Billionaire hedge fund managers stand out for a very clear and obvious reason: they manage huge equity portfolios and have influence other investors don’t due to the sheer size of their investments, and the pressure they can exert over companies they invest in. Since these funds manage such large sums of money, they are drawn towards large-cap stocks. After all, stocks of companies with a small market capitalization only offer billionaires limited investment options, since the purchase of too great a stake exposes the funds’ moves and often drives up the price of that stock, and there simply aren’t enough high quality small-cap stocks to be able to invest billions of dollars into.
Hence, billionaire hedge fund managers usually hold positions in numerous large-cap stocks, while small-cap stocks are used to run-up returns. With this in mind, it becomes clear why institutional investors often have a hard time beating the market, even if only by a small margin. Since stocks of large-cap companies tend to offer less promising returns, a hedge fund’s performance can suffer from having too much capital to invest. Hence, investing directly in a hedge fund might not be as profitable as some seem to anticipate, as hedge funds continue to manage record amounts of investors’ capital; especially once the hefty fees come into play. Nevertheless, following the moves of billionaire investors can be quite interesting, especially when it comes to small-cap stocks, since this is where the largest margins can be achieved.
With this information in mind, it becomes clear why taking a closer look at the equities held by billionaire hedge fund managers is not in vain. The five basic industries stocks that these individuals were betting the most on last quarter were: Air Products & Chemicals, Inc. (NYSE:APD), Dow Chemical Co (NYSE:DOW), LyondellBasell Industries NV (NYSE:LYB), Ecolab Inc. (NYSE:ECL), and Eastman Chemical Company (NYSE:EMN).
With a total of 10 billionaires holding a stake in the company, Air Products & Chemicals, Inc. (NYSE:APD) was clearly the most favored stock in this sector amongst this group of wealthy hedge fund managers. As the company’s largest institutional investor, Bill Ackman’s Pershing Square is clearly the most bullish of the lot. The fund’s stake amounts to 20.54 million shares and accounts for more than 18% of its equity portfolio. Another billionaire betting on this stock is the famous Andreas Halvorsen, who increased his fund’s exposure to Air Products & Chemicals, Inc. (NYSE:APD) by 51% last quarter and now holds a position of 5.36 million shares. Last year, the stock gained more than 27%, while shares have already climbed by almost 9% year-to-date as of the closing bell on Tuesday.