In order to diversify portfolios and reduce exposure to one particular country, it is generally a good idea for retail investors to buy shares of companies which generate a major chunk of their revenues overseas. Keeping this in mind, we decided to formulate a list of the top five such companies that are most popular among the over 700 hedge funds that we track. The fact that these firms have earned the trust of professional money managers who spend significant resources researching stocks before they make an investment decision, goes to show that they are definitely worth a look.
Why do we pay attention to 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 have 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 118% over the last 36 months and outperformed the S&P 500 Index by over 60 percentage points (see the details here).
- Perrigo Company plc Ordinary Shares (NYSE:PRGO)
Investors with Long Positions (as of June 30): 83
Aggregate Value of Investors’ Holdings (as of June 30): $4.83 Billion
At the end of the second quarter the total value hedge funds’ holdings represented about 17.9% of the Ireland-based manufacturer of over-the-counter pharmaceutical products, the world’s largest. Even though Perrigo Company plc Ordinary Shares (NYSE:PRGO)’s stock has depreciated by over 7.3% so far this year, hedgies piled into the company during the second trimester, as their total number increased from 37 funds with $1.58 billion in total holdings at the end of March. James Dinan‘s York Capital Management is the largest stockholder of Perrigo Company plc Ordinary Shares (NYSE:PRGO) within our database, holding over 3.31 million shares valued at $612.60 million.