Billionaires Can’t Live Without These 5 Stocks

The latest round of 13F filings has given us a glimpse into the minds of the world’s best and most successful investors. The Insider Monkey team monitors more than 40 billionaire hedge fund and other institutional investors, and needless to say these wealthy money managers are worth tracking and imitating, especially as some of them have direct bearing on the outcomes of their investments, which is why they have been delivering exorbitant returns over the decades. Earlier this year, billionaire Carl Icahn (one of my favorite investors, I must admit) stated that “if a person invested in each company on the date that the designee [Icahn’s designee] joined the Board and sold on the date that the Icahn designee left the Board they would have obtained an annualized return of 27%”. That being said, the following article will lay out a list of the five most favored stocks among the billionaire hedge fund investors tracked by Insider Monkey.

At Insider Monkey, we track hedge funds’ and billionaires’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically 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 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

#5 eBay Inc. (NASDAQ:EBAY)

– Billionaires with Long Positions (as of September 30): 17

– Aggregate Value of Billionaires’ Holdings (as of September 30): $2.01 Billion

Predictably, eBay Inc. (NASDAQ:EBAY) lost some of its charm during the third quarter among the billionaires observed by Insider Monkey, following the spin-off of Paypal Holdings Inc. (NASDAQ:PYPL). The number of billionaires invested in the e-commerce giant declined to 17 from 21 quarter-over-quarter. Just recently, the global commerce leader was removed from Goldman Sachs’ Conviction Buy list, as the investment bank’s analysts believe that eBay does not have as much growth potential as other companies on the list. Even so, Goldman Sachs reiterated its ‘Buy’ rating on the stock and raised its price target on it to $33 from $30. Meanwhile, eBay shares have advanced by more than 10% over the past three-month period and are currently trading at a temping trailing price-to-earnings ratio of 14.72, which is significantly below the average of 23.12 for the companies included in the S&P 500 Index. Andreas Halvorsen’s Viking Global added a 7.26 million-share position in eBay Inc. (NASDAQ:EBAY) to its portfolio during the third quarter.

#4 Facebook Inc. (NASDAQ:FB)

-Billionaires with Long Positions (as of September 30): 18

-Aggregate Value of Billionaires’ Holdings (as of September 30): $3.57 Billion

A total of 18 billionaires had positions in Facebook Inc. (NASDAQ:FB) at the end of the September quarter, compared with 16 registered following the prior one. Similarly, the value of billionaires’ investments grew to $3.57 billion from $2.95 billion quarter-over-quarter. Facebook has seen immense growth in terms of user growth over the past several years, which has positively affected its financial results. Facebook’s average daily active users stood at 1.01 billion in September, up by 17% year-over-year. Meanwhile, the company’s third-quarter revenue added up to $4.50 billion, which marked an increase of 41% year-over-year. Almost 96% of this figure is attributable to ad revenue, as Facebook has found a new way to boost its ad revenue, which has included the introduction of video ads. Just recently, the company revealed its “Facebook Instant Articles” product that enables newspaper publishers to post their articles directly to Facebook’s iOS app, which will most likely result in increased ad revenue. The stock is 35% in the green year-to-date, while Stephen Mandel’s Lone Pine Capital owns 10.70 million shares of Facebook Inc. (NASDAQ:FB) as of September 30.

#3 Microsoft Corporation (NASDAQ:MSFT)

-Billionaires with Long Positions (as of September 30): 18

-Aggregate Value of Billionaires’ Holdings (as of September 30): $7.47 Billion

The number of billionaires with stakes in Microsoft Corporation (NASDAQ:MSFT) climbed to 18 from 14 during the third quarter, while the value of their stakes increased to $7.47 billion from $7.14 billion quarter-over-quarter. Microsoft’s commercial cloud business grew by 8% year-over-year, generating quarterly revenue of $5.89 billion. The tech giant’s top-line declined by 12% year-over-year to $20.38 billion in the third quarter, mainly owing to the slowing PC market. Even so, analysts believe that Microsoft’s cloud business will entirely offset its slowing PC business in the upcoming years. Just recently, UBS reiterated its ‘Buy’ rating on the stock and lifted its price target on shares of Microsoft to $60 from $56, citing the company’s steady cash flow streams and fast-growing cloud business. Jeffrey Ubben’s ValueAct Capital holds a 75.27 million-share stake in Microsoft Corporation (NASDAQ:MSFT) as of September 30.

#2 Apple Inc. (NASDAQ:AAPL)

-Billionaires with Long Positions (as of September 30): 18

-Aggregate Value of Billionaires’ Holdings (as of September 30): $10.35 Billion

Apple Inc. (NASDAQ:AAPL) lost some of its appeal among the hedge fund industry overall during the September quarter, but received a vote of confidence from billionaires. The number of hedge funds in our database invested in Apple dropped to 133 from 144 during the third quarter, whereas the number of billionaires with positions in the company climbed to 18 from 15. The ongoing concerns about Apple’s high reliance on iPhone sales stands behind the poor stock performance during the third quarter. Apple shares are 7% in the green this year and are trading at a cheap trailing P/E ratio of 12.83, which seems to reflect the concerns mentioned above. Meanwhile, Apple is anticipated to gain market share in the global smartphone industry next year, as Nomura Securities predicts that the tech giant will reach a market share of 13% in 2016, up from 12% in 2015. Activist Carl Icahn of Icahn Capital LP was among the largest equity holders of Apple Inc. (NASDAQ:AAPL) at the end of the third quarter, holding 52.76 million shares.

#1 Allergan PLC (NYSE:AGN)

-Billionaires with Long Positions (as of September 30): 26

-Aggregate Value of Billionaires’ Holdings (as of September 30): $10.79 Billion

Allergan PLC (NYSE:AGN) was by far the most favored stock among the billionaires tracked by Insider Monkey at the end of the latest quarter. The number of billionaire investors with positions in the specialty-drug giant stood at 26 at the end of the September quarter, compared with 24 registered at the close of the previous one. Earlier this week, Pfizer Inc. (NYSE:PFE) and Allergan sealed a $160 billion deal, which is set to create the largest drugmaker in the world. Pfizer agreed to offer Allergan shareholders 11.3 Pfizer shares for each share of Allergan. This deal also represents the second-largest merger and acquisition deal ever, and will enable Pfizer to undergo a tax inversion by domiciling in Ireland. Billionaire John Paulson of Paulson & Co. was bullish on Allergan PLC (NYSE:AGN) at the end of the third quarter, owning 7.18 million shares.

Disclosure: None