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.
In third place is KAR Auction Services Inc (NYSE:KAR), which had eight billionaires with $606.01 million invested in it. Among them are Daniel Och and Leon Copperman, who own 3.48 million and 3.38 million shares respectively. KAR conducts auction services for both used and salvaged vehicles, and also boasts insurance and financing arms.
KAR Auction Services Inc (NYSE:KAR) has enjoyed a strong three-year run, with shares nearly tripling in value from the beginning of 2012 to present. A dip in early October to its 52-week low of $26.44 may have provided the perfect opportunity for bullish billionaires to make large additions to their portfolios, as many did during the fourth quarter, including Steve Cohen with 2.78 million shares, a 2,157% increase, Israel Englander with 1.77 million shares, an 828% increase, and Ken Griffin with 1.69 million shares, a 196% increase. KAR is up 39.98% since October 14.
Landing in second position, with nine billionaire investors is Ashland Inc (NYSE:ASH), one of the top picks of billionaire Barry Rosenstein, who held 5.85 million shares at the end of the year. Those shares, valued at $701 million, accounted for a majority of the capital invested in the company from billionaires, who sank $1.01 billion of capital into it. Leon Cooperman, Steve Cohen, and Jim Simons were other billionaire shareholders.
Ashland Inc (NYSE:ASH), which is involved in the chemical solutions business across a variety of sectors, announced a new quarterly dividend of $0.34 at the end of January, with a dividend yield of 1.10%. Shares appreciated over 8% in the days following that announcement, and are up 7.08% year-to-date after a strong 2014 during which shares rose 23.4%.
Last, but certainly not least (in fact it’s the best) is Mohawk Industries, Inc. (NYSE:MHK), which had 10 billionaires invested in it at the dawn of 2015. The most bullish among them was Andreas Halvorsen with 3.95 million shares, which he increased slightly to 4.04 million in early January, though we reported on it as a decrease at the time, owing to the fact that he had last reported ownership of 5.68 million shares at the end of the third quarter. Stephen Mandel, Larry Robbins, and Daniel Och were three other prominent investors in Mohawk.
Investors of this company have enjoyed quite a ride up the mountain aboard this stock since the beginning of 2012, with it more than tripling in value. Nor does it appear the summit has yet been reached, as it only continues to grow: another 14.26% in the fourth quarter of 2014, and 19.41% thus far in 2015. The global flooring supplier deals in everything from rugs and carpets, to wood and laminate flooring, to stone and vinyl flooring. The company recently announced record adjusted net earnings of $167 million for the fourth quarter of 2014, with adjusted earnings per share coming in at $2.27.
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