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. 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 the company’s 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 a whopping $34.3 billion in value as of Dec. 31, 2012, 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 General Electric Company (NYSE:GE) and PepsiCo., Inc. (NYSE:PEP) Other new holdings of interest include InterOil Corporation (USA) (NYSE:IOC) . InterOil is an interesting beast — it drills for natural gas in Papua New Guinea. It has major expansion plans, though, including building an export facility, and it’s looking for partners to help finance its growth. Its reserves have a lot of potential, but they’re not all proven. There’s risk in this company, but Renaissance seems to think the possible rewards outweigh that.
Among holdings in which Renaissance Technologies increased its stake was Micron Technology, Inc. (NASDAQ:MU). Micron Technology, Inc. (NASDAQ:MU) is hoping that growth in tablets and smartphones, not to mention laptop sales, will drive demand for memory chips. Some expect the company to post strong results soon due to surging DRAM prices. But analysts at Lazard recently downgraded Micron, expecting DRAM prices to level off.