While most hedge funds are going through a turbulent time amid a decline in their performance and rising redemptions by investors, Boston-based quant hedge fund Arrowstreet Capital has been growing steadily. The Boston-based hedge fund started by Peter Rathjens, Bruce Clarke, and Harvard professor John Campbell in 1999 has seen its assets under management rise by more than 17.5% since May last year to almost $65 billion, as of June 30, 2016.
The fund’s recently-submitted 13F filing for the second quarter revealed that it significantly increased its exposure to US equities during the second quarter. At the end of June, its equity portfolio was worth $30.27 billion, up by 28.2% on the quarter. The filing also showed that during the second quarter the fund became more bullish on the technology and material sectors, which amassed 21% and 13% of its equity portfolio, respectively, at the end of June, compared to 17% and 4%, respectively, a quarter earlier.. Considering the fund’s bullishness on these two sectors, in this post, we will take a look at five stocks, in which Arrowstreet Capital significantly boosted its holdings during the second quarter.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
Apple Inc. (NASDAQ:AAPL)
– Shares Owned by Arrowstreet Capital (as of June 30): 2.78 Million
– Value of The Holding (as of June 30): $266.55 Million
Let’s start with Apple Inc. (NASDAQ:AAPL), which was a new entrant in Arrowstreet Capital’s equity portfolio in the second quarter. The fund would be pleased with its decision of initiating a stake in the tech behemoth as shares of Apple Inc. (NASDAQ:AAPL) have appreciated by 18.77% so far in the third quarter, but are up by only 6% year-to-date. A lot of the gains that the stock has seen in this quarter have come in the last few days after reports emerged showing that the demand for the company’s recently released iPhone 7 is much more than what analysts had originally anticipated. This changing view on the demand has prompted several analysts to boost their price target on the stock this week, including analysts at Nomura, who raised the target to $135 from $120 and reaffirmed their ‘Buy’ rating. On September 21, the Financial Times reported that Apple has approached British sports car manufacturer McLaren Automotive for a takeover or strategic investment. However, a McLaren spokesman, while talking to BBC, denied this development. At the end of June, there were 116 hedge funds covered by us that were long Apple with the aggregate value of their holdings amounting to $10.67 billion.
Goldcorp Inc. (USA) (NYSE:GG)
– Shares Owned by Arrowstreet Capital (as of June 30): 16.40 Million
– Value of The Holding (as of June 30): $313.22 Million
Moving on, Arrowstreet Capital increased its stake in Goldcorp Inc. (USA) (NYSE:GG) by 445% during the second quarter. Billionaire Ray Dalio‘s Bridgewater Associates also upped its stake in the company during that time, by 79% to 172 million shares. Goldcorp Inc. (USA) (NYSE:GG)’s stock saw a 7% spike on September 21 after the Federal Reserve announced that it will be keeping the short-term interest rate unchanged for the time being. Taking that gain into account, the stock is now up by 46% year-to-date. However, the stock has underperformed its peers in the recent months and several analysts expect that underperformance to continue because the company’s production costs are much higher when compared to its peers and even if it manages to bring them down, its margins will still be lower than other precious metal mining companies. During the April-June period, the ownership of Goldcorp Inc. (USA) among funds covered by us fell to 28 from 33, but the aggregate value of their holdings jumped to $1.46 billion from $1.02 billion.