Jim Simons‘ Renaissance Technologies is not just another hedge fund. The fund charges a fixed fee of 5% and a performance fee of between 36% and 44%. The abnormally high fees are a result of high transaction costs that Renaissance Technologies incurs owing to its unconventional investment strategy. Using computational trading models for high frequency trading, the firm exploits market inefficiencies. For example, one such strategy is to use these algorithms to detect and front-run large transactions. The high fees are also due to the firm’s exceptional results, which have led to a rise in such quantitative investing by other investors.
Renaissance Technologies has about $65 billion worth of assets under management. At the end of March, the market value of its equity portfolio increased to $46.96 billion from $41.42 billion a quarter earlier. Technology and finance were the highest contributing sectors to the fund’s portfolio, containing 18% and 16% of the market value of its holdings respectively. The fund is very well-diversified, with its top ten holdings representing only 9.88% of its portfolio’s value. We picked through the fund’s latest 13F filing to find its largest new positions, stocks its algorithms have identified as good short-term bets. We’ll look at those stocks: Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), Union Pacific Corporation (NYSE:UNP), and Priceline Group Inc (NASDAQ:PCLN), in this article.
The newly initiated stake in Amazon.com, Inc. (NASDAQ:AMZN) amounts to 1.15 million shares valued at $428.98 million and was the fund’s fourth largest equity holding overall, representing 0.91% of its portfolio’s value. However, this is not the first time that the $199.18 billion e-commerce giant has made it into the fund’s portfolio. Renaissance has been walking in and out of Amazon.com, Inc. (NASDAQ:AMZN) since the first quarter of 2001. The stock has appreciated by nearly 40% year-to-date, as it appears Simons’ fund has timed its latest re-entry well. Amazon’s cloud infrastructure, AWS, which is also the leader in the industry, registered phenomenal growth in the first quarter. Revenues from the segment stood at $1.57 billion, an increase of 49% year-over-year. This also led to Bernstein hiking Amazon.com, Inc. (NASDAQ:AMZN)’s price target to $600 from $450, while reiterating its ‘Outperform’ rating. Paul Ruddock and Steve Heinz‘s Lansdowne Partners is the largest stockholder of the company according to our database.
Facebook Inc (NASDAQ:FB) made an entry in Renaissance’s portfolio with some 2.65 million shares valued at $217.60 million. The social media platform company is continuing to engage more and more people worldwide; comScore reported that Facebook’s user engagement for April in terms of mobile internet time climbed to 24%, from 22% in March. The figure looks even more towering when compared to the 5% combined engagement from all other networking services including Twitter, Snapchat, and even Facebook Inc (NASDAQ:FB)’s own platforms, WhatsApp and Instagram. JPMorgan is certain about the company’s bright prospects in 2015, naming Facebook as one of its top picks for the year. Stephen Mandel of Lone Pine Capital held about 13.50 million shares of Facebook Inc (NASDAQ:FB) in his fund’s portfolio, according to its latest filing.
The newly initiated stake in Union Pacific Corporation (NYSE:UNP) is comprised of nearly 1.95 million shares valued at $210.92 million. The holding represented 0.45% of the fund’s portfolio value. Although up by about 7.85% over the past year, Union Pacific Corporation (NYSE:UNP)’s stock has slid by 14.3% year-to-date. After a slow first quarter, things still don’t seem to be improving for the $89.56 billion railroad company, according to its weekly carload report. Freight shipped in cars was down by 11% for Week 18 as compared to the same week last year. Among the prominent stockholders of Union Pacific Corporation (NYSE:UNP) are Jean-Marie Eveillard and Cliff Asness.
Jim Simons’ new bet in the online travel business Priceline Group Inc (NASDAQ:PCLN) represented 0.34% of his fund’s portfolio value. A total of 135,199 shares valued at $157.40 million were acquired during the first quarter. Priceline Group Inc (NASDAQ:PCLN)’s stock has increased by a modest 4.37% year-to-date. Shares have lost some ground owing to a rather soft future guidance provided by the company’s management, despite an earnings beat in the first quarter. David Tepper’s Appaloosa Management held about 316,900 shares of Priceline Group Inc (NASDAQ:PCLN) at the end of 2014.
As far as the importance of tracking hedge funds is concerned, we discovered through our research that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds under-performed the same index by seven basis points per month during the same period. In forward tests since August 2012, through March 2015 the top 15 small-cap stocks beat the market by a hefty 79.4 percentage points (read the details here). Hence a retail investor needs to isolate himself from the herd of investors chasing large-cap stocks and take advantage of the prevalent arbitrage opportunities in the market by concentrating on these money-making small-cap stocks.
Disclosure: None
