In this article, we presented billionaire Louis Bacon's top 10 stock picks that helped his hedge fund in generating massive gains in 2020. Click to skip ahead and see Billionaire Louis Bacon's Top 5 Stock Picks.
Billionaire Louis Bacon’s hedge fund Moore Capital Management has generated massive profits during the first year of trading after the macro hedge fund manager decided to step back from managing investors’ money in 2019 and consolidating its three funds into a single fund. Moore Capital, which oversees Bacon’s and partner's money, gained more than 70% in one of the most unpredictable years.
One of the most successful hedge fund managers of his era Louis Bacon, who established Moore Capital in 1989 using a $25,000 inheritance from his mother and returned 17.6% annualized return since inception through 2019 from its flagship Remington funds, last year said in an investor’s letter that his firm would operate with less participation from him. Here is what he said in an investor’s letter:
“Dear Investor, As Moore Capital Management (MCM) approaches its 30th year at the end of this decade, the time is propitious to take a step I have eyed for some time and “privatize” our three multi-manager flagship funds-- that is to say returning client assets and funding the multi-manager program with private capital from the principals at MCM. These three funds –MGI (Moore Global Investments), RIS (Remington Investment Strategies), and MMM (Moore Macro Advisors)--will (post the return of investor funds) be consolidated into one proprietary fund which will continue to trade and invest with the same line-up of Portfolio Managers, but with less participation from me.”
Louis Bacon MOORE GLOBAL INVESTMENTS
Louis Bacon Moore of Moore Capital
However, the reports are hinting that Louis Bacon has still been working with the portfolio managers. The market value of its 13F portfolio grew from just over $2 billion at the end of the March quarter to more than $5.2 billion at the end of the September quarter.
The New York-based hedge fund has quickly been making changes in its 13F portfolio to take advantage of the market volatility. For instance, the hedge fund has initiated 222 positions during the September quarter and increased its stake in 38 existing positions. Moreover, the firm has sold-out 102 positions and reduced its position in 63 stocks.
Louis Bacon’s hedge fund believes in diversifying investments across several securities and sectors. The top ten holdings accounted for 41% of the overall portfolio and the hedge fund ended the September quarter with 368 positions.
While Louis Bacon’s 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 88 percentage points since March 2017 (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 16. 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.
Let’s start reviewing the top ten stock picks of Louis Bacon's portfolio to see how many returns these positions have generated during the December quarter and in fiscal 2020.
The billionaire Louis Bacon’s hedge fund has been showing confidence in VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) over the years. Fortunately, the GDX position has helped the New York-based hedge fund to generate robust returns in 2020. VanEck Vectors Gold Miners ETF underperformed in the last three months, but GDX rallied more than 28% in the last twelve months. Other macro-focused billionaire hedge fund managers such as Paul Tudor Jones have been betting on bitcoin in anticipation of an inflationary environment. Moore seems to shun bitcoin and instead picks the more traditional route of investing in gold and gold miners.
Moore Capital Management has raised its position in VanEck Vectors Gold Miners ETF by 49% in the September quarter to 1.02% of the overall portfolio. Gold price came under pressure in the last month amid a strengthening dollar.
VanEck Vectors Gold Miners ETF is an exchange-traded fund that invests in public equity markets of the global region. The fund invests in stocks of companies operating across materials, metals and mining, gold, silver sectors.
Moore Capital has initiated a stake in The Walt Disney Company (NYSE: DIS) during the September quarter. The position in the movies and entertainment giant helped the hedge fund to post big gains in 2020 as shares of Disney rallied close to 37% in the last three months. Disney accounted for 1.27% of the overall 13F portfolio at the end of the September quarter.
Third Point, which has posted a return of 10.8% for the second quarter, has also highlighted a compelling investment case for Walt Disney in an investor's letter. Here is what Third Point said:
“During Q2, we initiated a long position in The Walt Disney Company when shares traded down on fears that closures of theme parks and movie theaters due to the coronavirus pandemic would cripple the company. A slew of sell‐side analysts had recently downgraded the stock but we believed they failed to grasp that the pandemic also provided Disney with an important opportunity – to accelerate a plan to bring its blockbuster content directly to the consumer via streaming, which will further elevate Disney’s position as the world’s pre-eminent media company.”
Louis Bacon’s hedge fund's stake in Facebook, Inc. (NASDAQ: FB) added to its 2020 performance. The hedge fund has sold 22% of its Facebook position in the latest quarter. Despite that, the social media company accounted for 1.33% of the overall portfolio. Shares of Facebook soared more than 30% in fiscal 2020, thanks to staying at home policies.
Facebook was in 230 hedge funds’ portfolios at the end of the third quarter of 2020 compared to the previous all-time high of 213.
Wedgewood Partners has highlighted a few stocks including Facebook in the investor's letter. Here is what Wedgewood Partners stated:
“Facebook reported 32% growth in constant currency ad revenue, along with expectations for 50-55% growth in expenses as the Company continued with their telegraphed plan to accelerate investments in privacy and security across their social platforms. The Federal Trade Commission (FTC) also approved a $5 billion fine for violating a 2012 FTC order by misrepresenting users’ ability to control data privacy. While this removed an overhang dating back to early 2018, continued pressure from politicians and regulators kept Facebook’s earnings multiple in check.”
Moore Capital has initiated a position in FedEx Corporation (NYSE: FDX) during the second quarter and raised its position by more than 1000% during the September quarter. FedEx also contributed to 2020 gains because its shares surged close to 60% in the last six months. In addition, the air courier company also offer dividends to shareholders.
Hedge fund position in FedEx Corporation hit a new all-time high of 71 hedge funds’ in the September quarter compared to the previous all-time high of 53.
Cartenna Capital, which posted a return of 5.6% for the third quarter, commented on a few stocks including FedEx in an investor's letter. Here is Cartenna Capital stated:
“FedEx Corporation (“FDX”) was the Fund’s largest positive contributor to performance during Q3, and we remain very bullish on the entire parcel sector into Q4. When we initially purchased shares of FedEx, it represented an extremely attractive idiosyncratic opportunity embedded within our constructive transportation market outlook. For the past several years, we have generally held a negative bias on FedEx operations as they have routinely suffered from both macroeconomic headwinds (US-China trade war) and company specific issues that have been self-inflicted (i.e. lost Amazon as a customer, poor TNT acquisition/ransomware attack). However, as FedEx began their Fiscal Year 2021 in June, many of these headwinds were poised to reverse and become tailwinds.”
6. JD.com, Inc. (NASDAQ: JD)
Moore Capital has also benefited from its JD.com, Inc. (NASDAQ: JD) position in 2020. Although the firm sold its 24% of stake during the third quarter, the e-commerce platform still accounted for 1.53% of the overall portfolio. Shares of JD.com rallied 121% in the last twelve months amid consumer's move towards online platforms during the pandemic.
Third Point Management, which returned 10.8% for the third quarter, highlighted the confidence in JD in an investor’s letter. Here is what Third Point Management stated:
“As the e‐commerce market matures, we believe Alibaba & JD will leverage scale and growing repositories of transaction data to increase monetization of their platforms through targeted advertising to improve revenue yields (revenues as a percentage of GMV) from a starting point of less than 4% today. As a point of comparison, brick‐and‐mortar retail store rent expenses in China are greater than 10% of sales on average, which provides a significant umbrella for online marketplaces to take a greater share of GMV through a combination of commission and advertising spending as online retailer cost structures converge with brick‐ and‐mortar retail.”
