Reviewing What The Rich Dudes Are Buying
Every quarter, the rich institutional investors must drop a report that details their investments, and how their positions have changed. These reports are always fun to look through. We’re going to hit some big names and briefly review some of their larger moves.
Bill Ackman bought into Nike. I don’t love this pick. As I have written about previously, Nike is not a flourishing company. Much like Lululemon, they are on the downslope of a fashion cycle. The reports these rich guys have to file do not state when they made the investment, other than they happened at some point in the previous quarter, but it is possible that Bill made this investment before the Nike drop, which would be a bummer for him.
Apparel and fashion are rarely great industries in which to invest. There is too much competition, too few routes to separate one brand from the other, and it moves too fast for me to always have a good finger on what is happening. Nike in particular, has a lengthy road back to high growth. They’re currently pumping out 4% revenue growth annually, on 3% inflation. I would steer clear of Nike because I foresee numerous challenges on the horizon.
Chris Hohn is a British hedge fund manager, who looks like a supervillain and is excellent at managing money. Over the past decade, he has put up 19% annualized returns, which has expanded his fund to $40 billion. I like Chris Hohn, and I like his approach. Hohn focuses on companies that maintain the deepest and most expansive moats. He has continued to add to his GE holding.
GE is a company I would never hold because I do not think it is dynamic or innovative enough, but the GE moat is impressive. Hahn’s top holdings are GE, Moody’s, and Microsoft. Those three companies do not have any major challengers, and there are few routes for their dominance to be ended.
Chuck Akre was very good at picking stocks. Then, because he was so good at picking stocks and holding them for forever, he became super rich. He retired with a little over $12 billion in his pocket and handed his hedge fund over to some other guys. Those other guys have been taking a much different approach to his portfolio. They sold 13% of the Mastercard position, 5% of Moody’s, and 8% of KKR. These are three high-quality companies made to appreciate over time.
They turned around and bought Airbnb. Airbnb has always irked me. I’m not sure what it is about the company, but it has never been a company I have wanted to invest in. I think it’s the level of competition, the fact that VRBO is better, the valuation, how little insulation there is, if the economy were to ever slow down, slowing revenue growth, and smaller voices in my mind telling me the company sucks. Safe to say, I do not like the Airbnb pick.
These hedge fund drops are fun to look at, but you should not try to mimic their picks. These guys have so much more information available to them, they can shift in and out of positions quickly, and their strategies are probably different than yours. However, if you’re 50/50 on a position, or you own one of these stocks, and they buy, you should feel better. COYS.
