Billionaire Jim Simons and his firm Renaissance Technologies filed its third quarter 13F, where notable investors and hedge funds are required to disclose their quarterly public equity holdings to the SEC. After analyzing Simons’ holdings we have found five defensive stocks that RenTech was heavily invested in. All of these defensive stocks pay investors a dividend and have low volatility, each with a beta less than 0.5. Simons founded Renaissance Technologies in 1982 and now has over $15 billion of AUM. Simons retired in early 2010, but still has some capital invested in the fund (check out Jim Simons’ top picks).
Two of Simons’ top defensive picks are in the tobacco industry: Lorillard Inc. (NYSE:LO) and Altria Group, Inc. (NYSE:MO). On a profit margin basis, the two tobacco companies are in line across the board. They also trade with very similar dividend yields, P/E ratios, betas and five year estimated EPS growth rates. Lorillard is Simon’s 15th largest 13F holding and is expected to see sales growth of only 3% in 2012, compared to 10% in 2011. Discount brands have helped carry Lorillard over the interim, with volume up 15% over the past year. Lorillard’s top brand, Newport, is also expected to continue capturing market share.
With a P/E of 14x, Lorillard is a value play when compared to Reynolds America (16x) and British American (20x). The tobacco company’s beta is only 0.4 and it pays a very nice dividend that yields 5.2% – with a payout of 70% – making it a solid defensive play. Ken Griffin, founder of Citadel Investment Group, is also a big fan of the tobacco company, having upped his stake 1500% last quarter (see Ken Griffin’s newest picks).
Altria is RenTech’s other tobacco play that has a 0.4 beta and a 5.3% dividend yield. Revenue growth for Altria is expected to be up 5% this year, higher than Lorillard. Helping hedge the decline in volume due to greater health concerns on an aggregate scale, is Altria’s initiative to cut costs by $400 million through 2013. The company is the largest cigarette manufacturer in the U.S., but it is also making key strides into the high-margin smokeless tobacco segment. RenTech increased its stake in Altria by 50% last quarter, and Ken Fisher was also upping his Altria stake over this time(check out Ken Fisher’s top picks here).