While we don’t recommend investing your money with billionaires’ hedge funds, we do recommend tracking their picks. In short, billionaires know how to pick profitable stocks, but their model (usually 50% long) and fees (22% to as much 40+%) conspire to severely limit their returns in comparison to the broader indices. This is why hedge funds, collectively, have been underperforming the market for years.
However our research has shown that their top picks do outperform the market, particularly when we zero in on their top 15 small-cap picks, which outperformed the market by double digits annually between 1999 and 2009. With that in mind, we’ve presented a series of articles detailing the top picks of some of the most successful investors of all time, in a multitude of sectors.
In this instance, we’ll look at a diverse array of stocks in the consumer durables sector, classified as products which are “durable” (hence the name). More specifically, this means they are consumer products that don’t need to be purchased frequently, as they last for some time (think furniture, appliances, and electronics). These are usually bigger ticket items, which is why the health of this sector is often considered a key one for measuring consumer confidence as a result.
Let’s take a look now at what billionaires thought about the prospects for this sector and some of the companies within it heading into 2015, based on their top picks at the end of 2014.
Coming in at fifth is Rock-Tenn Company (NYSE:RKT), a packaging company that makes corrugated boxes, consumer packaging, merchandising displays, and paperboard. Eight billionaires were invested in Rock-Tenn at the end of 2014, with $415.58 million in capital invested. Tops among them was David Shaw with 3.64 million shares, an increase of 21%, while Larry Robbins had a new position of 1.09 million shares with his fund Glenview Capital.
Rock-Tenn Company (NYSE:RKT) enjoyed a blistering fourth quarter, up 28.16%, as the company’s corrugated boxes have been in particularly high demand as online shopping has proliferated, leading to record sales and earnings. In late January Rock-Tenn announced it had acquired fellow packaging giant MeadWestvaco Corporation (NYSE:MWV) for $9.2 billion, creating the second largest packaging company in the world. Shares of Rock-Tenn are up another 14.15% year-to-date.
In fourth place is Goodyear Tire & Rubber Co (NASDAQ:GT), as eight billionaires were also invested in the tire maker, with $569.58 million of capital invested. David Tepper is one of them, with Goodyear ranking as one of his top holdings dating all the way back to 2011. Tepper owned 10.24 million shares of Goodyear at the end of 2014. Rob Citrone, Ken Griffin, and Steve Cohen were other billionaires with stakes in Goodyear.
Goodyear reported decreased revenue of $4.36 billion for the fourth quarter of 2014, a 9% dip, though income increased to $229 million, a 15% increase. Goodyear Tire & Rubber Co (NASDAQ:GT) enjoyed a strong fourth quarter, up 20.68%, but is down nearly 5% in 2015 over fears of the strengthening dollar crunching margins, and a timid winter hurting the sales of winter tires. Goodyear will be the first major tire manufacturer to launch an online web store later this year, and it’s estimated 6% of all tires sold in the US are already being sold online.