Can you earn money by mimicking the activity of large investors? Tracking hedge funds might not get you rich fast, but it might give you an edge to beat the market and earn some solid returns. At Insider Monkey we track over 700 funds with hundreds of millions of dollars in assets under management, which employ a scrupulous approach to researching companies and picking those that are most likely to offer big returns. Moreover, when a fund plans to invest a significant amount of cash in a company, its manager can go to the management of the company and have a face-to-face discussion, which publicly discloses further information about the company, it’s management’s performance, and its operations. However, since funds have such large amounts of money they have to invest, they can obtain lower returns in exchange for a lower risk and still satisfy their investors with profits. That’s why we follow the activity of all the funds that we track and identify the most popular stocks among them. A particular case is billionaire investors, who managed to earn their impressive wealth by meticulously picking winners in the US equity markets or picking undervalued stocks and then pushing for changes that maximize shareholder value.
In this article we will focus on billionaire investors and five stocks from the consumer defensive sector that have been the most popular among them. Consumer defensive stocks are non-cyclical and are always in demand, no matter how the market is going, that’s why the sector was able to provide average returns of around 16% over the last year. Warren Buffett has invested around 25% of his equity portfolio in these stocks, with Coca-Cola being one of his largest holdings for decades. The last round of 13F filings showed that The Coca-Cola Co (NYSE:KO), together with Mondelez International Inc (NASDAQ:MDLZ), Tyson Foods, Inc. (NYSE:TSN), Lorillard Inc. (NYSE:LO) and Coca-Cola Enterprises Inc (NYSE:CCE) have been some of the favorite stocks of billionaires. Let’s take them one by one.
In first place stands Mondelez International Inc (NASDAQ:MDLZ), in which 12 funds led by billionaires held long positions. Among them are billionaires Nelson Peltz and Mason Hawkins, who held 46.30 million shares and 26.74 million shares at the end of the last quarter respectively. In the equity portfolios of both investors, Mondelez International Inc (NASDAQ:MDLZ) represented one of the largest stakes, accounting for over 17% of Peltz’s Trian Partners’ portfolio, and 5% of Hawkins’ Southeastern Asset Management’s equity portfolio. Mondelez’s stock returned around 10% over the last year, underperforming the sector’s average of 14%. On the other hand, among all funds that we track, 63 investors reported holding shares of Mondelez in the last round of 13F filings, versus 69 funds in the previous quarter.
Even though Mondelez International Inc (NASDAQ:MDLZ) reported earnings above the estimates in its latest financial report, the company is struggling from the volatility in currencies and the stronger US dollar, as 80% of its revenues are from international markets, as well as from competitive pressure and weaknesses in some categories of food products it manufactures.
Tyson Foods, Inc. (NYSE:TSN) was another consumer defensive stock on billionaires’ radars, one in which 12 billionaires reported stakes, the same number as in Mondelez. However, the overview of our whole data shows that the number of funds holding long positions went up to 54 from 52 during the fourth quarter. Stakes in the poultry and meat producer have been disclosed by billionaires Ken Griffin of Citadel Advisors and Steven Cohen of Point72 Asset Management, among others. However, both Griffin and Cohen cut their exposure to Tyson Foods, Inc. (NYSE:TSN) during the fourth quarter, to 5.56 million shares and 5.18 million shares respectively. Other billionaires betting on Tyson Foods, Inc. (NYSE:TSN) include Israel Englander, David E. Shaw, and Glenn Russell Dubin.
Then there is The Coca-Cola Co (NYSE:KO), a leading beverage producer. At the end of the fourth quarter 11 billionaires held shares of the company, the aggregate value of their stakes amounting to over $18 billion. However, the largest stake is held by Warren Buffett, with Berkshire reporting a $16.89 billion position that amasses 400.00 million shares. Therefore, other billionaire investors hold much smaller positions. Ken Fisher’s Fisher Asset Management reported ownership of 10.16 million shares, followed by David E. Shaw with 5.57 million shares.
Earlier last year, The Coca-Cola Co (NYSE:KO) reported a decrease in its net income, despite revenue growth. However, the company also intended to conduct some cost-cutting activities, such as refranchising of its bottling facilities in North America. Overall, through cost-cuttings, The Coca-Cola Co (NYSE:KO) plans to save around $3 billion per year within the next four years.
Lorillard Inc. (NYSE:LO) was also a stock watched by billionaires, as investors have been preparing for a merger between Lorillard and Reynolds American, Inc. (NYSE:RAI). Even though the merger was approved by shareholders over a year ago, both companies still trade independently. Moreover, the last financial report showed that Lorillard Inc. (NYSE:LO) has successfuly implemented its cost-cutting strategy, which allowed the company to report an impressive 16% annual growth in net income to $0.91, on a modest revenue growth of $1.76 billion from $1.74 billion.
Two billionaires betting on Lorillard Inc. (NYSE:LO) at the end of the fourth quarter are Daniel S. Och, with OZ Management doubling its position to 4.37 million shares, and James Dinan, whose fund York Capital reported ownership of 2.62 million shares.
In Coca-Cola Enterprises Inc (NYSE:CCE), a total of nine billionaire investors disclosed long equity positions. The official partner of the Coca-Cola Company in Western Europe managed to beat estimates for earnings, even though its sales volumes have stayed weak, and the company had to revise downwards its earnings outlook in 2014, citing competitive pressure and the macroeconomic situation. Therefore, Coca-Cola Enterprises Inc (NYSE:CCE)’s profitability was mainly due to its cost-cutting initiatives, and for 2014 the revenue appreciated to $8.26 billion from $8.21 billion a year ago, while net income went up to $2.66 per share, from $2.44.
Nevertheless, Farallon Capital founded by billionaire Thomas Steyer has a significant portion of his fund’s equity portfolio invested in Coca-Cola Enterprises Inc (NYSE:CCE). At the end of 2014, Farallon Capital held 4.74 million shares, valued at $209.38 million and equal to 2.85% of the fund’s equity portfolio. Moreover, billionaire Andreas Halvorsen’s Viking Global initiated a stake with 3.24 million shares during the October-December period.