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Ally Financial Inc, AIG, Rock-Tenn Company: Billionaire Richard Perry’s Picks Eclipse S&P 500

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Billionaire Richard Perry’s 11 long stock picks for his fund Perry Capital returned 1.8% beating the S&P 500 ETF (SPY) by a full percentage point. Perry is a Goldman Alum having worked in the Risk Arbitrage department decades back. He also worked as an adjunct professor at NYU’s Stern Business School where he got his MBA. In 1998 he co-founded Perry Capital.

Richard Perry

Why is tracking Perry’s fund important? Tracking the activity of hedge funds such as Perry Capital is vital for small investors who try to seek out new promising investment opportunities. However, simply imitating the moves made by billionaires and hedge funds firms does not guarantee great returns because most of their top picks are in large-cap stocks. These equities usually don’t beat the market by a large margin, as they are usually more efficiently priced.  Hence, here at Insider Monkey, we concentrate our efforts on gathering and analyzing information regarding the small-cap picks of more than 700 hedge funds.

Our research has shown that the most popular small-cap stocks among hedge funds beat the market by 95 basis points per month between 1999 and 2012. There aren’t a lot of investment strategies that can beat the market by 10 percentage points a year so we started tracking the performance of hedge fund’s most popular small cap picks since the end of August 2012. These stocks returned more than 137% since then through the end of March 2015 and dominated S&P 500 ETF (SPY)’s 54% gain by more than 82 percentage points (read the details here).

Now on to the picks.

The largest holding in Richard Perry’s Perry Capital is American International Group Inc (NYSE:AIG). In the last quarter of 2014, Perry actually increased the position in American International Group Inc (NYSE:AIG) by 4% from the level of the previous filing to a total of 10.3 million shares at an allocation of $578 million. This represents a 24% position in the 13F portfolio. Perry is the third largest holder among the funds we track. American International Group Inc (NYSE:AIG) finished the quarter down 1.9% and was a tough stock to hold for other funds as well. Yesterday we mentioned Bruce Berkowitz’s fund also having a rough first quarter with the stock.

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