Billionaire Jim Simons’ Top Stock Holdings

RENAISSANCE TECHNOLOGIESThe “Quant King,” Jim Simons, founded Renaissance Technologies in 1982, growing AUM to ~$15 billion. Simons retired on January 1, 2010 but remains Renaissance’s nonexecutive chairman with a net worth of $10.7 billion. The fund utilizes complex computer modeling to identify and exploit inefficiencies in publicly-traded, preferably very liquid, securities. Given this overwhelmingly quantitative approach, Simons prefers to hire PhDs over MBAs. In fact, most of Renaissance employees do not have financial backgrounds but are mathematicians, physicists and statisticians. In 2011, Renaissance’s funds earned net returns as high as 33%.

Simons has one of the more unique backgrounds compared to his billionaire hedge fund manager peers. In1958, Simons received a bachelor’s degree in mathematics from the Massachusetts Institute of Technology (MIT) and a PhD also in mathematics, from the University of California, Berkeley at 23. He continued doing research at the Communications Research Division of the Institute for Defense Analyses (IDA), working as a code breaker for the US. Department of Defense during the Vietnam War. Later, Simons taught at a number of institutions before being appointed chairman of the math department at Stony Brook University.

Top 10 Holdings:

Company Ticker Value ($000s) Activity
MCDONALDS CORP MCD 465,180 112%
APPLE INC AAPL 441,640 -42%
BRISTOL MYERS SQUIBB CO BMY 438,426 102%
LILLY ELI & CO LLY 363,541 25%
GOOGLE INC GOOG 293,013 444%
PRICELINE COM INC PCLN 273,797 30%
INTEL CORP INTC 271,965 17%
MICROSOFT CORP MSFT 269,997 149%
CHIPOTLE MEXICAN GRILL INC CMG 264,092 -26%
MASTERCARD INC MA 255,730 92%

Renaissance made a few buys this quarter, though all on the smaller side and with not clear sector preference. The fund bought shares of Monster (NYSE:MNST), Time Warner (TWX), Research in Motion (RIMM), JC Penney (JCP), and CME Group (CME) amongst others. Renaissance also more than doubled holdings in McDonald’s (MCD), Bristol Myers (BMY), Google (NASDAQ:GOOG), and Microsoft (MSFT). Even though Coca-Cola (NYSE:KO) has dispelled the rumors of potentially acquiring MNST, we still think there are other catalysts to drive the stock. Other potential drivers include international revenue and cash generation/utilization. Regarding the former, we feel that MNST has room to increase international sales from the current 14% of total sales. As the company works out issues with distributors, the division should be able to be profitable either this year or next. Regarding cash, the company has ~$800 million in cash and equivalents and no debt. Aside from share buybacks, there are other opportunities to enhance the capital structure. Competitors like Dr Pepper Snapple (DPS), Jones Soda (JSDA), and the privately held Arizona Tea may be more attractive targets for KO. With PepsiCo (PEP) getting into the mid and low calorie soda market, KO may consider DPS more seriously as an acquisition target. DPS trades at 13.2x, a discount to MNST’s almost 30.0x forward earnings.

The fund’s top-weighted sectors are Technology, Consumer Services, and Healthcare. Renaissance Technologies is among the hedge funds that see deep value in mega-cap tech stocks like Apple (NASDAQ:AAPL), Microsoft, and Google. These are the top three most popular stocks among hedge funds (see the 10 most popular stocks). All of these stocks have huge piles of cash and trade significantly below their historical price multiples. Excluding cash Microsoft and Apple have single digit 2012 forward PE ratios. We are very bullish about these stocks over the long-term. Billionaire David Einhorn, Rob Citrone, and D.E. Shaw have positions in both Microsoft and Apple as well.

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