Every quarter, fund managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at the Renaissance Technologies hedge fund company founded by James Simons, and known for its quantitative approach to investing. Indeed, Simons explained in 2007 that, "We hire physicists, mathematicians, astronomers and computer scientists and they typically know nothing about finance... We haven't hired out of Wall Street at all." The company's most well-known fund is the Medallion Fund. Interestingly, most of the company's assets belong to employees of the firm, and outside investors are generally turned away.
Why should you look at Renaissance Technologies' moves? Well, it's hard to find performance data for it, but in his 2009 book Blunder: Why Smart People Make Bad Decisions, Zachary Shore noted that Renaissance's flagship Medallion fund "has yielded an average 38% annual return since its inception in 1988. The fund has lost money only in a single year, 1989, when it dropped 4.1%." That's so remarkable that some have mused jokingly that it's either a Madoff-like Ponzi scheme, or a simply amazing hedge fund.
Renaissance's stock portfolio totaled a whopping $24.6 billion in value as of Dec. 31, 2011, with 2,758 holdings. (Concentration, thy name is not Renaissance Technologies!)
So what does Renaissance Technologies' latest quarterly 13F filing tell us? Here are a few interesting details:
Among many new holdings are Broadcom (NAS: BRCM) and Cummins (NYS: CMI) . Broadcom makes communications chips found inside iPhones and other devices, and many are optimistic about its future, as some of its main customers are growing briskly. It's continuing to innovate, too, parking Wi-Fi, Bluetooth, and radio all on one chip that can save money and improve performance for smartphone makers. Cummins makes engines for trucks, and while it has already been performing well, it's poised to do even better as the economy rebounds and more trucks are purchased. In the meantime, it's expanding into emerging markets.
Monster Beverage (NAS: MNST) is not a new holding to Renaissance, but its number of shares held soared 76% over the quarter. You may know the company by its former name, Hansen Natural. It has been turning in strong numbers and continues to innovate -- introducing a concentrated energy drink, for example. Energy drinks are a briskly growing niche, and Monster is a key player.
Two companies seeing their shares held by Renaissance shrink are Philip Morris International (NYS: PM) and priceline.com (NAS: PCLN) , with reductions of 58% and 40%, respectively. Philip Morris is a powerful force in tobacco, and it appears to be a better buy than its U.S.-based cousin, Altria, but it does carry a lot of debt, and it is in a business that has some special forces working against it, such as anti-smoking regulations, rising taxes, and a consumer base featuring plenty of people trying to quit. That said, it's still likely to keep growing over the foreseeable future, and does offer a solid dividend. Priceline, meanwhile, keeps thwarting naysayers, posting quarter after quarter of robust growth. It's expanding its international operations, but its growth rate may well start tapering off in the near future.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and to that end 13-F forms can be great places to find intriguing candidates for our portfolios.
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At the time thisarticle was published
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