Billionaires Were Buying These Stocks Heading Into 2016

Due to the large amounts of money they manage, hedge funds and institutional investors are able to expend vast resources on their research capabilities, allowing them to identify investment opportunities ahead of the crowd. This advantage they have over the general investor, along with their investing acumen helps hedge funds to routinely outperform the markets. Research done by Insider Monkey shows that over a long period of time, the most popular small-cap stocks among hedge funds not only outperform the broader market, but also beat the returns generated by hedge funds’ favorite large-cap stocks by a wide margin. Which is why we at Insider Monkey track over 800 elite hedge funds and institutional investors as part of our small-cap strategy (see more details here). However, among these 800 funds, we pay special attention to a group of about 60 funds which were launched by people who, through decades of exemplary stock picking, have managed to become billionaires. In this article, we are going to analyze the top five stocks which saw a surge in popularity among these billionaire investors during the fourth quarter, which could imply big things ahead.

#5 McDonald’s Corporation (NYSE:MCD)

– Billionaires with Long Positions (as of December 31): 14

– Value of Billionaires’ Holdings (as of December 31): $2.1 billion

Let’s start with McDonald’s Corporation (NYSE:MCD), which had its ownership among the billionaire investors covered by us increase by five during the fourth quarter, amid a greater than 20% rise in its stock during the period. However, the aggregate value of the holdings of these investors in the company declined by $454 million over the quarter, which could be because McDonald’s Corporation (NYSE:MCD)’s stock was trading in a range for nearly four years before the recent rally, so that when it finally broke out of it, long-term investors took the opportunity to book some profits. Led by the better-than-expected numbers the company reported for the fourth quarter, its stock is trading flat in 2016, despite a slump in the broader market. However, some analysts are concerned that the stock has become overvalued, since it is currently trading at a trailing P/E of 24.36, which is significantly above its historical average P/E. Billionaire Daniel S. Och‘s OZ Management reduced its stake in the company by 22% to 5.53 million shares during the fourth quarter.

#4 Synchrony Financial (NYSE:SYF)

– Billionaires with Long Positions (as of December 31): 15

– Value of Billionaires’ Holdings (as of December 31): $1.17 billion

Though its stock ended the fourth quarter in the red, Synchrony Financial (NYSE:SYF) saw an unprecedented rise in its popularity among the billionaire investors covered by us during the period. Billionaire investors with long positions in the stock increased by 13 and the aggregate value of their holdings jumped by a whopping 1,800% during the October-to-December period. Among the funds that initiated a stake in the company during that time was legendary investor George Soros‘ family office Soros Fund Management, which purchased 7.12 million shares. Synchrony Financial (NYSE:SYF)’s investors feel that 2016 will be a rewarding year, for them as the company’s management has indicated that it will start returning capital to them in the form of dividend payments and/or a share repurchase program beginning this year. On February 22, the company got a positive mention in Barron’s, which highlighted that on the back of a strong growth in loans, Synchrony Financial’s stock could soar by 40% this year.

#3 Humana Inc (NYSE:HUM)

– Billionaires with Long Positions (as of December 31): 15

– Value of Billionaires’ Holdings (as of December 31): $3.63 billion

Humana Inc (NYSE:HUM) saw billionaire investors making a beeline for its stock during the final quarter of 2015, as the company prepares for the completion of its acquisition by Aetna Inc (NYSE:AET). The total amount of billionaires in our system with ownership positions in the company increased by 66% and the aggregate value of their holdings in it swelled by almost $1.13 billion during the fourth quarter. Though Humana Inc (NYSE:HUM)’s stock was trading down by over 10% this year a few weeks ago, it has recouped those losses thanks to the company reporting better-than-expected fourth quarter numbers and now trades up by 2.66% year-to-date. The pending Aetna/Humana merger got a big boost recently after insurance regulators  in Florida, which is Humana’s key Medicare Advantage market, approved the deal without asking any of the two companies to divest any of their assets. Billionaire Andreas Halvorsen‘s Viking Global raised its stake in Humana by 13% to 4.33 million shares during the fourth quarter.

#2 Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

– Billionaires with Long Positions (as of December 31): 15

– Value of Billionaires’ Holdings (as of December 31): $4.75 billion

Moving on, the number of billionaire investors in our database with long positions in Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) increased by 50% and the aggregate value of their holdings in the stock jumped by over 95% during the fourth quarter. Billionaire John Paulson‘s Paulson & Co was among the hedge funds which increased its stake in the company during the October-to-December period; it held 20.4 million shares of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) as of December 31. Shares of the Israeli pharmaceutical behemoth have been on a gradual decline this year and currently trade down by over 15% year-to-date. For the fourth quarter, the company reported EPS of $1.28, missing analysts’ estimates by $0.01, while revenue of $4.88 billion came in $50 million above expectations. On March 3, analysts at Nomura reiterated their ‘Neutral’ rating and $73 price target on the stock.

#1 EMC Corporation (NYSE:EMC)

– Billionaires with Long Positions (as of December 31): 17

– Value of Billionaires’ Holdings (as of December 31): $3.13 billion

Finally, EMC Corporation (NYSE:EMC) was the stock which saw the largest surge in its popularity during the fourth quarter among the billionaire investors covered by Insider Monkey. During that period, the ownership of the company among said investors increased by seven and the aggregate value of their holdings in it jumped by 134%. EMC Corporation (NYSE:EMC)’s stock saw a massive rise in early October after rumors started making the rounds that Dell Inc. would be acquiring the company. However, it gave up all of those gains in the months following the official announcement. Though Dell initially announced that it will be acquiring the company for $67 billion, making it the largest technology M&A deal ever, in a recently submitted regulatory filing it revealed that the deal’s value could fall to $57 billion because of the declining worth of EMC Corporation’s 83% stake in VMware, Inc. (NYSE:VMW), whose stock has declined heavily since the deal was announced. Recent regulatory filings by Dell Inc. and EMC Corporation reveal that both companies have selected a team of executives to lead the various departments of the combined company. Billionaire Seth Klarman‘s Baupost Group was among the hedge funds which initiated a stake in EMC Corporation the fourth quarter; it held nearly 29.25 million shares of the company at the end of December.

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