Billionaire Richard Chilton’s Top Picks Are Already Hitting All-Time Highs

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Founded in 1992, Richard Chilton‘s Chilton Investment Company has over $7 billion worth of regulatory assets under its management. During the third quarter the fund boosted its stake in each of its top five equity holdings, expecting a bright future for them in the upcoming quarter. Most of these picks have posted strong gains this year, which makes it worthwhile to take a look at these companies and analyze the catalysts behind them that have caught the billionaire’s attention, which we’ll do in this article.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 3-year period beginning from September 2012, returning 102% (read the details here).

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#5 Allergan PLC (NYSE:AGN)

 – Shares held (as of September 30): 417,661

 – Total Value (as of September 30): $113.52 million

During the third quarter, Chilton Investment increased its stake in the $122.77 billion Botox maker by 5%. Pfizer Inc. (NYSE:PFE)’s recent announcement that it will be acquiring the Ireland-based Allergan PLC (NYSE:AGN) in a $160 billion deal to take advantage of the company’s domicile when it comes to taxation puts this merger as the largest ever in the healthcare sector. So far this year Allergan’s stock has appreciated by more than 24%. Among the other funds that were bullish on Allergan PLC (NYSE:AGN) during the September quarter is Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, holding about 593,000 shares of the company at the end of the trimester.

#4 Costco Wholesale Corporation (NASDAQ:COST)

 – Shares held (as of September 30): 794,002

 – Total Value (as of September 30): $114.79 million

Chilton acquired an additional 71,840 shares of the discount retail juggernaut during the third quarter. While the discount stores industry is up by about 2.3% for the year, Costco Wholesale Corporation (NASDAQ:COST)’s shares have appreciated by more than 14% and recently touched an all-time high. The company’s strategy of razor thin margins while heavily relying on memberships is keeping it ahead of the pack. The global membership renewal rate for the most recent quarter stood at 88%, signifying the loyalty of the company’s customers. Legendary investor Warren Buffett of Berkshire Hathaway is the largest stockholder of Costco Wholesale Corporation (NASDAQ:COST) within our database, owning about 4.33 million shares valued at $626.47 million at the end of September.

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#3 Sherwin-Williams Co (NYSE:SHW)

 – Shares held (as of September 30): 533,812

 – Total Value (as of September 30): $118.92 million

Chilton hiked its stake in Sherwin-Williams Co (NYSE:SHW) by a hefty 21% during the last quarter. The paint retailer’s stock has surged by more than 27% since the end of October, when it announced its financial results for the third quarter. The company saw record high profitability, as gross profit rose by more than three percentage points year-over-year to 49.9% of sales. This resulted in net income reaching 11.9% of sales, an all-time high for the $25.73 billion company. Its sales also grew by a healthy 4% on an adjusted currency basis. Eric Mindich‘s Eton Park Capital tops our list of Sherwin-Williams Co (NYSE:SHW)’s stockholders, as it owned about 1.12 million shares of the company valued at $248.96 million at the end of the September trimester.

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