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Buffett Buys More Shares of This Energy Company, Carlson Reaches Agreement With Vitamin Shoppe Inc. (VSI), Plus Two Other Moves

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The HFRX Absolute Return Index, which measures the overall returns of the hedge fund industry, posted a negative return of 0.09% in 2015, which compares with a negative return of 0.73% delivered by the Standard and Poor’s 500 Index (or a 1.40% gain including dividends). The investment environment for hedge funds has changed significantly over the past several months, so one should expect hedge funds to beat the broader market in the upcoming years. Rising interest rates and high uncertainty in the equity market form the perfect environment for hedge funds in 2016 and beyond, creating opportunities that were difficult to achieve in the bull market (hedge funds are hedged after all). For those interested in hedge funds’ recent moves, this article discusses four filings submitted with the SEC by several widely-known hedge fund managers tracked by Insider Monkey.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).

Warren Buffett’s Berkshire Hathaway keeps buying more shares of Phillips 66 (NYSE:PSX). According to a freshly-filed Form 4, the acclaimed investor snapped up 1.74 million shares on Friday at a weighted average cost of $76.01, boosting his overall holding in the oil refiner to 65.68 million shares. As covered on Tuesday, Berkshire Hathaway bought 1.65 million shares of Phillips 66 last Thursday, so it would not be surprising to see Buffett purchase even more shares in the days ahead. The energy manufacturing and logistics company has seen its shares decline by 18% since the beginning of December, presumably because of the plummeting crude oil prices. Even so, the stock is up by 27% over the past year and trades at extremely attractive price-to-earnings ratios.

It is true that the company’s sales were pressured by low crude oil prices in 2015, but its bottom-line results greatly benefited from this outcome, especially in the oil refining segment. Phillips 66 (NYSE:PSX)’s refining revenue for the nine months that ended September 30 accounted for only 23% of the company’s total revenue, whereas the net income generated from this segment accounted for a whopping 60% of the total bottom-line figure. Although refining revenue was down year-over-year, the increased refining margins which were achieved thanks to the average market crude oil price declining by more than the average market gasoline price, had a very beneficial impact on the company’s financial performance. A total of 33 hedgies tracked by Insider Monkey had stakes in the company at the end of the third quarter, accumulating 16.30% of its shares. Iridian Asset Management, founded by David Cohen and Harold Levy, cut its stake in Phillips 66 (NYSE:PSX) by 4% during the September quarter to 5.22 million shares.

Warren Buffett
Warren Buffett
Berkshire Hathaway

The next two pages of this article discuss three other filings submitted with the SEC recently.

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