In this article, we discuss the 10 best stocks to buy according to DE Shaw.
David Elliot Shaw, an American billionaire scientist and hedge fund manager, founded DE Shaw in 1988. DE Shaw is a New York-based hedge fund, with a Q1 portfolio worth about $107 billion. The hedge fund invests in the information technology, industrials, healthcare, finance, energy, consumer discretionary, and communications sectors. While David Shaw remains involved in some top strategic investment of the D. E. Shaw group, the firm’s operations are generally managed by its executive committee.
D.E. Shaw posted robust returns for its two biggest funds in 2021. The firm’s flagship Composite Fund generated a net return of approximately 18.5% in 2021, compared to a 19.4% return in 2020. Similarly, DE Shaw’s Oculus Fund, which employs a macro-oriented strategy, reported net returns of about 15% in 2021. Both funds are not accepting outside investment. The hedge fund has assets under management of approximately $60 billion, focusing on private investments and long-only strategies.
As per 13F filings for the first quarter of 2022, DE Shaw purchased 952 new stocks, made additional purchases in 1814, sold out of 820 securities entirely, and reduced holdings in 2113 names. Some of the most notable stocks in DE Shaw’s portfolio include Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL).
Our Methodology
We used the Q1 2022 portfolio of DE Shaw for this analysis, selecting the top 10 holdings of the hedge fund. The list is ranked according to the hedge fund’s stake value in each company.
David E. Shaw of D.E. Shaw
Best Stocks to Buy According to DE Shaw
10. Pfizer Inc. (NYSE:PFE)
DE Shaw’s Stake Value: $510,199,000
Percentage of DE Shaw’s 13F Portfolio: 0.47%
Number of Hedge Fund Holders: 79
Pfizer Inc. (NYSE:PFE) is an American multinational biopharmaceutical company that offers medicines and vaccines in multiple therapeutic areas such as cardiovascular, metabolic, and women’s health. DE Shaw boosted its stake in Pfizer Inc. (NYSE:PFE) by 197% in Q1 2022, holding 9.85 million shares worth over $510 million, representing 0.47% of the total 13F portfolio.
On June 23, Pfizer Inc. (NYSE:PFE) declared a $0.40 per share quarterly dividend, in line with previous. The dividend is payable on September 6, to shareholders of the company as of the close of business on July 29. The company delivers a dividend yield of 3.09% as of July 15.
Morgan Stanley analyst Terence Flynn on July 8 reiterated an Equal Weight rating on Pfizer Inc. (NYSE:PFE) and lowered the price target on the shares to $49 from $52 after adjusting estimates in light of the company’s upcoming Q2 results. He forecasts that biopharma revenues will remain robust amid slower economic activity and believes companies that can generate revenue growth in the second half of the decade are best positioned among the sector.
According to Insider Monkey’s data, 79 hedge funds were bullish on Pfizer Inc. (NYSE:PFE) at the end of Q1 2022, compared to 83 funds in the last quarter. Cliff Asness’ AQR Capital Management is a significant shareholder of the company, with 10.70 million shares worth $554.12 million.
Like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), elite hedge funds are piling into Pfizer Inc. (NYSE:PFE).
Here is what ClearBridge Investments Value Equity Strategy has to say about Pfizer Inc. (NYSE:PFE) in its Q4 2021 investor letter:
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.
What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.”
9. Ford Motor Company (NYSE:F)
DE Shaw’s Stake Value: $528,364,000
Percentage of DE Shaw’s 13F Portfolio: 0.49%
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is an American manufacturer of trucks, cars, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles. It operates through three segments – Automotive, Mobility, and Ford Credit. Ford Motor Company (NYSE:F) reported that U.S. sales rose 31.5% to 152,262 vehicles in June, compared to a 4.5% decline in May. DE Shaw boosted its position in Ford Motor Company (NYSE:F) by 10% in Q1 2022. The hedge fund held 31.2 million shares of the company, worth $528.3 million, representing 0.49% of the total 13F portfolio.
Morgan Stanley analyst Adam Jonas on July 14 maintained an Equal Weight rating on Ford Motor Company (NYSE:F). The analyst is making “material cuts” to estimates across his autos and shared mobility coverage, particularly in FY23, to account for slowing growth and credit headwinds.
According to Insider Monkey’s data, 46 hedge funds were bullish on Ford Motor Company (NYSE:F) at the end of Q1 2022, compared to 53 funds in the earlier quarter. Ken Griffin’s Citadel Investment Group is a significant position holder in the company, with roughly 8 million shares worth $133.7 million.
Here is what Baron Fund has to say about Ford Motor Company (NYSE:F) in its Q1 2022 investor letter:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
8. PayPal Holdings, Inc. (NASDAQ:PYPL)
DE Shaw’s Stake Value: $533,073,000
Percentage of DE Shaw’s 13F Portfolio: 0.49%
Number of Hedge Fund Holders: 100
PayPal Holdings, Inc. (NASDAQ:PYPL) is a California-based company offering a technology platform that allows digital payments for merchants and consumers worldwide. DE Shaw lifted its stake in PayPal Holdings, Inc. (NASDAQ:PYPL) by 151% in Q1 2022, holding 4.60 million shares worth $533 million, representing 0.49% of the total portfolio.
On July 15, RBC Capital analyst Daniel Perlin reiterated an Outperform rating on PayPal Holdings, Inc. (NASDAQ:PYPL) but lowered the price target on the stock to $92 from $110 ahead of its Q2 results. PayPal Holdings, Inc. (NASDAQ:PYPL)’s total payment volume and transaction revenue was possibly more affected by foreign exchange headwinds than is reflected at the Street, the analyst told investors. He added that with the stock down 62% year-to-date and its P/E multiple trading at a 16-point discount to its 5-year average compared to the market, most of the bad news is already factored into the shares.
According to Insider Monkey’s data, 100 hedge funds were bullish on PayPal Holdings, Inc. (NASDAQ:PYPL) at the end of the first quarter of 2022, compared to 110 funds in the previous quarter. Ken Fisher’s Fisher Asset Management featured as the largest stakeholder of the company, with 16.7 million shares worth about $2 billion.
Here is what Harding Loevner Global Equity Fund has to say about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q1 2022 investor letter:
“We hold a similar view on other companies that hurt us this quarter: most of the specific blemishes that marred their shares are likely to be transient; the companies’ long-term prospects remain bright while the sell-off has left their shares more attractively priced. PayPal is admittedly at a crossroads with its still-untested strategy of focusing on deepening existing user relationships instead of growing e-commerce commissions off new users; but, at its current price, we are prepared to wait a while longer to gauge if it can succeed.”
7. Alphabet Inc. (NASDAQ:GOOG)
DE Shaw’s Stake Value: $534,637,000
Percentage of DE Shaw’s 13F Portfolio: 0.50%
Number of Hedge Fund Holders: 160
Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology firm. In Q1 2022, DE Shaw strengthened its hold on Alphabet Inc. (NASDAQ:GOOG) by 3%, with the hedge fund owning 192,222 shares of the company worth $534.6 million, representing 0.50% of the total 13F securities.
On July 14, Citi analyst Ronald Josey maintained a Buy rating on Alphabet Inc. (NASDAQ:GOOG) but lowered the firm’s price target on the stock to $2,900 from $3,175. Ahead of the Q2 earnings amid higher macroeconomic challenges and currency moves, the analyst changed projections and target prices for internet firms including Alphabet Inc. (NASDAQ:GOOG). According to the analyst, conversations with advertisers suggest a “fluid environment”.
As per Insider Monkey’s Q1 data, Alphabet Inc. (NASDAQ:GOOG) was part of 160 hedge fund portfolios, up from 158 funds in the earlier quarter. Chris Hohn’s TCI Fund Management held the largest stake in the company, with 2.3 million shares worth $6.6 billion.
Here is what Farrer Wealth Advisors said about Alphabet Inc. (NASDAQ:GOOG) in its Q1 2022 investor letter:
“Alphabet: We won’t waste much time trying to explain to our clients why Alphabet is such a phenomenal business, we believe that is quite self-evident. The better explanation is why we never bought Alphabet before. The reason was a personal bias we held based on three beliefs (which we now believe to be incorrect)
Growth in YouTube would stall as the increased ad-load would turn-off viewers (the double ad-load at the beginning of videos for example). Consumers will focus on discovery rather than search to purchase new items. For example – using Instagram/TikTok to decide what new clothes to buy instead of ‘googling’ for clothes. Other Bets: In general, we felt that capital spent on “Other Bets” has been a bit wasteful with the segment earning just around $3.1bn in revenue versus nearly $21bn in operating losses over the last five years…” (Click here to see the full text)
6. Marathon Petroleum Corporation (NYSE:MPC)
DE Shaw’s Stake Value: $536,936,000
Percentage of DE Shaw’s 13F Portfolio: 0.50%
Number of Hedge Fund Holders: 43
Marathon Petroleum Corporation (NYSE:MPC) is an Ohio-based integrated downstream energy company with operations in the United States. It operates in two segments – Refining & Marketing and Midstream. In the first quarter of 2022, DE Shaw owned 6.2 million shares of Marathon Petroleum Corporation (NYSE:MPC), worth about $537 million, representing 0.50% of the total portfolio.
On June 14, Wells Fargo analyst Roger Read raised the price target on Marathon Petroleum Corporation (NYSE:MPC) to $129 from $117 and kept an Overweight rating on the shares. As per the analyst, if Marathon Petroleum Corporation (NYSE:MPC)’s Q2 capture approximates its long-term average of 102%, he forecasts that Q2 EPS would be $8.63 or 30% ahead of his updated estimate of $6.66.
Among the hedge funds tracked by Insider Monkey, 43 funds were bullish on Marathon Petroleum Corporation (NYSE:MPC) at the end of Q1 2022, up from 41 funds in the last quarter. Paul Singer’s Elliott Management is the leading shareholder of the company, with 11 million shares worth $946 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), smart investors are pouring into Marathon Petroleum Corporation (NYSE:MPC).
Here is what Clark Street Value has to say about Marathon Petroleum Corporation (NYSE:MPC) in its Q4 2021 investor letter:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum (MPC) as a proxy for Par Pacific (PARR) since long dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
5. Walmart Inc. (NYSE:WMT)
DE Shaw’s Stake Value: $837,124,000
Percentage of DE Shaw’s 13F Portfolio: 0.78%
Number of Hedge Fund Holders: 60
Walmart Inc. (NYSE:WMT) is an American retailer that operates supercenters, supermarkets, hypermarkets, discount stores, membership-only warehouse clubs, and ecommerce websites. On February 17, Walmart Inc. (NYSE:WMT) declared a $0.56 per share quarterly dividend, a 1.8% increase from its prior dividend of $0.55. The dividend was distributed on April 4 and May 21. The next dividend payment is due on September 6, to shareholders of record on August 12. 2022 marks the 49th consecutive annual dividend increase by the company and it is well on its way to becoming a dividend king.
Securities filings for Q1 2022 reveal that DE Shaw strengthened its hold on Walmart Inc. (NYSE:WMT) by 55%. The hedge fund held 5.6 million Walmart Inc. (NYSE:WMT) shares worth over $837 million, representing 0.78% of the total 13F securities.
On July 7, Oppenheimer analyst Rupesh Parikh removed Walmart Inc. (NYSE:WMT) as a Top Pick, while keeping an Outperform rating on the shares with a price target of $165. The analyst cited inventory conditions and markdown risks, which varied greatly by location. The analyst observed that cost controls and solid grocery share gains offset these headwinds.
Among the hedge funds tracked by Insider Monkey, 60 funds were long Walmart Inc. (NYSE:WMT) at the end of Q1 2022, compared to 63 funds in the earlier quarter. Rajiv Jain’s GQG Partners is the biggest position holder in the company, with 15.4 million shares worth roughly $2.3 billion.
4. Tesla, Inc. (NASDAQ:TSLA)
DE Shaw’s Stake Value: $1,185,119,000
Percentage of DE Shaw’s 13F Portfolio: 1.10%
Number of Hedge Fund Holders: 80
Tesla, Inc. (NASDAQ:TSLA) was incorporated in 2003 and is headquartered in Austin, Texas. The company manufactures and sells electric vehicles and battery storage systems in the United States, China, and internationally. In the first quarter of 2022, DE Shaw held over one million Tesla, Inc. (NASDAQ:TSLA) shares, worth $1.18 billion, representing 1.10% of the total portfolio.
On July 14, Morgan Stanley analyst Adam Jonas reiterated an Overweight rating on Tesla, Inc. (NASDAQ:TSLA) but lowered the price target on the shares to $1,150 from $1,200. He is making “material cuts” to forecasts across his autos and mobility coverage, especially in FY23, to factor in decreasing growth and higher credit headwinds, added the analyst.
Among the hedge funds tracked by Insider Monkey, 80 funds were long Tesla, Inc. (NASDAQ:TSLA) at the end of the first quarter of 2022, compared to 91 funds in the prior quarter. ARK Investment Management is a prominent shareholder of the company, with roughly 1.6 million shares worth $1.71 billion.
Here is what GMO LLC has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla (NASDAQ:TSLA). At its Battery Day last year, Tesla projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
DE Shaw’s Stake Value: $1,340,244,000
Percentage of DE Shaw’s 13F Portfolio: 1.25%
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) has been part of the DE Shaw since the fourth quarter of 2010, with a few breaks over the years. In the first quarter of 2022, the hedge fund boosted its position in the company by 28%, holding 411,124 shares worth $1.34 billion, representing 1.25% of the 13F portfolio.
After Amazon.com, Inc. (NASDAQ:AMZN) posted record Prime Day sales, Morgan Stanley analyst Brian Nowak estimated Prime Day revenue increased 19% year-over-year to $4.6 billion, which was 12% ahead of his earlier expectations. The analyst said an acceleration compared to 8% Prime Day growth in 2021 gave him higher confidence in Q3, and maintained an Overweight rating and a $175 price target on Amazon.com, Inc. (NASDAQ:AMZN) shares on July 16.
Among the hedge funds tracked by Insider Monkey, 271 hedge funds were long Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q1 2022, compared to 279 funds in the last quarter. Skye Global Management is a notable position holder in the company, with 740,500 shares worth $2.4 billion.
Here is what Weitz Investment Management Partners III Opportunity Fund has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter:
“Amazon.com’s (NASDAQ:AMZN) stock was down modestly in the quarter, but opportunistic purchases helped the position contribute positively to the Fund. Our index short positions against ETFs tracking market indexes provided helpful ballast during the first quarter drawdown but were otherwise detractors for the fiscal year. During the quarter, we covered roughly 20% of our S&P 500 short and 50% of our Nasdaq 100 short at progressively lower prices. Among our long equities, we added materially to high-conviction holdings Amazon.com.”
2. Microsoft Corporation (NASDAQ:MSFT)
DE Shaw’s Stake Value: $1,402,277,000
Percentage of DE Shaw’s 13F Portfolio: 1.31%
Number of Hedge Fund Holders: 259
DE Shaw has been a long-term shareholder of Microsoft Corporation (NASDAQ:MSFT). The hedge fund first invested in Microsoft Corporation (NASDAQ:MSFT) back in Q4 2010, and in the first quarter of 2022, DE Shaw owned 4.5 million shares of the company worth $1.40 million, representing 1.31% of the total 13F portfolio.
On July 15, Microsoft Corporation (NASDAQ:MSFT) reported that it has responded to the Federal Trade Commission’s second request in its planned $69 billion acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI). Wall Street analysts have a ‘Buy’ consensus rating on Microsoft Corporation (NASDAQ:MSFT), with an average price target of $345.84.
According to Insider Monkey’s data, 259 hedge funds were bullish on Microsoft Corporation (NASDAQ:MSFT) at the conclusion of March 2022, compared to 262 funds in the last quarter. Fisher Asset Management is the leading shareholder of the company, with 27.8 million shares worth about $8.6 billion.
Here is what Carillon Clarivest Capital Appreciation Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
1. Apple Inc. (NASDAQ:AAPL)
DE Shaw’s Stake Value: $1,558,119,000
Percentage of DE Shaw’s 13F Portfolio: 1.45%
Number of Hedge Fund Holders: 131
Apple Inc. (NASDAQ:AAPL) is an American multinational consumer electronics company. Wall Street analysts have a consensus ‘Buy’ rating on Apple Inc. (NASDAQ:AAPL), with an average price target of $182.20. Apple Inc. (NASDAQ:AAPL) is the biggest holding of DE Shaw, and the hedge fund boosted its position in the company by 34%. DE Shaw owned about 9 million shares worth $1.5 billion, representing 1.45% of the total 13F portfolio.
TF International Securities analyst Ming-Chi Kuo said on July 14 that demand for Apple Inc. (NASDAQ:AAPL)’s iPhone 14 is “continuing to increase” among distributors, retailers, and scalpers. Bank of America recently observed that Apple Inc. (NASDAQ:AAPL) had reduced the trade-in prices for its iPhone, iPad, Apple Watch, Mac earlier this month, which suggests “strong demand”.
Among the hedge funds tracked by Insider Monkey, 131 funds were bullish on Apple Inc. (NASDAQ:AAPL) at the end of March 2022, compared to 134 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the biggest position holder in the company, with approximately 891 million shares worth $155.5 billion.
Here is what Weitz Investment Management Partners III Opportunity Fund has to say about Apple Inc. (NASDAQ:AAPL) in its Q1 2022 investor letter:
“Changes to Apple’s (NASDAQ:AAPL) mobile operating system have temporarily impacted growth of Meta’s advertising business just as the company’s investments in Instagram’s “Reels” feature ramp up ahead of full monetization. (Shareholders can read research analyst Jon Baker’s in-depth discussion of current events impacting Meta and reasons why we’re optimistic about the company in our recent Analyst Corner feature.) CoreCard (formerly Intelligent Systems) struggled early in the fiscal year to hire and train staff to handle growth from new and existing clients. Lately, Apple-related headlines also took a bite out of CoreCard shares, as reports suggest Apple is exploring a transition of its credit card and other financial services to internally built solutions. Such a move would create revenue headwinds for its partners, which CoreCard is widely believed to be. We are monitoring these developments and stress-testing our model accordingly.”
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Disclosure: None. 10 Best Stocks to Buy According to DE Shaw is originally published on Insider Monkey.
