Times are tough for billionaire investors. Warren Buffett’s top stock picks aren’t working — whether it’s IBM or American Express, the Oracle can’t seem to catch a break.
Buffett had his worst year since the financial crisis in 2015, and hedge fund great Bill Ackman of Pershing Square Capital Management had his worst year ever in 2015, thanks to, among other things, the dramatic fall in controversial drug company Valeant Pharmaceuticals, a top pick. David Einhorn of Greenlight Capital apologized to shareholders for a bad year and big bet gone bad on solar company SunEdison, which he failed to take profits in before the stock tanked. Though he hasn’t given up on SunEdison and now has been given a board seat at the company.
The volatile markets were supposed to be a time for stock pickers to shine. But it hasn’t worked out that way.
Einhorn said a few years ago, “It doesn’t make sense to blindly follow me or anyone else into a stock. … Do your own work.”
Indeed, it’s never been harder to be a billionaire investor, but here’s the catch: It’s never been easier, either.
And it’s the latter that should have the attention of individual investors.
CNBC recently covered an interesting report from Goldman Sachs equity strategists who said that a concentrated list of hedge fund stock picks created by Goldman, the Hedge Fund VIP List, was just about the worst investment in the market right now. In fact, Goldman strategists advised investors looking for a viable equity strategy to do the exact opposite of the Hedge Fund VIP List — chase stocks that are among the least popular in hedge fund portfolios.
But here’s the curious thing. Goldman Sachs recently filed for an exchange-traded fund based on — yes, you guessed it — the Hedge Fund VIP List.
Now before you cry foul and accuse Goldman of being up to Wall Street financial crash tricks, selling retail investors on an investment that Goldman executives are calling a dog internally, the divide between Goldman’s short-term stock strategist call and Goldman Sachs Asset Management’s ETF plans may not be a divide at all.
As noted in the recent CNBC article on the recent Goldman anti-hedge “conviction list” market advice, “What Goldman calls its ‘VIP’ list, or the one that includes the 50 most-owned stocks, has beaten the S&P 500 on a quarterly basis 64 percent of the time since 2001.”
Goldman Sachs declined to comment on its plans to launch the “VIP List” ETF at a time when its analysts have released a report advising investors to do the opposite.
But Goldman isn’t the only asset manager that believes an ETF based on the stock picks of investing giants is a good idea.
There are now at least seven ETFs offering a way to invest in the ideas of investing greats. Not surprisingly, after getting off to a good start, these ETFs have underperformed the market right alongside Buffett and Ackman more, and are they likely on a shorter leash than Buffett. He has earned his softly stated distaste for a short-term performance focus thanks to decades of excellence.