According to Bank of America Merrill Lynch, hedge funds have been net buyers of U.S equities for four consecutive weeks. Therefore, it appears that the smart money does not believe that the U.S stock markets are entering a longer-term bear market. Only time will tell whether hedge funds’ collective decision to pile up more equities amid increased volatility and uncertainty was well-thought. Nonetheless, it pays off to monitor hedge funds’ moves, as they tend to reveal great investment opportunities. For that reason, the following article will discuss four filings submitted with the SEC by financial gurus Warren Buffett, Christian Leone, and Crispin Odey. These filings usually reveal interesting research-backed investment ideas, which is the main reason individual investors should be inclined to closely monitor hedge funds’ filings.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
Will The Oracle of Omaha ever stop buying shares of Phillips 66 (NYSE:PSX)? According to a Form 4 filing, Berkshire Hathaway purchased another 719,055 Phillips 66 shares on Thursday at prices ranging from $74.33 per share to $80.08 per share, boosting its overall holding in the oil refiner to 69.75 million shares. The freshly-upped position accounts for 13.08% of the company’s outstanding common stock. The shares of the diversified energy manufacturing and logistics company are up by 14% over the last year, but have lost 17% since the beginning of December. It should be noted that the stock trades at a forward price-to-earnings ratio of 11.08, which is notably lower than the average of 15.65 for the companies included in the S&P 500 Index. Although the recent fall in Phillips 66 (NYSE:PSX)’s stock price is mainly attributable to the declining crude oil prices, the company profited enormously from this outcome. The U.S. 3:2:1 crack spread, which represents an indicator for refining margins, increased in the third quarter of 2015 relative to both the second quarter of 2015 and the third quarter of the prior year. With a portfolio of midstream, chemicals, refining, and marketing and specialties businesses, the company seems to represent a great investment opportunity at the moment. Aside from Berkshire Hathaway, D.E. Shaw & Co. L.P., founded by David E. Shaw, represents another large shareholder in Phillips 66 (NYSE:PSX), holding 9.94 million shares as of September 30.
Follow Warren Buffett's Berkshire Hathaway
Let’s move on to the next two pages of this article, which discuss the other three filings submitted with the SEC.