Ken Fisher’s Fisher Asset Management is one of the biggest funds out of the universe of around 730 hedge funds that we track at Insider Monkey. Few may know it, but Ken Fisher started his fund back in 1979 with only $250. Since then, the fund’s assets under management have grown exponentially to $48 billion, and Fisher has become quite rich himself in the process, standing today as a billionaire worth around $2.8 billion. Without further ado, let’s take a closer look at Fisher’s top picks of Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Visa Inc (NYSE:V), Pfizer Inc. (NYSE:PFE), and Johnson & Johnson (NYSE:JNJ).
First a little about our site. Insider Monkey tracks hedge fund sentiment. Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).
#5 Johnson & Johnson (NYSE:JNJ)
Shares held (as of September 30): 10.69 million
Total Value (as of September 30): $997.86 million
Percent of Portfolio (as of September 30): 2.08%
Although many biotech companies have seen their share prices fall substantially in the last quarter due to regulatory pricing cap concerns, Johnson & Johnson (NYSE:JNJ)’s stock price is almost unchanged from June 30. Shares are up 0.55% year-to-date as investors warm up to the healthcare company’s large drug pipeline and as the company has largely moved on from its previous OTC recall problems. Remicade, Zytiga, Stelara, and Prezista sales are still doing well too. Given the forward PE of 15.6% and dividend yield of 2.99%, Johnson & Johnson, a dividend aristocrat, is a good long term holding. Donald Yacktman’s Yacktman Asset Management owned 7.44 million shares at the end of June.
#4 Pfizer Inc. (NYSE:PFE)
Shares held (as of September 30): 31.93 million
Total Value (as of September 30): $1 billion
Percent of Portfolio (as of September 30): 2.09%
Although Pfizer Inc. (NYSE:PFE) is famous for producing Viagra and Lipitor, the company also produces many other blockbuster drugs, including Lyrica, Celebrex, Zyvox, and Norvasc. In addition, Pfizer has some promising drugs in its pipeline, including Palbociclib, a drug for the potential treatment of advanced breast cancer. Experts believe Palbociclib could bring in as much as $4 -$6 billion a year in revenues by 2020. Given Pfizer’s pipeline and its M&A history, the future is still bright for the company. With a forward P/E of 14.5 and dividend yield of 3.29%, Pfizer Inc. (NYSE:PFE) is also reasonably priced.
#3 Visa Inc (NYSE:V)
Shares held (as of September 30): 14.63 million
Total Value (as of September 30): $1.02 billion
Percent of Portfolio (as of September 30): 2.12%
Payments processing company Visa Inc (NYSE:V) has a wide moat. It has network effects and economies of scale in a two sided market. Unless everyone begins using bitcoins immediately, Visa will continue making a lot of profits for its shareholders for many years to come. Visa shares have done well this year, with shares up 18.19% year-to-date. Analysts expect good things from the company in the next five years, with an average next 5 year EPS growth rate of 18.1%. Paul Ruddock And Steve Heinz’s Lansdowne Partners owned 13 million shares at the end of June.
#2 Apple Inc. (NASDAQ:AAPL)
Shares held (as of September 30): 11.12 million
Total Value (as of September 30): $1.23 billion
Percent of Portfolio (as of September 30): 2.56%
Steve Jobs may be gone, but his life’s work is still thriving. With a market capitalization of over $650 billion, Apple Inc. (NASDAQ:AAPL) is the largest publicly traded company in the world. Given the forward PE of 12.15, Apple is also one of the cheapest big tech companies in the world. Bears think Apple is really just a one product company — the Apple IPhone — and Apple’s China business will deteriorate as the economy slows further, but the results have proved the bears wrong so far. Apple’s China business is growing and its iPhone business is taking business away from Android. Fully automated internet connected cars, virtual reality, the connected healthcare home, and the biggest future market of them all, artificial intelligence, offer huge growth opportunities. Carl Icahn‘s Icahn Capital Lp, who thinks Apple should trade for $240 per share, owned 52.76 million shares at the end of June.
#1 Amazon.com, Inc. (NASDAQ:AMZN)
Shares held (as of September 30): 2.5 million
Total Value (as of September 30): $1.28 billion
Percent of Portfolio (as of September 30): 2.66%
Investors like Amazon.com, Inc. (NASDAQ:AMZN) mainly because of the extraordinary success of company’s Amazon Web Services unit, which has dominated the cloud Infrastructure as a Service market so far. Margins are higher than expected, while growth is faster than estimates. In Amazon’s third quarter, the unit reported revenues of $2.09 billion, up 15% quarter-over-quarter and 78% year-over-year. Segment operating profit was an amazing $521 million. Given the large potential size of the cloud market, Amazon Web Services can continue growing at a fast rate for a long time yet. Meanwhile, Amazon shareholders don’t seem to care about profits in other units, giving Amazon a competitive advantage over its competitors in other sectors. Andreas Halvorsen‘s Viking Global owned 2.28 million shares at the end of the second quarter.