The S&P 500 ETF (NYSEMKT:SPY) sank 6.4% in the third quarter, but that didn't stop some of the world's richest investors from stepping up and buying stocks.
Billionaires Warren Buffett, George Soros, and Carl Icahn all put their cash to work last quarter, and because each of them has seen his fair share of market pops and drops, knowing what they're buying could help you figure out your next investment move.
No. 1: The Oracle of Omaha shifts his energy bet
Warren Buffett's Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) manages more than $100 billion in assets, and Buffett's legendary long-haul approach to investing and folksy demeanor have made him one of the most followed and liked people in finance.
Buffett tends to avoid businesses he doesn't understand, and that typically keeps Berkshire's portfolio focused on predictable businesses, such as insurance, industrial, and transportation companies.
In the past, that strategy has also led him to own energy stocks, including mega-large-cap oil and gas company ExxonMobil (NYSE:XOM). However, swelling domestic production that's weighing down commodity prices has led Buffett to unload most of his energy stocks this year, and that has many thinking Buffett is sour on all energy companies.
Apparently, that's not the case.
While Buffett isn't interested in owning upstream oil and gas producers, he did make a big bet last quarter on Phillips 66 (NYSE:PSX), a company that operates refining, chemical, distribution, and retail energy businesses.
Buffett took more than a 10% stake in Phillips 66 that's worth more than $5.6 billion, and as a result, Phillips 66 is Berkshire Hathaway's sixth largest position.
Whether investors should join Buffett and buy Phillips 66 depends a lot on whether it can leverage lower input costs and steady demand for bigger margins. Typically, midstream and downstream operators benefit from falling input costs because prices at the pump tend to lag declines in upstream prices. For that reason, Phillips 66 may indeed be a good company to own.
No. 2: Soros bets on Black Friday
Unlike Buffett, billionaire hedge-fund legend George Soros tends to shift around his portfolio pretty rapidly.
His quick-fire investment style means stocks he owns in any given quarter could as easily be sold the next, but that approach has been massively successful for him over his 50-plus=year career.
One of his most recent big buys is Amazon.com (NASDAQ:AMZN), the online retailing Goliath.
Ahead of the surging holiday sales season, Soros picked up $50 million in Amazon shares during the third quarter, and that investment may already be paying off, given that Amazon's shares have climbed to $660, up from $434 in June.
Admittedly, Soros may not stick around in Amazon for long (heck, he may already be selling it), but given that Amazon is a go-to retailer with an expanding reach into consumers' homes through Amazon Prime, I think it's a good bet that the company will deliver better-than-hoped-for financials in Q4. If so, then it's a name investors ought to consider buying, too.
No. 3: Icahn digs this miner
Few industries have been as hard hit by the slowing growth in China as mining. Falling demand has caused copper prices to tumble about 27% in the past year, and that, combined with a bad bet on oil and gas, has taken a big toll on copper mining giant Freeport McMoran (NYSE:FCX).
In the third quarter, Icahn bought 100 million sharea of Freeport McMoran, making him its biggest shareholder.
Although demand for Freeport McMoran's commodities is struggling, Icahn thinks those struggles could be temporary, especially if he can persuade the company to restructure and cut costs further.
In October, Icahn won two seats on Freeport McMoran's board, and he's already advocating to cut management pay and capital spending. Pressure from Icahn could also be a catalyst for making significant changes in Freeport McMoran's oil and gas business, such as an IPO or an outright sale.
Previously, Freeport McMoran announced a capital spending cut of 29% for next year and plans to reduce production and eliminate 1,500 jobs. If Icahn accelerates this right-sizing and emerging markets recover, then Freeport McMoran could be a nice stock to own for the long term, too.