Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
M&A in Healthcare Sector
Medtronic PLC (NYSE:MDT) is acquiring HeartWare International Inc (NASDAQ:HTWR) for $58 in cash per share for a transaction with a total value of $1.1 billion. The boards of directors of both companies have approved the transaction and the deal is expected to close during Medtronic’s second fiscal quarter. HeartWare is a leading innovator of less-invasive, miniaturized circulatory support technologies for the treatment of advanced heart failure and Medtronic’s acquisition of the company will help it grow in that category. Although they expect the deal to be accretive in year three, management does not expect the deal to change Medtronics’s fiscal year 2017 EPS and revenue outlook. Shares of Medtronic are down 2% while shares of HeartWare have surged 91% on the news. Among the funds we track, 47 funds amassed $1.4 billion worth of Medtronic PLC (NYSE:MDT) and 21 funds had a long position in HeartWare International Inc (NASDAQ:HTWR) at the end of the first quarter.
Amazon.com Invests More In Dash
Amazon.com, Inc. (NASDAQ:AMZN)\s shares are in the spotlight after the Wall Street Journal reported that the eCommerce giant is doubling down on its innovative dash ordering devices. Although customer uptake to the USB-like devices that allow shoppers to order products with a push of a button has been slow, Amazon is said to plan to announce the launch of dozens of new buttons this week that will allow customers to order more product brands. Amazon bulls hope that the devices will further entrench Amazon as the go-to eCommerce site for millions of homes and help Amazon continue its brisk revenue growth. At the end of March, 133 funds from our database were long Amazon.com, Inc. (NASDAQ:AMZN) as of the end of March.
On the next page, we examine Baidu, and BHP Billiton Limited.
Chinese Regulator Announce More Consumer Friendly Rules
Baidu Inc (ADR) (NASDAQ:BIDU) is slightly lower after China’s internet regulator issued new rules requiring ‘objective, fair and authoritative results’. The rules strongly suggest that internet search companies label paid ads and organic links separately, and also urge internet search providers to limit the total number of paid ads on any given page. Baidu has said the company will comply fully with the laws and regulations outlined by the regulator. Although Baidu has the lion’s share of the lucrative search market in China, the company needs to be in the good graces of the government for shareholders to do well. The number of funds tracked by us with holdings in Baidu Inc (ADR) (NASDAQ:BIDU) rose by 17 quarter-over-quarter to 72 at the end of March.
BHP Billiton to Invest More in Exploration
Although commodity prices haven’t recovered strongly, BHP Billiton Limited (ADR) (NYSE:BHP) is nevertheless planning for the future. According to Reuters, the commodity giant is planning to raise its exploration spend by 29% for its next year and to dedicate almost all of the budget to finding new reserves of copper and crude oil. Although crude and copper prices are still substantially lower than two years ago, BHP’s management believes demand for the two commodities will remain robust enough to justify the additional investment. The added exploration spend could mean that the probability of BHP getting involved in a big M&A deal in the near future might be lower. A total of 12 funds from our database were long BHP Billiton Limited (ADR) (NYSE:BHP) at the end of the first quarter, up by two funds from the previous quarter.