Jim Simons, the founder of Renaissance Technologies, has since become a multi-billionaire due to the combination of the hedge fund’s large size, strong returns, and very high fees. Renaissance recently filed its quarterly 13F with the SEC, disclosing many of its long equity positions as of the end of March; while this information is a bit old, we’ve found that 1Fs can be useful sources of information for investors. Our research shows that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year, and of course the stocks top managers have been buying can serve as initial investment ideas to be researched further. Read on for our quick take on Renaissance’s five largest new positions at the end of Q1 (or see the full list of stocks the fund reported owning).
Renaissance initiated a position of 7.9 million shares in EMC Corporation (NYSE:EMC), the $51 billion market cap data storage solutions company. While EMC Corporation (NYSE:EMC) trades at 20 times its trailing earnings, and recent financial results actually show business being about flat, Wall Street analysts expect high growth in earnings per share over the next year and a half. As a result, the forward P/E is 12, and if the company did manage to hit its targets it might be close to being a value stock. Lee Ainslie’s Maverick Capital increased its stake in EMC Corporation (NYSE:EMC) by 70% last quarter, to nearly 11 million shares (check out Ainslie’s stock picks).
The fund bought 2.2 million shares of Virgin Media Inc. (NASDAQ:VMED) during the quarter, seeking to take advantage of the merger arbitrage opportunity being created by Liberty Global Inc. (NASDAQ:LBTYA)’s merger with the company. Many hedge funds like to invest in merger arb plays because the return on the investment (caused by the small difference between the acquired company’s price and the transaction price) depends on whether or not the deal closes and so the returns are independent of broader market indices. Learn more about merger arb strategies.