Small-cap stocks usually fail to get the attention of the markets, but our research shows that if these stocks are picked with the right strategy, they can deliver huge profits. For example, the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
More recently the top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters (S&P 500 Index funds returned only 7.6% during the same period). In this article, we will go even smaller and talk about the five stocks (with less a billion dollars in market value) that billionaires in our database are bullish on.
PHH Corporation (NYSE:PHH)
A total of 5 billionaires from our list of 64 billionaires were long PHH Corporation (NYSE:PHH) at the end of the third quarter, up from 3 billionaires a quarter earlier. The stock is down over 11% year-to-date. The New Jersey-based financial services company reported third quarter loss of $0.35 a share, worse than the estimates of $0.16 a share, while revenue of $197 million also fell short of the projected $198.67 million. PHH was recently fined $28 million for discrepancies in mortgage foreclosures, origination and servicing practices. Larry Robbins’ Glenview Capital owns 4.72 million shares of the company as of the end of the third quarter.
ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS)
A total of 4 billionaires in our data had amassed $144.97 million worth of shares of ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS) at the end of the third quarter. The stock has gained 2,306% in value since the start of the year. The Taiwan-based company earned $0.01 per share in the third quarter on $160.4 million revenue, above the forecasts of $0.23 EPS and $157.2 million revenue. The company will halt trading at the Taiwan Stock Exchange on November 30 because it has some pending material information which will be announced after the market close on Wednesday. Seth Klarman’s Baupost Group owns 3.75 million shares of ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS), as of the end of the third quarter.
On the next page, we will discuss the rest of the small-cap stocks which have the attention of famous billionaires.