Apple Inc. (AAPL): AQR Capital’s Top Pick

Apple Inc. (NASDAQ:AAPL) is the top stock pick among the hedge funds we track. Let’s take a look at one money manager in particular that holds a stake in the tech giant.

AQR Capital was founded in 1998 by Cliff Asness and other former Goldman Sachs alums. AQR invests in public equities across the world and as of 2011 managed upwards of $44 billion. Asness graduated from the University of Pennsylvania with dual degrees in Economics and Engineering, and also earned his MBA and ultimately his PhD in Finance from the University of Chicago. According to the Financial Times, AQR ”takes a systematic, computer-assisted approach to investment involving both value and momentum factors.” After reviewing AQR’s most recent 13F – which is filed with the SEC quarterly and reveals the majority of public securities owned by the firm – we found that AQR was upping its shares in each of its top five holdings by at least 15%. Outlined below are AQR’s top five holdings:

Apple Inc. (NASDAQ:AAPL) saw AQR up its stake 16% during 3Q 2012 and kept the tech stock as its number one 13F holding. Apple is expected to be a standout of the 2012 holiday season, thanks to new iterations of its iPhone and iPad. What should help drive Apple’s industry-leading long-term expected EPS growth is its ability to continually introduce new products. This includes the potential launch of an iTV. The tech giant also has a solid balance sheet with no debt and a large cash position.

Apple Inc. (NASDAQ:AAPL) has put some of this cash to work with a 2% dividend yield. The tech company has faced formidable competition in the mobile market, but still holds a solid position. IDC expects Apple’s iPhone to own 17% of the smartphone market by 2015. The stock only trades around $525, but Wall Street’s price target averages $740 and analyst Brian White of Topeka Capital Markets has a $1,111 price target on Apple.

In addition to Apple Inc. (NASDAQ:AAPL), two of AQR’s big picks are oil and gas giants, Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), ranking second and third, respectively, in AQR’s 3Q 2012 13F. AQR upped its stake by at least 20% in each energy company and has had the stocks in its top five for almost two years. Exxon plans to target production growth of 1%-2% per through 2016, with asset base decline of 3% over the same time period. Billionaire Bill Gates is Exxon’s top fund owner of those we track with over 7.6 million shares (check out Bill Gates’ top picks).

AQR CAPITAL MANAGEMENTA couple big initiatives for Exxon have been adding acreage in Bakken and Western Canada. Exxon has been performing well, helped by strong performance in its refining segment, not to mention a greater focus on upstream deep-water opportunities. Exxon’s balance sheet remains robust with $13 billion in cash and $12 billion in debt. Recent quarterly results for 3Q 2012 also showed that cash flow continues to outpace capital expenditures, with $14 billion in cash flow compared to $9 billion in CapEx.

Chevron also managed to see cash flow ($26 billion) outpace CapEx ($21 billion) during 3Q. Chevron is targeting more robust production growth than Exxon at 4% through 2017. Chevron is also focusing on rearranging its operational structure; part of the restructuring includes the sell-off of some of its downstream operations. These plans to reduce its refining operations will allow the oil/gas company to focus on higher margin businesses, with plans to expand further into the liquid natural gas sector. Billionaire Ken Fisher – founder of Fisher Asset Management – is the top fund owner of those we track with over 3.5 million shares (check out Ken Fisher’s newest picks).

Aside from Apple Inc. (NASDAQ:AAPL), Exxon and Chevron, what other stocks are in Asness’ portfolio?

AT&T Inc. (NYSE:T) was the fourth largest 13F holding for AQR during 3Q 2012 and is also one of the top dividend plays around. AQR upped its stake in the wireless company by 27% during the quarter. Compared to major competitor Verizon, AT&T trades on the high end at a 1.5x P/S, compared to Verizon’s 1x sales multiple. The big downside for AT&T is its continued battle for spectrum, especially since its bid to purchase T-Mobile fell apart.

We do remain cautious about the long-term prospects of AT&T, with respect to service and coverage in its wireless segment. Positives for the wireless provider is that during 4Q 2012, it managed to sell a record 10 million smartphones, thanks in large part to Apple Inc. (NASDAQ:AAPL)’s iPhone 5. With over $40 billion in trailing twelve month free cash flow, the wireless company should not have a problem funding its 5% dividend yield in the interim. Billionaire Ray Dalio of Bridgewater Associates is one of AT&T’s top-name investors (see Ray Dalio’s top picks).

Wal-Mart Stores, Inc. (NYSE:WMT), the retail giant, finally broke into AQR’s top five holdings after the firm upped its stake by 18% during 3Q 2012. Wal-Mart and one of its top competitors, Target, trade relatively in line on a P/E and P/S basis, and both pay a 2.3% dividend yield. Wal-Mart’s longer-term growth should come by way greater international expansion and solid same-store sales growth. Same-store sales growth is expected to be up 2.3% in FY2013, thanks to a weak economy and the retailer’s low-priced products. Warren Buffett is the top fund owner of those we track with over 46 million shares (check out Warren Buffett’s new picks).

To recap: AQR is one of the many firms making big bets on Apple Inc. (NASDAQ:AAPL), but also has a couple key investments in the oil and gas industry. Other notable picks of AQR’s include a high dividend play in AT&T, and a bet on the world’s largest retailer.

Read more related coverage here:

Wal-Mart Is One of Warren Buffett’s Favorite Service Stocks

Vodafone Group: An Overlooked Telecom Giant

5 Dividend Stocks Growing Dividends Faster Than The S&P 500 Index

Disclosure: I have no positions in any of the stocks mentioned in this article

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

The 20 Biggest Contracts in MLB History

The 7 Worst Blown Calls in Sports History

7 Free Ways to Advertise Your Business Online

The 18 Best R&B Songs of the 90’s

The 10 Most Dangerous States to be a Cop

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!