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5 Small-cap Stocks Billionaires Are Piling Into

Although they are not always right, billionaire investors did not become wealthy without a sterling track record of stock picking success. We have found that historically, their picks in the small-cap space have done particularly well.

Given that, we decided to create a list of 5 small-cap stocks that billionaires were loading up on in the third quarter, which are Dynegy Inc. (NYSE:DYN), Viavi Solutions Inc (NASDAQ:VIAV), WebMD Health Corp. (NASDAQ:WBMD), Platform Specialty Products Corp (NYSE:PAH), and KLX Inc (NASDAQ:KLXI). Read on for all the details.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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– Number of Billionaire Shareholders (as of September 30): 5
– Total Value of Billionaire Holdings (as of September 30): $256.37 million

According to our database of 64 billionaires, 5 of them were long $256.37 million worth of KLX Inc (NASDAQ:KLXI) shares at the end of September. Bulls are optimistic on the stock due to the perception that the company will benefit from the new aircraft-maintenance cycle (aerospace distribution makes up for almost all of KLX’s bottom-line). If OPEC can get its act together and cut production meaningfully, oil prices could rebound and help KLX’s energy business do well too. Richard Safran of Buckingham Research has a $45 sum-of-parts price target on KLX.

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#4 Platform Specialty Products Corp (NYSE:PAH)

– Number of Billionaire Shareholders (as of September 30): 5
– Total Value of Billionaire Holdings (as of September 30): $600.1 million

Although he is more famous for investing in other stocks, billionaire Bill Ackman‘s Pershing Square was among the five billionaire investors in our system that reported holding stakes in Platform Specialty Products Corp (NYSE:PAH) as of the end of Q3. With a holding of 42.7 million shares at the end of September, Ackman had 6.4% of his 13F portfolio dedicated to the stock. Aleksey Yefremov of Nomura has a ‘Buy’ recommendation and $11 price target on Platform Specialty, citing the stock’s discount valuation and its free cash flow strength.

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On the next page, we’ll check out three more small-caps that billionaire fund managers were piling into during the third quarter.

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