Several weeks after the end of each quarter, hedge funds and other major investors file their 13Fs with the SEC to disclose many of their long equity positions in U.S. stocks as of the end of the previous quarter. Even though the information in 13Fs is a bit old, we have found that it is possible to use these filings to develop profitable investment strategies (for example, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year). We also like to see what top fund managers such as billionaire David Shaw of D.E. Shaw are doing- their picks can serve as initial investment ideas. Read on for our thoughts on five of D.E Shaw’s largest holdings by market value at the end of March and compare these picks to previous filings.
The fund reported a large position in the class B shares of Berkshire Hathaway Inc. (NYSE:BRK.B), Warren Buffett’s holding company. The stock trades at a considerable premium to the book value of its equity with a P/B ratio of 1.4, reflecting investors’ confidence in Buffett’s ability- and, presumably, the ability of his hand-picked successors- to continue to deliver strong returns. Berkshire Hathaway Inc. (NYSE:BRK.B) has filed its own 13F, with the holding company’s two largest positions in publicly traded stocks being its stakes in Wells Fargo & Co (NYSE:WFC) and The Coca-Cola Company (NYSE:KO). Find more of Buffett’s favorite stocks.
D.E. Shaw owned over 12 million shares of American International Group Inc (NYSE:AIG) at the end of the first quarter of 2013. American International Group Inc (NYSE:AIG) is no longer the most popular stock among hedge funds- Apple Inc. (NASDAQ:AAPL) regained the crown last quarter- but it still makes the top three in our analysis (see the rest of the top ten list). The insurer currently carries a significant discount to book, as shown by the P/B ratio of 0.7, and while we do think that AIG deserves a small discount given its disastrous performance during the financial crisis these levels likely still leave the stock with some upside.