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Billionaire Och’s Most Disappointing New Pick (And Two Good Ones)

Daniel Och’s OZ Management has filed its 13F with the SEC for the reporting period of March 31, 2015 and the fund manager reported a public equity portfolio value of $30.85 billion. Daniel Och holds the 150th spot on Forbes’ list of billionaires with a net worth of $4 billion, mostly attained through managing his fund, which he founded in 1994. OZ Management is among the largest alternative asset managers in the world today, and holds assets worth $48.1 billion under management as of June 2015. Actavis plc (NYSE:ACT), Air Products & Chemicals, Inc. (NYSE:APD), and Canadian Pacific Railway Limited (USA) (NYSE:CP) are among the major stock investments of the fund manager, but it’s his new picks we’ll be studying during this article. Och initiated positions in 159 new stocks during the first quarter, with the leaders among those being Avago Technologies Ltd (NASDAQ:AVGO), Twitter Inc (NYSE:TWTR), and Platform Specialty Products Corp (NYSE:PAH).

Och-Ziff Capital Management

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 142% and beating the market by more than 83 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

Daniel S. Och
Daniel S. Och
OZ Management

OZ Management initiated a new position in Avago Technologies Ltd (NASDAQ:AVGO) consisting of 2.46 million shares valued at $311.96 million. The investment manager owns 0.96% of the common shares of the semiconductor device manufacturer, which has witnessed 41.69% growth in its shares year-to-date, though about two-thirds of that was during the first quarter, potentially before Och bought into the stock. Nonetheless, Avago Technologies Ltd (NASDAQ:AVGO) grows with every merger and the recent acquisition of Broadcom Corporation (NASDAQ:BRCM) only continues that trend. Avago and Broadcom announced a definitive merger agreement under which Avago would acquire the latter for $37 billion. After the acquisition, the combined enterprise value of the firm would be $77 billion, with it having expected annual revenues of $15 billion. As per market experts, Avago Technologies Ltd (NASDAQ:AVGO) should initiate large-scale cost-cutting for Broadcom Corp starting with its R&D expenditure. At the same time, the company should divest unproven and unprofitable products in the upcoming years, with a target to increase its operating margins to 40%. Philippe Laffont and Lee Ainslie are among some of the other major stockholders of Avago Technologies.