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We got a glimpse into billionaires’ thinking recently when major hedge funds opened up their portfolios to the public by making their quarterly 13-F SEC filings.
These filings show what major billionaires like Warren Buffett and Carl Icahn were buying during the second quarter.
The media likes to make a big deal of what Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) is up to. And yes, he’s an Apple (NASDAQ: AAPL) bull and has been buying up airline stocks. However, he’s one of the few Apple and airline bulls.
However, heavyweight investors Leon Cooperman, David Einhorn, Carl Icahn and David Tepper have all been selling their Apple shares over the last couple quarters. Making heads or tails of who wins the Apple battle is anyone’s guess.
And so, instead, we’ve dug deep into the hedge fund portfolios and put together three stocks that saw a major influx of hedge fund buying in the second quarter. The source: Goldman Sachs’ (NYSE: GS) quarterly list of the 50 stocks that have the largest number of hedge fund investors.
All three names below not only make this list but have also got a sizable jump in hedge fund ownership — meaning, hedge funds were buying up shares handsomely in the second quarter. With that in mind, here are the top 3 stocks billionaires have been buying:
Billionaire Buys: Monsanto (NYSE: MON)
Monsanto had a total of 98 hedge fund shareholders heading into the third quarter, but more importantly, hedge funds now own 9% of the company, up from 6% at the end of the first quarter.
A number of hedge funds took a new stake in Monsanto during the second quarter, including York Capital, Eton Park Capital, PointState Capital, Elliott Management, Corvex Management and Third Point. Monsanto is a top 10 holding for York Capital, Eton Park Capital and PointState Capital.
What’s changed for Monsanto? Funds are betting that Monsanto will get bought out sooner rather than later and they’re collecting a 2% dividend yield while they wait. Monsanto is awaiting a “better” buyout offer from Bayer AG after rejecting the latest bid. If Bayer can pull off the buyout, it would become the largest seed company in the world. But there could be another suitor for Monsanto — BASF SE could swoop in and create a bidding war for Monsanto.
Billionaire Buys: United Airlines (NYSE: UAL)
United Airlines now has 79 hedge funds as shareholders. Their collective ownership of the airline rose from 13% to 16% from the first quarter to second quarter.
Now something else that Goldman does is put together a list of the stocks that most frequently appear as a top 10 holding for hedge funds — dubbed Goldman’s Very Important Positions (VIP) for hedge funds list. United Airlines makes that list — with 16 of the funds owning the stock have it as a top 10 holding
Par Capital is the most notable hedge fund buying up shares of United Airlines. It upped its stake by 13% in the second quarter and now owns 4.5% of the company. Of note, Par Capital is the activist investor involved with trying to cut costs and help make the airline more efficient.
Still, shares are down 12% in 2016 as the low oil prices have yet to translate into a meaningful tailwind. Still, United is now more focused on what it can control — including adding new board directors and fixing a faulty buggy reservations.
Billionaire Buys: Expedia (NASDAQ: EXPE)
Activist hedge fund JANA Partners took a new position in Expedia in the second quarter. It now has Expedia in its top 10 holdings and owns 1.5% of the company. Meanwhile, Coatue Management boosted its stake by over 30%.
There are 69 hedge funds that now have a stake in Expedia, and collective hedge fund ownership has gone from 22% in the first quarter to 25% heading into the third quarter. Expedia is also one the 50 VIP stocks per Goldman list; 23 of the funds have it as a top 10 holding.
Expedia pays a 1% dividend yield but its shares have fallen 10% in 2016. The key is that the company is a travel-industry behemoth and should be able to benefit from lower unemployment and the strengthening economy. Expedia has been expanding its reach as well; it bought home-sharing service HomeAway. It also has a stake in Trivago, which is partnering with Facebook (NASDAQ: FB) to target the social network’s sizable audience.
In the end, following billionaires buys blindly isn’t an advisable investment strategy. Still, it can pay to know what the big guys are buying and why. Consider it a free idea-generation tool for investors.