iBillionaire Index Rebalance: Highlights from Q1

This month, the iBillionaire Index (IBLN) went through its quarterly rebalance, reflecting the billionaires’ newest conviction stocks. Five of the 30 companies tracked by the IBLN Index changed, as the billionaires shifted their bets mainly from Technology to Healthcare.

What is Out:

Facebook (NYSE:FB)

This quarter, Facebook missed Wall Streets’ sales estimates for the first time in three years. The company blamed disappointing results on the strengthening dollar against the Euro. Based on the most recent 13F filings, Steve Mandel sold 5M shares last quarter. The stock gained a modest 0.82% since our last rebalance.

The other tech giant no longer tracked by the IBLN Index is Yahoo (NYSE:YHOO). Billionaire James Dinan sold out his 9.3M shares position, and the stock lost 2.99% in value since February.

Chesapeake Energy (NYSE:CHK)

The Index’s return was hurt by the exposure to energy, especially by the performance of Chesapeake Energy, a position held by Carl Icahn. “This year’s results were obviously disappointing, with the precipitous decline in oil prices impacting the profitability of many of our segments.” Icahn said in a statement earlier this year. Chesapeake plunged -27.34% since our last rebalance on February 20, but this did not stopped Icahn to increase his shares. In March, Icahn doubled down on the stock and he now owns 11.19% of the company.

EMC Corp. (NYSE:EMC) and PVH Corp. (NYSE:PVH) also exited the IBLN Index. David Einhorn reduced his EMC position, while Daniel Loeb sold out his shares. This quarter, EMC and PVH were down -8.26%, and -4.62% respectively.

What is In:

Healthcare has been a much talked about topic this year. Last quarter, the sector was a winner for both the S&P500 and the IBLN Index. The healthcare boom, skyrocketing valuations and the expected increase in interest rates led to fears of a bubble. But the billionaires don’t show signs of concern yet. Before the Fed increases interest rates there may still be upside for biotech investors. Dan Loeb notes in his 1Q2015 letter: “The Fed does not seem to be in any rush to move early and a June rate hike seems unlikely.”

Three new healthcare stocks joined the IBLN Index: Endo (NYSE:ENDP), McKesson (NYSE:MCK), and Humana (NYSE:HUM).

The companies’ healthy financials, an aging U.S population, and the M&A trend make a good case against an imminent healthcare bubble.

Sector Allocation: 

In Q1, the best performing sector of the Index was Healthcare while Energy, Tech, and Consumer Discretionary lagged. The Index is now diversified across six sectors. Screen Shot 2015-05-29 at 1.31.06 PMStock Picks for a Bull Market

The U.S. stock market had a volatile Q1, but the billionaires remain bullish on U.S equities going forward.

We expect share buyback activity can lift earnings growth by about 2%; as such, we anticipate S&P 500 earnings per share growth of 5% to 7% per year for quite some time. This expectation of an extended period of earnings growth should bring with it near double-digit dividend growth, persistent/sizeable share buyback activity, and strong M&A activity.” Leon Cooperman, May 2015.

Dow Chemical (NYSE:DOW)

In his first quarter letter to Omega Advisors investors, Leon Cooperman revealed that he has bought into Dow. Dow’s recent moves to cut costs, sell off assets and buy back stock “should drive earnings, cash flow and the stock price meaningfully higher” said Cooperman.

Dow beat earnings estimates by an astonishing 41%. Earnings per share climbed to $1.18 from $0.78 per share last year, and EBITDA margins reached the highest levels since 2005. “This marks our 10th consecutive quarter of year-over-year operating EPS, EBITDA and margin growth,” said Howard Ungerleider during the quarterly call. Dow has also returned almost $1 billion to shareholders through dividends and repurchases. Dan Loeb, George Soros, Larry Robbins, Leon Cooperman, and Ray Dalio hold the stock.

General Motors (NYSE:GM)

The stock was recently upgraded by Morgan Stanley to equal-weight from underweight. According to Morgan Stanley, GM is likely to enhance shareholders value through strategic alternatives. Additionally, GM is benefiting from a healthy demand in North America and announced plans to cut down on loss-making production facilities abroad.

David Einhorn notes in his 1Q2015 letter to investors: “We decided to take another drive in General Motors. (…) 2015 should be a better year for GM: the company is a year closer to eliminating its losses in Europe; low gas prices should stimulate demand for its highly profitable SUV and light truck product lines; raw material costs are low; and we believe that the worst of the product recalls is behind them.”

David Tepper, Marc Lasry, George Soros, Warren Buffett, Leon Cooperman and Larry Robbins also hold GM shares.

 Micron Technologies (NYSE:MU)

Micron was one of David Einhorn significant losers during the first quarter of the year. But despite its performance the stock remains one of Greenlight’s top positions. Micron’s quarterly EPS of $0.81 came in five cents higher than the estimated $0.77 per share. Revenue beat forecasts and increased by 1.4% from the first quarter of 2014 to $4.17 billion. According to Zacks, the better-than-expected numbers resulted from improving market conditions, diversified product portfolio and encouraging operating performance.

David Tepper, Ray Dalio and Julian Robertson own Micron shares.

Priceline (NYSE:PCLN)

Priceline’s revenue is driven by international bookings from its European subsidiary website booking.com. If the fundamentals are improving in Europe, Priceline could benefit.

The analysts Scott Devit upgraded the stock last month from Hold to Buy and explained: “We believe the recent underperformance in shares and conservative company guidance have reset expectations and priced much of the European macro risk into the stock. At this point we view the potential upside from positive surprises in the region as a key driver for share appreciation to new highs.”

Priceline announced strong quarterly results above the expectations, reflecting a clear recovery in global travel. Leon Cooperman mentioned Priceline among his stock picks at the Sohn Conference in NY earlier this month.

The iBillionaire Index (IBLN) is comprised of the top U.S. equities among a select pool of billionaire investors. It is an equal weighted, long-only equity index and rebalanced on a quarterly basis.

For more information visit: www.iBillionaireIndex.com.

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