2017’s Billion-Earning Hedge Fund Managers All Love These Surprising Stocks

Michael Platt of BlueCrest Capital cemented his position atop the list of highest-earning hedge fund managers, taking home a cool $2 billion in earnings in 2017. Platt, who finished in a tie atop the 2016 list with earnings of $1.5 billion, was one of four money managers to earn over $1 billion last year according to Forbes data. Joining him were Jim Simons of Renaissance Technologies ($1.8 billion) who tied Platt for first place in 2016, David Tepper of Appaloosa Management ($1.5 billion), and Ken Griffin of Citadel Investment Group ($1.4 billion).

Griffin had the greatest leap in earnings from 2016, with his total jumping by $900 million. Citadel’s main funds, Kensington and Wellington, gained 13% in 2017, a big improvement over Citadel’s 5% returns in 2016, though they nonetheless failed to beat the market. Tepper’s earnings doubled from 2016, which helped him purchase the NFL’s Carolina Panthers earlier this month for $2.2 billion. The biggest fall from grace was reserved for Ray Dalio of Bridgewater Associates, who earned $1.4 billion in 2016, but “only” $900 million last year.

While impressive, the bloated earnings figures are as much a sign of hedge funds’ exorbitant fees as they are performance. Many massive investment firms like Bridgewater and Citadel pour billions of dollars (and rake in millions in fees) into nothing but hugely popular stocks like Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB). With so much money to invest, they’re all but forced to focus the bulk of their capital on the same popular mega-caps that feature just as prominently in low-cost index funds and will do little to help them beat the market.

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Below, we’ll look at three interesting (read: not mega-cap tech) stocks that were owned by all four of the billion-dollar-earning hedge fund managers’ firms as of March 31, 2018.

Centene Corp (NYSE:CNC)

Share Ownership of Centene Corp (NYSE:CNC): Appaloosa Management – 1.22 million, BlueCrest Capital Management – 3,172 (new position), Citadel Investment Group – 99,336, Renaissance Technologies – 297,716

Centene Corp (NYSE:CNC) was one of several healthcare stocks that sold off towards the end of January when news broke that Amazon.com, Inc. (NASDAQ:AMZN), JPMorgan Chase & Co. (NYSE:JPM), and Warren Buffett’s Berkshire Hathaway were joining forces to create a company called ABC that would be focused on lowering the health costs of the firms’ 1.2 million employees combined. It was expected the move signaled Amazon’s entry into the pharmacy supply chain, which sent jitters throughout the industry, though just ten weeks later Amazon had officially put any such plans on hold.

Meanwhile, Centene Corp (NYSE:CNC) has rallied nicely since the end of March, pushing its year-to-date gains to 13%. The health insurer grew its revenue by 19.5% in 2017 and its net income by 46.12%, though operating income declined slightly. Centene was forced to scale back its 2018 earnings per share estimates last month due to delays in the closing of its acquisition of Fidelis, which will be converted from a non-profit insurer into a for-profit one as part of the deal. However, Centene still anticipates the deal will add to its earnings per share in 2018.

On the next page we’ll look at two more stocks that were owned by all four of the firms managed by 2017’s billion-earning hedge fund managers as of March 31.