The handful of hedge fund billionaires have not become billionaires out of thin air; their talent, expertise and experience at picking stocks are the main features that have assisted them in becoming so successful and wealthy. This is one of the key reasons why one should track billionaires’ moves, as they might point to great buying opportunities. The Insider Monkey team monitors over 40 billionaire hedge fund investors and we definitely reckon that their top stock picks should not be overlooked. However, we decided to take a different angle in this article. The following article will discuss the least favored Dow Jones Industrial Average stocks by the billionaires tracked by our team. So, let’s take a look at what billionaire hedge funds have to say about the five least preferred stocks from the 30 companies included in the Dow, and their performance over the past few months.
At Insider Monkey, we track hedge funds’ and billionaires’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
#5 Goldman Sachs Group Inc. (NYSE:GS)
The number of billionaires invested in Goldman Sachs Group Inc. (NYSE:GS) at the end of the second quarter stood at six, compared with seven registered in the previous quarter. Even so, the value of their investments increased to $3.17 billion from $2.67 billion quarter-over-quarter. The shares of Goldman Sachs have lost more than 10% since the end of the second quarter, and are down by slightly over 3% year-to-date. Even though the bank delivered disappointing third quarter earnings results, its investment management business has been steadily strengthening. Goldman Sachs’ investment management revenues reached $1.42 billion in the third quarter, down by 3% year-over-year. However, the total assets under supervision increased by $6 billion to $1.19 trillion, so this business will represent a key source of revenue for the bank in the upcoming quarters. Edgar Wachenheim’s Greenhaven Associates owns 3.32 million shares of Goldman Sachs Group Inc. (NYSE:GS) as of September 30.
#4 United Technologies Corporation (NYSE:UTX)
Two less billionaires had United Technologies Corporation (NYSE:UTX) in their portfolios at the end of the second quarter compared to the prior one. Similarly, the value of the money held in the stock by the remaining six hedge fund managers decreased to $1.25 billion from $1.57 billion during the June quarter. Earlier this month, the industrial manufacturer reported mixed financial results for the third quarter. United Technologies posted earnings from continuing operations of $1.61 per share, down from $1.93 per share reported a year ago, but above analysts’ expectations of $1.55 per share. Its revenues declined by 5.7% year-over-year to $13.79 billion, missing analysts’ estimates by $770 million. However, the company’s officials asserted that they would reveal substantial restructuring efforts in the fourth quarter. Let’s not forget to mention that the stock has declined by nearly 11% since the end of the June quarter and is 13% in the red year-to-date. Ken Fisher’s Fisher Asset Management reported ownership of 8.18 million shares in United Technologies Corporation (NYSE:UTX) through the current round of 13F filings, for the September 30 reporting period.
#3 Travelers Companies Inc. (NYSE:TRV)
Travelers Companies Inc. (NYSE:TRV) received more attention from billionaire hedge fund managers during the second quarter, as the number of billionaires with stakes in the stock increased to five from two quarter-over-quarter. By the same token, the value of their investments increased to $520.31 million from $294.18 million over the three-month period. This stock provides valuable evidence as to why it makes perfect sense to track billionaires’ moves. The shares of the provider of property casualty insurance have advanced by 17% since June 30, after suffering a disappointing second quarter. The stock got beaten down during the June quarter, so billionaires took advantage of that and went long. Just recently, BMO Capital Markets increased its price target on the shares of Travelers Companies to $113 from $106, following its stronger-than-expected third quarter earnings results. Cliff Asness’ AQR Capital Management was the largest shareholder of Travelers Companies Inc. (NYSE:TRV) within our database at the end of the second quarter, with 2.52 million shares.
#2 3M Co (NYSE:MMM)
The number of billionaires with positions in 3M Co (NYSE:MMM) increased to five from three during the June quarter, while the value of their investments in the company augmented to $284.25 million from $234.05 million. The stock has advanced by slightly over 1% since the end of the second quarter, but is still 5% in the red year-to-date. The shares of the diversified technology company are currently trading at a forward price-to-earnings (P/E) ratio of 18.40, compared to a ratio of 15.0 for the industrial sector. Even so, Deutsche Bank recently raised its price target on the stock to $165 from $155, citing solid third quarter results. The newly-updated price target yields an upside potential of more than 5%, so the stock may keep going higher despite trading at a seemingly rich forward P/E ratio. Edgar Wachenheim’s Greenhaven Associates is bullish on 3M Co (NYSE:MMM) as well, reporting an ownership stake of 2.25 million shares in the stock as of September 30.
#1 Caterpillar Inc. (NYSE:CAT)
Caterpillar Inc. (NYSE:CAT) is the least favored Dow stock by the billionaires observed by the Insider Monkey team. In fact, the number of billionaire hedge fund managers with stakes in the company decreased to four from six during the June quarter. Similarly, the value of these stakes decreased to $1.04 billion from $1.15 billion quarter-over-quarter. Coincidentally, the shares of the manufacturer of construction and mining equipment, diesel and natural gas engines, have declined by 12% since the end of June, so some billionaires made the right move by selling out their stakes in the company. Nevertheless, the company’s business and its stock performance in particular has suffered quite seriously over the past few years, and some billionaires’ portfolios might have been hit by this outcome as well. Phill Gross and Robert Atchinson’s Adage Capital Management owned approximately 578,000 shares of Caterpillar Inc. (NYSE:CAT) as of June 30.