It’s not easy beating the market with large-cap stock picks that are extensively followed by analysts and often inflated in value by common investors who bet on their name recognition, but billionaire hedge fund managers managed to do it in the second quarter. Their top picks of Apple Inc. (NASDAQ:AAPL), Allergan PLC (NYSE:AGN), eBay Inc (NASDAQ:EBAY), Baidu Inc (ADR) (NASDAQ:BIDU), and Alibaba Group Holding Ltd (NYSE:BABA) outperformed the market, with these five stocks returning 0.5% on average during the period against the mere 0.2% return of the S&P 500, making them good candidates for an investor’s portfolio to balance out their riskier stock choices. Let’s take a look at the performance of these stocks last quarter and their prospects for the coming one.
We don’t just track the latest moves of funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 135%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
The world’s largest company in terms of market capital, Apple Inc. (NASDAQ:AAPL), has always been a favorite stock pick of fund managers. The technology giant has an impressive portfolio of products and services including iPhone, iPad, iPod, Apple Pay, Mac, Apple Watch, and Apple Music. Apple Inc. is all set to launch its card-less payment system, Apply Pay, in the UK this month, allowing users to make payments through an iPhone or Apple Watch. Apple Pay is powered by Near Field Communication (NFC) technology, which allows devices to communicate wirelessly within a short range. The shares of Apple Inc. (NASDAQ:AAPL) have grown 0.8% during the second quarter and smart money has a positive outlook for the company. Among the hedge funds tracked at Insider Monkey, 150 hedge fund managers held positions in the company with net holdings amounting to $21.52 billion at the end of the first quarter. On the contrary, 149 hedge funds had Apple in their equity portfolios to end the previous quarter, with aggregate investments of $20.88 billion. Carl Icahn has the largest position in the company among those, with 52.76 million shares, which have a market value of $6.57 billion. There were 16 billionaires among those we track who held positions in the iPhone-maker at the end of the first quarter.
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eBay Inc (NASDAQ:EBAY) is another favorite stock pick of billionaire hedge fund managers and the share price of the e-commerce company are up by 4.44% in the second quarter. The online marketplace website will spin off its payment arm, PayPal, on July 17, with an estimated market cap of $44 billion for PayPal, or about 57% of eBay’s total current value. In its fourth quarter earnings call, eBay said that it would give $5 billion in cash to PayPal after its spin off. eBay is disposing of the majority of its other businesses to focus on the online marketplace, as the company sold its 28.4% stake in Craigslist Inc to the advertising company itself. eBay is further said to be looking for a buyer for its enterprise division, which offers an e-commerce platform, delivery service, warehouse services, and customer services to its clients. The smart money is bullish on the stock of eBay Inc (NASDAQ:EBAY), as 90 hedge fund managers in our database held cumulative investments of $11.86 billion in the company at the end of the first quarter. Carl Icahn is among the primary shareholders of this company as well, with ownership of 46.27 million shares of eBay valued at $2.67 billion. In terms of number of billionaires holding positions in the company, according to our records, eBay attracted 17 billionaires at the end of the first quarter, which was higher than that of Apple Inc.
The Chinese technology company, Baidu Inc (ADR) (NASDAQ:BIDU), is another favorite stock pick of billionaires. Baidu has been investing heavily towards expansion and one of its recent investments includes a $3.2 billion push into Nuomi, an app that connects online customers with brick-and-mortar businesses. This investment could help the Chinese tech company expand its existing ecosystem and monetize mobile users. The shares of Baidu Inc (ADR) (NASDAQ:BIDU) have declined 4.47% during the second quarter and smart money is bearish on the stock. In comparison with the 95 hedge fund managers holding $8.42 billion of the company’s shares at the end of the fourth quarter of 2014, 75 hedge fund investors maintained positions in the company at the end of the first quarter of 2015, with aggregate holdings of $7.00 billion. Baidu Inc has attracted investments from numerous Tiger Cubs, including Stephen Mandel of Lone Pine Capital and Lee Ainslie of Maverick Capital. Mandel’s current stake in the company includes 5.28 million shares valued at $1.10 billion. Baidu was equally competitive in terms of landing investments from billionaires, as the Chinese tech firm bagged 17 billionaire investors at the end of the first quarter.
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Alibaba Group Holding Ltd (NYSE:BABA) is among the top e-commerce companies in the world and the Chinese retailer is quickly becoming known for entering other business segments at a rapid pace. The company is ready to enter the Chinese entertainment market by forming new partnerships with other Chinese media players including Hunan Satellite Television and DMG Entertainment. The service will start by offering films, TV content and games to the existing six million cable TV subscribers of Hunan Satellite Television and later expand to offer the first bundled package of mobile, internet, and cable TV entertainment in a single service. The shares of Alibaba Group Holding Ltd (NYSE:BABA) declined 1.17% during the second quarter. Smart money was bearish over this Chinese company as well, with 86 investors holding net investments of $5.80 billion at the end of the first quarter compared to total holdings of $7.11 billion from 90 investors in the previous reporting period. Rob Citrone’s Discovery Capital Management was the biggest shareholder of Alibaba heading into the second quarter, holding $730.36 million in the company’s stock, owning 8.77 million shares. Among all the stock choices discussed in this post, Alibaba had the lowest number of billionaire investors, with 15 at the end of the first quarter.
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