Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.
Today, let’s look at the Renaissance Technologies hedge fund company founded by James Simons and known for its quantitative approach to investing. Indeed, Simons explained in 2007 that, “We hire physicists, mathematicians, astronomers and computer scientists and they typically know nothing about finance… We haven’t hired out of Wall Street at all.” The company’s most well-known fund is the Medallion Fund. Interestingly, most of its assets belong to employees of the firm, and outside investors are generally turned away.
Why should you look at Renaissance Technologies’ moves? Well, it’s hard to find performance data for it, but in his 2009 book Blunder: Why Smart People Make Bad Decisions, Zachary Shore noted that Renaissance’s flagship Medallion fund “has yielded an average 38% annual return since its inception in 1988. The fund has lost money only in a single year, 1989, when it dropped 4.1%.” That’s so remarkable that some have mused that it’s either a Madoff-like Ponzi scheme or a simply amazing hedge fund.
The company’s reportable stock portfolio totaled $41.2 billion in value as of March 31, 2013, with several thousand holdings. (Concentration, thy name is not Renaissance Technologies!)
So what does Renaissance’s latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are EMC Corporation (NYSE:EMC) and Virgin Media Inc. (NASDAQ:VMED). Other new holdings of interest include Nokia Corporation (ADR) (NYSE:NOK) and Corning Incorporated (NYSE:GLW). Nokia has struggled in recent years, but has been regaining its footing, providing less developed economies with less expensive mobile phones and also partnering on Windows phones. It’s coming out with new offerings, too. Sales in China have been shrinking recently, though, and some worry about developing nations embracing more pricey smartphones.
Corning has suffered lately due to low prices and demand for LCD substrates, but it’s enjoying solid demand for its Gorilla Glass, which generated more than $1 billion in 2012 revenue. The company’s flexible new Willow Glass is also promising. Despite some issues such as falling profit margins, there’s a solid case to be made that the stock is attractively priced at recent levels and a good long-term investment. It has upped its dividend as well.
Among holdings in which Renaissance Technologies increased its stake was New York Community Bancorp, Inc. (NYSE:NYCB), which is offering a hefty 7.3% dividend yield. The company has recently been growing via acquisitions and its management is known for prudent management of credit risk. Bulls like that its CEO has been with the company for decades and is heavily invested in it, and a recent decline in its non-performing assets is a plus, too.
Renaissance Technologies reduced its stake in lots of companies, including Houston-based oil and natural gas company Linn Energy LLC (NASDAQ:LINE). Linn offers a whopping 8.8% dividend yield, and has been making some income-generating acquisitions. The company specializes in buying mature, productive energy assets — and is poised to eventually profit from the rich Bakken fields. It’s also admired for its successful long-term hedging and organic growth, and is seen by some as a solid investment.