Should you be bullish on Ally Financial Inc (NYSE:ALLY), Harbinger Group Inc (NYSE:HRG), Alcoa Inc (NYSE:AA), and CenterPoint Energy, Inc.(NYSE:CNP)? According to our research, an investor can beat the market by investing in the top picks of big hedge funds. We follow around 750 funds, among which is Lion Point, which had all four of those companies among its top picks. Therefore, we decided to examine these stocks, see how they performed in the third quarter, and what was the general smart money sentiment towards them.
Lion Point was founded by ex-Elliott Management portfolio manager Didric Cederholm in 2015. Lion Point’s portfolio had a total value of about $376.51 million on June 30 and the fund returned 13.96% in the third quarter from its 7 long positions in companies having a total market cap of at least $1 billion. As you’ll see below, some of its top picks are also held by Elliott Management, suggesting Cederholm carried some of his favorite stock ideas with him to Lion Point.
Lion Point was one of 627 funds in our database that returned positive gains from their long positions in $1 billion+ companies in the third quarter. Our research shows that the hedge funds in our system with at least 5 non-microcap stocks in their 13F portfolios tend to outperform on the long side of their portfolios. In the third quarter, 95% of such hedge funds returned an average of 8.3% from those positions, whereas S&P 500 ETFs returned only 3.3%. We should note that hedge fund investors didn’t see average gains of 8.3% in their statements because overall gains of hedge funds go down due to losses from short positions. Having that in mind, let’s analyze Lion Point’s top picks.
Lion Point ended the second quarter with a total of 6.21 million shares of Ally Financial Inc (NYSE:ALLY) in its portfolio, having a total worth of $106.1 million. Ally Financial returned 14.6% during the third quarter. Ally Financial Inc (NYSE:ALLY) was in 49 hedge funds’ portfolios at the end of the second quarter of 2016, down from 51 at the end of the previous quarter. More specifically, Cerberus Capital Management was the largest shareholder of Ally Financial Inc (NYSE:ALLY), with a stake worth $411.7 million reported as of the end of June. Trailing Cerberus Capital Management was Perry Capital, which amassed a stake valued at $269 millions. First Pacific Advisors LLC, Oaktree Capital Management, and Canyon Capital Advisors also held valuable positions in the company.
Lion Point added Harbinger Group Inc (NYSE:HRG) as a new position to its portfolio in the June quarter, and the move proved to be fruitful, as the stock returned 14.3% in the next quarter. Lion Point had a total of 3.66 million shares of Harbinger, having a total value of about $50.36 million on June 30. At Q2’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a 14% fall from the first quarter of 2016. Of the funds tracked by Insider Monkey, Leucadia National, managed by Ian Cumming and Joseph Steinberg, holds the largest position in Harbinger Group Inc (NYSE:HRG). Leucadia National has a $639.8 million position in the stock, comprising a mammoth 74.1% of its 13F portfolio. The second-largest stake is held by Omega Advisors, managed by Leon Cooperman, which holds a $141.5 million position. Remaining hedge funds and institutional investors that hold long positions include Jason Karp’s Tourbillon Capital Partners, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management, and James H. Litinsky’s JHL Capital Group.
We’ll check out two more of the fund’s stock picks on the next page.
Lion Point held 1.30 million Alcoa Inc (NYSE:AA) shares whose total value stood at $36.15 million at the end of the second quarter. This holding of Lion Point returned 9.7% in the quarter ended September 30. The largest stake in Alcoa Inc (NYSE:AA) among the funds that we track was held by Elliott Management, which reported holding $719.4 million worth of its stock as of the end of June. It was followed by First Pacific Advisors LLC with a $597.5 million position. Other investors bullish on the company included Orbis Investment Management and Slate Path Capital.
Lion Point had a total of 1.16 million shares of CenterPoint Energy, Inc.(NYSE:CNP) at the end of the second quarter. The net worth of these shares was about $25.41 million. CenterPoint Energy, Inc. (NYSE:CNP) returned 9.7% during the third quarter. Elliott Management was again a major shareholder of one of Lion Point’s picks, owning 11.7 million shares of the company on June 30.