Although the U.S. stock markets had a very rough start to the year, they have managed not only to recuperate their losses, but to reach record highs in recent weeks. Major indexes like the S&P 500 and the Dow Jones Industrial Average are both up by more than 6.4% year-to-date now. However, the financial sector could not accompany the wider market in its strong rebound, as evidenced by the Financial Select Sector SPDR Fund (NYSEARCA:XLF) being up by only 0.67% since the beginning of the year, despite a 22% surge since February 12. The sector’s underperformance has been attributed to several factors, including concerns about global growth and the timing of interest rate hikes, to depressed oil prices.
Nonetheless, billionaires in our database continue to bet on some of the key names in the space, making them some of their favorite stock picks overall. In this article we’ll take a look at their favorite finance stocks going into the third quarter of the year and see how they traded them during the second quarter and how those stocks have done this year.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).
#5. Synchrony Financial (NYSE:SYF)
– Number of Billionaires With Long Positions (as of June 30): 11
– Aggregate Value of Billionaires’ Holdings (as of June 30): $1.07 billion
The number of billionaires in our database long Synchrony Financial (NYSE:SYF) declined by one over the second quarter of 2016, to 11. Among the ones that stayed, we can count Ken Griffin (Citadel Advisors), with 2.56 million shares or roughly $64.8 million in stock, and David Tepper (Appaloosa Management), with 6.06 million shares. Also of note is how D E Shaw (founded by billionaire David E. Shaw) traded the stock during the quarter, increasing its holding by 57% to 8.87 million shares as of June 30.
Shares of Synchrony are down by roughly 10.5% year-to-date, after a 10.92% tumble over the second quarter. However, since the beginning of July, shares have regained more than 9.6% of their value, mostly during early-July, after the company declared a $0.13 per share dividend and a share buyback program of $952 million.
#4. American International Group Inc (NYSE:AIG)
– Number of Billionaires With Long Positions (as of June 30): 12
– Aggregate Value of Billionaires’ Holdings (as of June 30): $3.51 billion
There was also a decline in billionaires’ support for American International Group Inc (NYSE:AIG) over the second quarter, as 12 of them were AIG shareholders on June 30, down from 14 on March 31. Among those who left were Jim Simons (Renaissance Technologies), who sold all of his 1.63 million shares between April and June. On the other hand, billionaires that remained bullish included Leon Cooperman (Omega Advisors), who held 2.89 million shares on June 30, and David Harding (Winton Capital Management), who disclosed ownership of 599,550 shares of the company as of the end of June.
Shares of the U.S. insurer surged earlier this week after the company said that it had agreed to sell its mortgage guaranty division, United Guaranty, to Arch Capital Group for roughly $3.4 billion. It has been said that this move will help AIG further streamline its business. AIG’s stock is down by 5.18% year to date, but has gained 14.2% since the second quarter ended.
We’ll find out the three most-loved finance stocks among billionaires on page two.