A Trio of Billionaire Buys

12/01/2016 10:00 am EST

Focus: STOCKS

Marshall Hargrave

Contributing Editor, Wyatt Investment Research

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, explains Marshall Hargrave, contributing editor to Daily Profit.

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.

Following billionaires' buys blindly isn’t an advisable strategy. Still, it can pay to know what the big guys are buying. Consider it a free idea-generation tool for investors. Here are three top stocks that billionaires have been buying: 

Monsanto (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 (BAYRY) 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 (BASFY) could swoop in and create a bidding war for Monsanto.

United Airlines (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.

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.

Expedia (EXPE)

Activist hedge fund JANA Partners took a new position in Expedia in the second quarter. It now 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.

The company is a travel-industry behemoth and should be able to benefit from lower unemployment and the strengthening economy. It has been expanding its reach as well; it bought home-sharing service HomeAway. It also has a stake in Trivago. 

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By Marshall Hargrave, Contributing Editor to Daily Profit

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