Big "smart money" investors are famous for breaking rank from the S&P 500 investing crowd. So when you see a few actually agreeing on a stock, it's worth paying attention.
Only 15 stocks, many in the S&P 500 including Eli Lilly, Meta Platforms, Amazon.com, Alphabet and Microsoft, appeared for the first time or grew in size in the portfolios of three or more of 47 major institutional investors tracked by Empire Financial Research in the second quarter.
That makes these stocks highly unusual. The remaining more than 380 new or expanded positions only show up in two or fewer of the portfolios, according to an Investor's Business Daily analysis of the data from Empire, S&P Global Market Intelligence and MarketSmith.
And we're talking about a glimpse into the portfolios of some of the world's largest and richest investors. Included in Empire's summary of second-quarter buys include giant firms like Warren Buffett's Berkshire Hathaway, George Soros and Carl Icahn.
"I've always skimmed these filings, both to see what institutional investors as a group are doing, as well as to get stock ideas from some of the investors I respect most," said Empire's Whitney Tilson.
Billionaire Investors Don't Agree On Much
It's remarkable how little agreement there is among the nearly 50 institutional funds tracked by Empire.
Roughly 310 of the more than 380 stocks were added by just one big fund during the second quarter. And two investors only agreed on adding 22 stocks. So to see three or more of these influential funds actually agreeing on a stock to add speaks volumes.
What are the stocks that get the most agreement? The standout is thriving S&P 500 pharmaceutical company, Eli Lilly.
Why Big Investors Like Eli Lilly?
Seven top investors added to or launched positions in Eli Lilly in the second quarter. That's more agreement than in any other S&P 500 stock in the recent period.
And we're talking some big names adding to the position, including Adage, Balyasny, Kenneth Griffin's Citadel, Duquesne, Healthcor, Perceptive and even Steven A. Cohen's Point72. What do all these funds like about Eli Lilly? It's hard to say as they all look for different traits. But Lilly is already a leader in treatments for diabetes, including a number of insulin treatments like Basaglar. It's also breaking ground in one of the biggest scourges of humanity: cancer. Additionally, the company is forging ahead in one of the most lucrative, but still untapped, areas of neurological diseases including anxiety and schizophrenia. Getting drugs past the brain-blood barrier continues to stymie promising treatments.
But these big investors are clearly not alone in betting on Eli Lilly.
Shares of Eli Lilly are up more than 15% this year, making it a standout in a year the S&P 500 is down by about that much Seems like investors are trying to get in while the business itself is in a lull. Analysts think Eli Lilly's adjusted profit will fall nearly 2% in 2022. But then, it's off the races. Analysts think profit will soar nearly 17% in 2023 and nearly 30% in 2024.
Billionaires Bet On S&P 500 Disaster: Meta
Some of the stocks these whale investors are loading up on, though, are disasters. The No. 2 largest bet the most of these investors agree on is fallen S&P 500 social media giant Meta Platforms, formerly known as Facebook.
Six of the big investors initiated or added to existing positions in Meta during the second quarter. And those include David Tepper's Appaloosa, Ray Dalio's Bridgewater, Citadel, David Shaw's DE Shaw, Lone Pine and Viking. It's definitely a gamble. Shares have lost half their value this year as the company makes the nauseous shift away from its lucrative social networking business and toward the unproven area of the metaverse and virtual reality.
It's going to be a rough ride. Analysts think Meta's profit will plunge more than 28% this year to $9.80 a share on an adjusted basis. It's only until 2023, with some luck, analysts think profit will grow more than 13% again. Analysts, too, are positive on the stock. They're calling for Meta to be worth 222.99 a share in 12 months. If they're right, that would be more than 30% higher than it is now.
To be sure, just because big investors are making these bets doesn't mean they'll work out. These giant investors can exit these positions just as fast as they got in. But it's still instructive to see where this infamously discordant cadre of investors can actually agree on.
Stocks 'Smart Money' Billionaires' Are Buying
Based on new or added to positions by 47 key institutional investors in the second quarter of 2022
| Company | Row Labels | Number of portfolios added to | Stock YTD % ch. | Sector |
|---|---|---|---|---|
| Eli Lilly | 7 | 15.0% | Health Care | |
| Meta Platforms | 6 | -49.7% | Communication Services | |
| Alphabet | 5 | -23.6% | Communication Services | |
| Amazon.com | 5 | -20.1% | Consumer Discretionary | |
| Microsoft | 4 | -21.4% | Information Technology | |
| Seagen | 4 | 0.6% | Health Care | |
| Biohaven Pharmaceutical | 3 | 9.4% | Health Care | |
| Healthcare Realty Trust | 3 | -22.2% | Real Estate | |
| PayPal Holdings | 3 | -49.0% | Information Technology | |
| Snowflake | 3 | -44.4% | Information Technology | |
| Neurocrine Biosciences | 3 | 25.0% | Health Care | |
| T-Mobile US | 3 | 25.6% | Communication Services | |
| Dollar General | 3 | 4.9% | Consumer Discretionary | |
| Salesforce | 3 | -36.0% | Information Technology |
Sources: Empire Financial Research, IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
