In this piece, we will take a look at ten little-known stocks billionaires are loading up on. For more stocks, head on over to 5 Little-Known Stocks Billionaires are Loading Up On.
The stock market is made up of thousands of different companies. Yet, as is the case with several other areas of life, most attention is often showered upon a handful few - in another example of Pareto's Law. According to the Financial Industry Regulatory Authority (FINRA), there are five categories of stocks segregated on the basis of their market capitalization. These are micro cap, small cap, mid cap, large cap, and mega cap. The classification starts from $250 million to $2 billion for the small caps to a market value of higher than $200 billion for the mega cap stocks. However, even though there are only forty mega cap stocks, they often get most of the media attention despite the fact that there are 1,565 small cap stocks. The bigger you are, the more attention you get, and this fact also rings true for the stock market.
The fact that in today's information age, it is nearly impossible to sift out the wheat from the chaff often leaves the regular investor with a plethora of information that is difficult to sort through. However, you might be able to take some solace in the fact that the professionals aren't doing so well either. Last year was one of the worst for hedge funds, with data from Preqin showing that cumulatively hedge fund returns were down by 6.5% in 2022 for the worst performance since the housing market crisis and the subsequent economic downturn in 2008. However, this does not mean that the funds have lost their mojo since their options to generate a return become limited if the market itself is crashing. Data from HFR shows that the divide in the stock market which has segregated it according to industry and created specific return profiles also affected hedge funds. This is because hedge funds that played the macroeconomy (such as interest rates and inflation) ended up generating 8.2% between January and November 2022 while others lost as much as 9.7%.
Yet, just as not all companies always make a loss even in an economic downturn, neither do all hedge funds. In fact, 2022 was a great year for some hedge funds, especially Ken Griffin's Citadel LLC. Citadel made a whopping $16 billion in returns last year according to data from the fund of funds, LCH Investments. This performance came just when another well known hedge fund, Chase Coleman and Feroze Dewan's Tiger Global, lost $18 billion - in a development that saw its portfolio drop by 25% between the third and four quarters of 2022 and by a shocking 81% annually as of December 2022. As for how well Tiger Global is doing right now, Insider Monkey's data for 2023's first quarter shows that the hedge fund's portfolio was worth $10.9 billion marking a 59% annual drop.
The hedge funds and the stock markets' troubles might not be over soon either. This is because there is a growing consensus in the market that a recession in the U.S. economy is on the horizon. One of the latest voices on this front belongs to the investment bank Goldman Sachs which released a new note in March that saw it increase the probability of a recession to 35% over the next twelve months. Goldman is one of the banks that has been calmer when speculating on a recession, but its tone appeared to have changed since the latest estimate was higher than the previous odds of one in four or 25%. However, this prediction was still lower than the median estimate from an economist poll from Bloomberg that had placed the odds at 60%.
So, there are a lot of folks that believe a recession is on the horizon. What does this mean for the stock market? Well, maybe some advice from Ken Fisher of Fisher Investments will ease your mind:
So there's always agitation about how's the economy going to do? And, in reality of course there's no certainties on those things, but in the period we're in now, there's a lot of talk about, with so much anticipation of a recession. Is it going to he a really bad recession? Is it going to be a so called minor recession? It is going to be a soft landing with no recession at all but not robust growth, or do we continue growing as we have been in recent quarters? Now, again there's no certainty on that any of that. It's all my opinion, your opinion, expert opinion. But some people think you gotta have a soft landing or you can't have stocks do well.
Look let me just put it in a simpler framework for you. Stocks move off of the difference between today's expectations in whatever it is the future brings. So if the future is better than people expect today, that'll help stocks go up. If the future is worse than people expect today, it'll make stocks suffer. That isn't very hard to understand. So the question is, what do they expect now? Now as I have said, I wrote about first in my Christmas Day Column in the New York Post then my end of January column in the New York Post, going back last year 2022 the most widely anticipated recession in modern measured history. We've been talking about having a recession since the second quarter of 2022 - now, over a year ago.
And the views of that grew all year long and remain strong now as we've had the so called March banking crisis. Now, in reality, which wasn't really a crisis but that's for another video – in reality, we don't need a soft landing. We just need a recession to not be terrible because most people expect a recession and they expect bad. And the sentiment is dour, and so if we had a recession that was minor, that would still be a positive surprise. Would a so called soft landing, meaning no recession at all help stocks more? Sure, if there was not a soft landing but continued moderate growth, would that help stocks mroe? Sure.
With these details in mind, let's take a look at what little-known stocks Mr. Fisher and other billionaires are piling into even as the rest of the market worries about a recession. Some top picks are AMERISAFE, Inc. (NASDAQ:AMSF), Nevro Corp. (NYSE:NVRO), and Dorian LPG Ltd. (NYSE:LPG).
To compile our list, we first selected forty top stocks with a market capitalization lesser than $1 billion. We then gauged these stocks' popularity among top billionaires using Insider Monkey's database and picked 10 stocks with the highest number of billionaire investors.
10 Little-Known Stocks Billionaires Are Loading Up On
10. Fiverr International Ltd. (NYSE:FVRR)
Number of Billionaire Investors In Q1 2023: 6
Fiverr International Ltd. (NYSE:FVRR) is an Israeli company that is headquartered in Tel Aviv, Israel. It is one of the world's largest platforms for freelancers, allowing them to connect with clients all over the world.
21 of the 943 hedge funds part of Insider Monkey's database had held a stake in Fiverr International Ltd. (NYSE:FVRR) during this year's first quarter. Out of these, the firm's largest investor is Israel Englander's Millennium Management with a $25 million investment.
Along with Nevro Corp. (NYSE:NVRO), AMERISAFE, Inc. (NASDAQ:AMSF), and Dorian LPG Ltd. (NYSE:LPG), Fiverr International Ltd. (NYSE:FVRR) is a little-known stock that billionaires have bought recently.
9. Healthcare Services Group, Inc. (NASDAQ:HCSG)
Number of Billionaire Investors In Q1 2023: 7
Healthcare Services Group, Inc. (NASDAQ:HCSG) is a services sector firm that provides housekeeping and other services to different establishments such as nursing homes, retirement homes, and hospitals.
After digging through 943 hedge funds for their March quarter of 2023 investments, Insider Monkey discovered that 17 had bought the firm's shares. Healthcare Services Group, Inc. (NASDAQ:HCSG)'s largest investor in our database is Chuck Royce's Royce & Associates since it owns 1.8 million shares that are worth $25 million.
8. Veritex Holdings, Inc. (NASDAQ:VBTX)
Number of Billionaire Investors In Q1 2023: 7
Veritex Holdings, Inc. (NASDAQ:VBTX) is a regional bank operating out of Dallas, Texas. It provides different kinds of accounts and provides loans along with other banking products.
After digging through 943 hedge funds for their Q1 2023 portfolios, Insider Monkey found out that 21 had invested in the bank. Veritex Holdings, Inc. (NASDAQ:VBTX)'s largest hedge fund investor is billionaire Israel Englander's Millennium Management with a $17 million investment.
7. NOW Inc. (NYSE:DNOW)
Number of Billionaire Investors In Q1 2023: 7
NOW Inc. (NYSE:DNOW) is a backend oil company operating out of Houston, Texas. The firm provides products such as pipes and valves along with repair and maintenance services to oil exploration companies targeting customers at all ends of the oil exploration supply chain.
By the end of March 2023, 24 of the 943 hedge funds polled by Insider Monkey had invested in the firm. NOW Inc. (NYSE:DNOW)'s largest hedge fund investor is billionaire Jim Simons' Renaissance Technologies with a $47 million stake.
6. TechTarget, Inc. (NASDAQ:TTGT)
Number of Billionaire Investors In Q1 2023: 8
TechTarget, Inc. (NASDAQ:TTGT) is an American internet company based in Newton, Massachusetts. It provides businesses with sales and marketing platforms.
19 of the 943 hedge funds part of Insider Monkey's database had held a stake in TechTarget, Inc. (NASDAQ:TTGT) during this year's March quarter. TechTarget, Inc. (NASDAQ:TTGT) largest hedge fund investor is Douglas T. Granat's Trigran Investments with a $49 million stake.
AMERISAFE, Inc. (NASDAQ:AMSF), TechTarget, Inc. (NASDAQ:TTGT), Nevro Corp. (NYSE:NVRO), and Dorian LPG Ltd. (NYSE:LPG) are some little-known stocks being bought by billionaires.
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Disclosure: None. 10 Little-Known Stocks Billionaires Are Loading Up On is posted on Insider Monkey.