Hedge funds are often managed by some of the most talented investment professionals with billions of dollars at their disposal. And with investment minimums that put them out of range for the average investor, their trading strategies and portfolio holdings are often hard to find and even harder to track. Fortunately, at Insider Monkey, we track 450 of the world’s most elite hedge fund managers and our research has shown that over time, their best picks routinely outperform. For more than a decade in our back tests, our strategy beat the market by 18 percentage points a year, and since we’ve started sharing these picks with the public, it has outpaced the S&P 500 by more than 20 percentage points (learn how to use this strategy yourself).
Lansdowne Partners is not only managed by a real-life knight, but has an impressive pedigree. Sir Paul Ruddock was once the head of international business at Schroeder’s, and Steve Heinz helmed Harvard Management. Together they have built a $6 billion fund that is one of the most respected funds internationally. Let’s look at what Lansdowne Partners considers to be the top five equities worth buying.
First on their illustrious list is JP Morgan Chase & Co. (NYSE:JPM). Lansdowne currently owns over 19 million shares of the company having just recently increased their position by another 7% last quarter. With a market cap of $193 billion, it is one of the largest banks in this sector of the market. The banking giant has outperformed the S&P 500 since the start of the year and has recently passed its 5-year high of $28.42.
The strength of JP Morgan comes not only from its superior management—Jamie Dimon, considered one of the best bankers in the world, has run JP Morgan Chase & Co. (NYSE:JPM) since 2006—but from its diversification, with businesses in investment banking, commercial lending, asset management and financial transaction processing. After plunging 30% in May 2012 on the heels of its $2 billion dollar derivative loss, shares of JP Morgan Chase & Co. (NYSE:JPM) made an impressive recovery with a continued upside targeted now sitting at $54.70.
Next, at number two is NIKE, Inc. (NYSE:NKE). Lansdowne increased their holdings in Nike by 132% according to the fund’s latest 13F filing. Although Nike has just recently dipped below the S&P 500 and was surpassed by competitor Adidas, the market is still bullish on the stock given the activity in the options market for the April 55 call—Nike last traded at $53.49 on March 12th. Most analysts continue to rate Nike a buy thanks to the ability of the sportswear behemoth to capitalize on its dominant market placement, economies of scale, and well, because it’s Nike.
Number three in Lansdowne’s top five is Wells Fargo & Co (NYSE:WFC), which just reached a 3-year high of $36.50 and is a darling among banking analysts. Much of the optimism surrounding this stock is due to the bank’s most recent earnings report, as net income, revenue and earnings were all higher in FY2012. Of the four major banking stocks, which also include Bank of America, JP Morgan, and Citigroup, Wells Fargo is considered to be the most financially sound, and will continue to flourish in the mortgage markets. Shares still trade at a forward P/E below 10x.
At number four is Google Inc (NASDAQ:GOOG). Lansdowne added to their position in Google by another 3% last quarter, but the fund might want to consider a larger stake after IDC said that it expects Android software to power more tablets than Apple’s operating system this year. Coupled with the impending launch of the highly anticipated Samsung Galaxy S IV, also powered by Android, the bulls could drive Google Inc (NASDAQ:GOOG)’s stock price through $839 resistance. Additionally, in the pipeline are plans for Google to challenge Microsoft and Amazon’s cloud technology. Given all the activity surrounding Google Inc (NASDAQ:GOOG) (and we haven’t even mentioned YouTube), analysts are forecasting a test of $1,000 before the year is over.
Who’s the best of the rest?