Ten Stocks Recommended by Top Hedge Fund Managers

Most investors are interested in what hedge fund managers recommend today, Insider Monkey, your source for free insider trading data, pays more attention to what they recommended in the past. The annual Ira Sohn Investment Research Conference is, by some standards, the top venue for hedge fund managers to showcase their best ideas. In May 2009, Stephen Mandel, Jim Chanos, Bill Ackman, Lee Hobson, Mark Kingdon, and David Einhorn were among the hedge fund managers that presented a long or short investment idea at that conference.

GREENLIGHT CAPITAL David Einhorn

We picked these hedge fund managers because their picks were highlighted in a Reuters or Bloomberg article. It’s been almost two years since that conference, so whatever the investment thesis of those recommendations, they had ample time to come true. Here is how those 10 stocks recommended by top hedge fund managers performed since that conference:

Strayer Education (STRA): Lone Pine Capital’s Stephen Mandel was extremely bullish about Strayer. “Strayer will be a far larger business 10 years from now, with cash flows a multiple of today’s levels,” he said.  The interesting part came 10 minutes after Mandel’s presentation. Jim Chanos was extremely bearish about for-profit education companies. Chanos explained that these companies spend too much money on advertising and their government funding will soon be cut. Chanos was bearish about these companies long before Steve Eisman. Strayer closed at $175.11 (prices are adjusted for dividend payments and splits) on May 28th 2009. Today, Strayer closed at $122.40, losing more than 30% during the past 20 months. Chanos was right, Mandel seems wrong so far.

Lincare Holdings (LNCR): Jim Chanos was right about Strayer but he was wrong about Lincare. Chanos was expecting Lincare’s prfit margins to weaken. The stock returned 93% since then. Of course, we should compare a short seller’s performance based on a benchmark. The Russell 2000 index ETF (IWM) returned 68% since then, so Chanos’ performance isn’t as bad as it may have first seemed.

General Growth Properties (GGP): This was the best recommendation at the Ira Sohn Conference. General Growth Properties, then in bankruptcy, increased ten-fold since May, 2009. Ackman stated that GGP had “huge potential reward and generally limited risk”. He was right then and he is still reaping the rewards of that investment. Ackman’s GGP investment was the main reason Pershing Square returned 29.7 percent in 2010.

Millicom International Cellular (MICC): Highside Capital’s Lee Hobson recommended buying Millicom on the expectation that the company will expand into emerging markets. MICC returned 58% since then, beating SPY’s 47% return.

Ritchie Bros. Auctioneers (RBA): Lee Hobson also recommended shorting Ritchie Bros because the company was facing falling merchandise prices and the market’s profit growth expectations were too high. He was right. RBA’s stock price increased by only 16% vs. SPY’s 47% increase. If one had bought MICC and sold RBA to form a market neutral portfolio, he would have made 42%.

Bank of America (BAC): Kingdon Capital Management’s Mark Kingdon recommended Bank of America because of its huge potential. John Paulson made the same recommendation later in 2009. Unfortunately, BAC returned 31%, underperforming the SPY by 16 percentage points. Citigroup (C) would have been a better recommendation.

Moody’s (MCO): David Einhorn is the main reason why Ira Sohn Conference is so famous. In 2008, he recommended shorting Lehman Brothers. In 2009, Einhorn recommended shorting Moody’s (MCO). Moody’s gained 15%, underperforming the SPY by 32 percentage points. This was another great recommendation. Warren Buffett was aware of Moody’s grim prospects and he has been selling his holdings (see Warren Buffett‘s portfolio moves).

Valeant (VRX): HealthCor’s Joseph Healey was expecting Valeant to double in the following 12 to 18 months. That was in May 2009. We hear these kinds of bullish statements all the time, and usually they don’t come true. This time was different. Joseph Healey’s prediction was actually very conservative. Valeant increased by 232% since then.

Hologic (HOLX): HealthCor was a $3 Billion healthcare fund. Healey’s second recommendation was Hologic. He also said that he was expecting this to double. The stock didn’t double but went up by 58% since then, beating the SPY by 11 percentage points.

Life Technologies (LIFE): Joseph Healey’s third recommendation at the Ira Sohn Conference was Life Technologies. Healey predicted a 60% increase in LIFE. The stock returned 38%, underperforming the SPY by 9 percentage points. Glenview’s Larry Robbins and Maverick’s Lee Ainslie have LIFE in their portfolios as well.

Long/short hedge funds are better stock pickers. Their best stock picks perform much better than their usual stock picks. If one had bought the long stock recommendations and sold the short stock recommendations made by these hedge fund managers, they would have achieved a triple digit return by assuming a much smaller risk than the market. Insider Monkey, your source for free insider trading data, follows hedge funds and developed a methodology to determine their best stock picks. Stay tuned.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!