Investing lessons from the masters of the universe

The Direxion iBillionaire Index ETF (IBLN) is about to get a quarterly overhaul. Its underlying index just announced it latest rebalancing based on the latest 13F filings by financial billionaires.

Fourteen of IBLN’s 30 holdings are being replaced.

iBillionaire is one of several guru-following strategies currently competing in the ETF space along with the AlphaClone Alternative Alpha ETF (ALFA) and the Global X Guru Index ETF (GURU), though the iBillionaire ETF takes an interesting twist.

Soros and Paulson

It specifically limits its portfolio to the 30 S&P 500 stocks being purchased by billionaire fund managers.

You can think of IBLN as the sliver of the S&P 500 being accumulated by masters of the universe like George Soros, Julian Robertson or John Paulson.

So, what are the billionaires buying? Healthcare, mostly.

Healthcare jumped from a 13% to a 20% allocation, and new additions included AbbVie (ABBV), Humana (HUM), Tenet Healthcare (THC) and Thermo Fisher Scientific (TMO).

In technology, we see Facebook (FB) and Google (GOOG) making the list. And Air Products & Chemicals (APD), CBS Corporation (CBS), Delta Airlines (DAL),General Motors (GM), Masco Corporation (MAS), Monsanto (MON), National Oilwell-Varco (NOV) and Whirlpool (WHR) make up the rest of the new additions.

Consumer plays

Portfolio wide, about two thirds of the iBillionaire Index is in consumer discretionaries, technology and healthcare stocks with materials, energy, industrials and financials being underweighted and utilities and consumer staples not represented at all.

And what are the billionaires selling?

There were six stocks added during the last quarterly rebalancing that are already making an exit: Transocean (RIG), Netflix (NFLX), Williams Companies (WMB), Comcast (CMCSA), McKesson Corporation (MCK) and Intercontinental Exchange (ICE).

With the exception of McKesson and Intercontinental Exchange, all had lost money over the past quarter.

iBillionaire is booking gains with the rest of the stocks leaving the index. Cigna Corporation (CI) and Cognizant Technology Solutions (CTSH) are up 135% and 112%, respectively, since joining the index.

And AIG (AIG), Microsoft (MSFT), McGraw Hill Financial (MHFI), Motorola Solutions (MSI) and The Gap (GAP) all had respectable gains.

Andarko Petroleum (APC) was roughly flat since being added to the index in August of 2013.


What are we to do with this information?

I not a big fan of hero worship when it comes to investing, and we should never mindlessly ape the investment moves of others, no matter how good their long-term track record might be.

I do, however, take their moves into consideration and view them as a useful starting point for further research.


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Photo credit: Yorick R via Flickr Creative Commons

Disclosure: MSFT and WMB. The information in this material is not intended to be personalized financial advice and should not be solely relied on for making financial decisions. Past performance is no guarantee of future results.

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