We have been going through hedge fund 13F filings from the fourth quarter of the year. One use of this information is by applying investing strategies which have worked in the past; for example, the most popular small cap stocks among hedge funds have produced an average excess return of 18 percentage points per year (learn more about our small cap strategy) and other techniques are likely possible as well. 13Fs can also be used to see what specific investors are doing in the markets. D.E. Shaw is a large hedge fund (total assets under management are over $25 billion) founded in 1988 and named after founder David Shaw. Shaw has since become a billionaire due to the combination of his fund’s size and success. Here are D.E. Shaw’s five largest holdings by market value at the end of 2012 according to its 13F filing (or check out more of Shaw's stock picks):
The fund actually added slightly to its position in Apple Inc. (NASDAQ:AAPL), closing December with a total of 1.5 million shares in its portfolio. Apple Inc. (NASDAQ:AAPL) is no longer the most popular stock among hedge funds, according to our database; that status now belongs to American International Group Inc (NYSE:AIG). See more of the most popular stocks. Down 17% in the last year, Apple Inc. (NASDAQ:AAPL) now trades at 10 times trailing earnings as the market consensus becomes that earnings will fall due to lower margins. Wall Street analysts remain highly bullish, with their growth projections implying a five-year PEG ratio of 0.5, and calls are intensifying for management to better use its cash.
D.E. Shaw was also buying shares of Berkshire Hathaway Inc. (NYSE:BRK.B) in the fourth quarter of 2012, and owned 7.6 million Class B shares at the beginning of January. Warren Buffett’s holding company (find Buffett's favorite stocks) is valued at a premium to the book value of its equity- the P/B ratio is 1.3- as investors express confidence both in Buffett and in his successors. Berkshire’s stock price has done well over the last year, outperforming the S&P 500.
Read on for more of D.E. Shaw's top picks: