Here's What This $53 Billion Hedge Fund Company Has Been Buying
Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at the D.E. Shaw & Co., founded by David E. Shaw and with a reportable stock portfolio totaled $53.2 billion in value as of June 30.
Shaw is known as a math wizard, and a quantitative investing pioneer. His firm is reportedly extremely selective, hiring less than 1% of applicants -- and Amazon.com CEO Jeff Bezos once made the cut.
So what does D. E. Shaw's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new positions are call options on Microsoft and puts on Tesla Motors. Its biggest new holdings are Gilead Sciences and Scripps Networks Interactive. Other new holdings of interest include NewYork Community Bancorp and Pinnacle Foods . New York Community Bancorp has been growing via acquisitions and its management is known for prudent management of credit risk. It has been growing its commercial and industrial lending business, and its second quarter featured estimate-topping earnings and a rising net interest margin. Some see the bank's sizable multi-family loan portfolio as an ace in the hole, offering refinancing-related income. For patient investors with conviction, the stock offers a whopping 6.8% dividend yield.
Pinnacle Foods is a recent IPO, with a strategy of "Reinvigorating Iconic Brands" and a new dividend, yielding a solid 2.7%. The company has a significant debt load, but it also has a strong brand lineup, featuring brands such as Birds Eye, Aunt Jemima, Hungry-Man, Van de Kamp's, Armour, Lender's, Mrs. Paul's, Vlasic, Log Cabin, Mrs. Butterworth, Duncan Hines -- and now Wish-Bone, thanks to a recent $580 million purchase. In Pinnacle's second quarter, revenue dropped 3%, with management noting, "We delivered another quarter of strong earnings growth as we expanded gross margins through effective productivity programs and ongoing improvement in product mix." The quarter impressed analysts at Zacks enough to lead to a rating upgrade, to Strong Buy.
Among sizable holdings in which D.E. Shaw increased its stake were Freeport McMoRan Copper & Gold and BMC Software. Smaller holdings that were greatly increased include Exelixis and Pengrowth Energy . Biotech company Exelixis has bulls excited about its cabozantinib drug, which, as COMETRIQ, is approved to treat thyroid cancer and even more promising, is in trials to treat prostate cancer and metastatic renal cell carcinoma. The company is looking at treating as many as nine different conditions with it, such as bone tumors. On the downside, though, Cometriq is expensive, and the company's debt has been growing, along with its share count. In its second-quarter conference call, management noted that it's tripling its sales force for COMETRIQ on promising sales from community physicians.
Canada-based Pengrowth, an oil and gas drilling and exploration company, offers a tantalizing dividend yield of 8.4% (though that payout has shrunk in recent years, and its stock has averaged 10.4% losses over the past five years). It has been challenged lately by rising costs, and has cut back on its production. It has also been selling some assets lately, to generate needed funds for its high-potential Lindbergh bitumen project and other needs. Look closer before jumping at this dividend, as the payout could shrink further.
D.E. Shaw reduced its stake in lots of companies, including network storage specialist NetApp and recovering drugstore chain Rite Aid.
Finally, D.E. Shaw's biggest closed positions included Virgin Media and News Corp. Other closed positions of interest include SunEdison and Western Asset Mortgage Capital . Western Asset is a real estate investment trust that has recently been yielding more than 23%. It focuses on mortgage-related investments, and invests in both agency-backed and non-agency-backed ones, upping its risk profile some in exchange for the chance of higher returns. It's vulnerable to interest rate changes, and an improving economy may deliver those. Upon reporting its latest quarter, management noted, "Since our initial public offering in May 2012 through June 30, 2013, we have delivered an economic return (calculated as change in book value over the period plus dividends paid) of 8%, despite challenging conditions for investing in Agency RMBS. We believe our ability to this result over that time frame is a testament to the strength of our security selection and hedging strategies."
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 13-F forms can be great places to find intriguing candidates for our portfolios.
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The article Here's What This $53 Billion Hedge Fund Company Has Been Buying originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter,owns shares of Microsoft, Amazon.com, and Gilead Sciences. The Motley Fool recommends Amazon.com, Exelixis, Gilead Sciences, Scripps Networks Interactive, and Tesla Motors and owns shares of Amazon.com, Exelixis, Freeport-McMoRan Copper & Gold, Microsoft, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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