
Number of Billionaires Long The Stock (as of September 30): 11
Total Value of Their Long Positions (as of September 30): $3.88 billion
Next up is American International Group Inc (NYSE:AIG), which witnessed an 8% reduction in the number of billionaires with long positions during the September quarter. Noteworthy investors as of September 30 included Carl Icahn (Icahn Capital), whose fund owned 45.64 million shares valued at $2.7 billion at the end of the quarter, and John Paulson (Paulson & Co.), with 9.06 million shares.
Shares of American International Group Inc (NYSE:AIG) have had a very volatile year, although the second-half has been quite strong. The stock rose by 15.31% in the third quarter, and by an extra 8.75% over what’s passed of the fourth quarter. A few days ago, the company hosted an investor day, where management said that normalized ROE for the first 9 months of the year came in at roughly 9%, and is expected to hit 10% by the end of the year, largely driven by capital returns, underwriting improvements and other efficiency measures. In addition, the team pointed out that recently-closed and pending business divestitures should result in approximately $4.3 billion in new cash for the company.
We’ll check out billionaires’ three favorite finance stocks on the next page, which likely includes at least one surprise.