Unknown Billionaire Phill Gross’ Top 10 Stock Picks

In the article, we discussed unknown billionaire Phil Gross’ top 10 stock picks and portfolio management strategy.

Adage Capital Management co-founder billionaire Phill Gross has successfully grown his money management firm from $3.8 billion in assets under management in 2001 to $45 billion at the end of 2020. The Boston-based hedge fund primarily manages assets for endowment and foundation clients. In addition to benefitting from the stock-picking expertise of Phill Gross and the co-founder Robert Atchinson, the firm has hired a team of industry-specific portfolio managers to oversee the market activity and use fundamental intra-industry investment approaches to generate the desired results.

Billionaire Phill Gross is specifically dealing with the healthcare sector at Adage Capital. He was also a healthcare analyst at the Harvard Management Company, where he spent 18 years before founding Adage. The pair of Harvard University’s endowment fund Gross and Atchinson has managed to beat the S&P 500 index by an average of 4.5 percentage points annually.

Adage Capital Management has been working on creating a well-diversified stock portfolio to beat the broader market index. Information technology stocks held the largest weighting in Phill Gross’ hedge fund portfolio followed by healthcare, consumer discretionary, and finance stocks. Besides these sectors, the firm has also spread investments across energy, industrial, utilities, and many other sectors. In addition to value generation through investment in high growth stocks like Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Facebook (NASDAQ: FB), Adage Capital also likes to hold a long-term position in dividend growth stocks like Microsoft (NASDAQ: MSFT), Coca-Cola (NYSE: KO), Pepsi (NYSE: PEP), Procter & Gamble (NYSE: PG) and Intel Corp (NASDAQ: INTC). Its time held for the top 10 stock positions averages around 12.30 quarters while the time held for all positions average around 17 quarters.

The firm held stakes  in 774 stocks at the end of the December quarter. It sold out 118 stock positions during the quarter and initiated 171 brand new positions. Tesla (NASDAQ: TSLA) is the largest new stock position of Adage Capital in Q4. The firm significantly increased its stake in Alphabet and oil giant Exxon Corporation (NYSE: XOM). Moreover, Adage has raised its position in companies that are likely to benefit from economic reopening. These stock positions include Walt Disney (NYSE: DIS), Visa (NYSE: V), MasterCard (NYSE: MA), General Electric (NYSE: GE), and many others. Overall, the firm added to its 226 existing positions. On the other hand, billionaire Phill Gross’ hedge fund didn’t completely sell out any of its key stock positions during the fourth quarter of 2020. The largest stock sale was accounted for less than 0.70% of the portfolio.

Phill Gross did B.S. in finance and economics in 1982 from the University of Wisconsin. He completed his M.S. in investments in 1983. Gross is an elusive billionaire who avoids limelight and fame. That’s why we are referring to him as the “unknown” billionaire. Unknown he might be for the market, but we pay special attention to anyone who understands and beats the market with wisdom and consistent gains.

While Phill Gross’  reputation remains intact, the same can’t be said of the hedge fund industry as a whole as its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Phillip Gross of Adage Capital

Let’s start reviewing unknown billionaire Phill Gross’ top 10 Stock picks:

10. The Walt Disney (NYSE: DIS)

The world’s largest entertainment giant Walt Disney has been one of the favorite stocks of unknown billionaire Phill Gross’ hedge fund over the last two decades. His firm increased its position in Disney by 2% in the fourth quarter to 2.2 million shares valued at $401 million. Following huge losses early in 2020, shares of Walt Disney rebounded strongly during the second half of the pandemic year and extended those gains into 2021. Its streaming network Disney Plus was the biggest catalyst behind the bull run in the last nine months.

Harding Loevner, an investment management firm, stated in the fourth quarter investor letter that Disney is in the middle of a bold shift. Here’s what Harding Loevner stated:

“A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”

9. Berkshire Hathaway Inc. (NYSE: BRK-B)

Warren Buffett’s investment holding firm Berkshire Hathaway Inc. (NYSE: BRK.B) is in the list of unknown billionaire Phill Gross’ top 10 stock picks for 2021. His money management firm reduced its stake in Berkshire Hathaway by 12% in the December quarter to 1.76 million shares, accounting for 0.88% of the overall portfolio. Shares of Berkshire Hathaway rallied 12% so far in 2021, outperforming the broader market index gains of just over 7%.

Separately, Buffett interestingly admitted a mistake in the annual letter to shareholders released along with the quarterly report. He stated in the letter:

“The final component in our GAAP figure – that ugly $11 billion write-down – is almost entirely the quantification of a mistake I made in 2016. That year, Berkshire purchased Precision Castparts (“PCC”), and I paid too much for the company. No one misled me in any way – I was simply too optimistic about PCC’s normalized profit potential. Last year, my miscalculation was laid bare by adverse developments throughout the aerospace industry, PCC’s most important source of customers. In purchasing PCC, Berkshire bought a fine company – the best in its business. Mark Donegan, PCC’s CEO, is a passionate manager who consistently pours the same energy into the business that he did before we purchased it. We are lucky to have him running things. I believe I was right in concluding that PCC would, over time, earn good returns on the net tangible assets deployed in its operations. I was wrong, however, in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business. PCC is far from my first error of that sort. But it’s a big one.”

8. Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN)   

Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) made it to the list of unknown billionaire Phill Gross’ top 10 stock picks for 2021 after he raised his position in the biotechnology company by 260% during the fourth quarter. The firm held 2.91 million shares of Alexion at the end of the latest quarter, accounting for 0.98% of the overall portfolio.

Hedge funds were getting more bullish on ALXN. The number of bullish hedge fund positions advanced by 19 recently. Alexion Pharmaceuticals was in 77 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all-time high for this statistic is 58. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high.

7. Tesla Inc (NASDAQ: TSLA)

Adage Capital Management initiated a brand new position in Tesla during the December quarter. The firm bought 659,500 shares valued at $465 million. Shares of Tesla underperformed this year due to investors’ shift towards value stocks and concerns regarding TSLA valuation. Despite short-term volatility, Tesla’s fundamentals look strong amid the robust growth in EV demand. The company expects to increase vehicle deliveries by 50% every year over the next couple of years.

Tesla was in 68 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to the all-time high for this statistic of 67. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high. TSLA investors should pay attention to an increase in hedge fund interest recently. There were 67 hedge funds in our database with TSLA positions at the end of the third quarter.

6. Exxon Corporation (NYSE: XOM)

Unknown billionaire Phill Gross has substantially increased his position in Exxon Corporation during the fourth quarter of 2020 to 1.14% of the overall portfolio. It appears that Phill Gross’ stock-picking strategy worked in the case of Exxon. This is because shares of the oil giant grew almost 20% since the beginning of this year, thanks to improving oil prices. In addition, the company also offers a hefty dividend yield of over 6%. The number of long hedge fund bets improved by 11 lately. Exxon Mobil was in 63 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all-time high for this statistic is 68.