5 Stocks That Caught the Attention of Cliff Asness’ Quant Fund in Q2

Famed investor Clifford S. Asness runs AQR Capital Management LLC, a global investment firm with over $55 billion in equity holdings at the end of June. By employing a wide array of investment strategies such as momentum, risk-parity, convertible arbitrage, and event-driven strategies, Mr. Asness’ firm has managed to beat the market in terms of risk adjusted returns through both good times and bad.

In this article, we’ll take a closer look at five stocks that Mr. Asness’ fund increased its position in during the second quarter, according to its latest 13F filing. Those stocks are Procter & Gamble Co (NYSE:PG), Tyson Foods, Inc. (NYSE:TSN), FirstEnergy Corp. (NYSE:FE), Exxon Mobil Corporation (NYSE:XOM), and HP Inc (NYSE:HPQ).

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#5 HP Inc (NYSE:HPQ)

– Shares Held by AQR (as of June 30): 18.8 million
– Total Value of Holding (as of June 30): $235.96 million

AQR increased its stake in HP Inc (NYSE:HPQ) by 30% during the second quarter, to 18.8 million shares, as HP’s stock remains attractive in terms of forward P/E (at just 9) and dividend yield (at 3.5%). On the other hand, the other smart money funds in our database have mostly kept their positions the same. 40 of those funds were long HP Inc (NYSE:HPQ) at the end of the second quarter, unchanged from the end of March. While investors may be hesitant due to the PC’s secular decline, the coming VR wave could spur sales of high-end PC’s in the coming years. NVIDIA Corporation (NASDAQ:NVDA) expects that there will be 100 million VR-capable machines (which will primarily be PC’s and laptops) by 2020, from just 13 million today.

#4 Exxon Mobil Corporation (NYSE:XOM)

– Shares Held by AQR (as of June 30): 2.75 million
– Total Value of Holding (as of June 30): $258.14 million

Mr. Asness’ fund increased its stake in Exxon Mobil Corporation (NYSE:XOM) by 52% in the second quarter, to more than 2.75 million shares as of the end of June. Part of the reason for the increased stake could be the improving fundamentals in the crude sector. Non-OPEC production is declining and demand remains robust. The major oil producers, including the U.S., could also potentially strike a freeze deal that will alleviate any inventory overflow concerns for the quarters ahead. If crude prices rise, Exxon Mobil’s already-safe quarterly dividend of $0.75 per share (which equates to a dividend yield of 3.44%) will become more attractive.

Three more stocks favored in the second quarter by Mr. Asness’ quant fund are scrutinized on the next page.

#3 FirstEnergy Corp. (NYSE:FE)

– Shares Held by AQR (as of June 30): 9.38 million
– Total Value of Holding (as of June 30): $327.59 million

FirstEnergy Corp. (NYSE:FE) was a favorite of AQR in the second quarter, as the fund raised its holding in the company by 138% during the March 31-to-June 30 period. Analysts at Morgan Stanley upgraded FirstEnergy to ‘Overweight’ from ‘Equal Weight’ and raised their price target on it to $41 per share from $38 in early-August, citing the stock’s relative under-performance year-to-date and the potential for strategic activity in terms of the company’s generation business. Shares are also attractive due to the company’s $1.44 per share annual dividend, good for a 4.46% dividend yield.

#2 Tyson Foods, Inc. (NYSE:TSN)

– Shares Held by AQR (as of June 30): 6.89 million
– Total Value of Holding (as of June 30): $460.49 million

AQR raised its holding in Tyson Foods, Inc. (NYSE:TSN) by 65% during the three month-period ended June 30, as U.S. consumer spending remains strong due to the humming economy. Tyson Foods reported excellent earnings for its third quarter of fiscal 2016, with earnings per share of $1.21 on revenue of $9.4 billion, besting estimates of $1.06 per share and $9.33 billion, respectively. Full-year EPS guidance was also strong, with Tyson Foods’ management guiding for adjusted EPS of $4.40-to-$4.50. David Cohen and Harold Levy‘s Iridian Asset Management owned almost 7.2 million shares of Tyson Foods at the end of June.

#1 Procter & Gamble Co (NYSE:PG)

– Shares Held by AQR (as of June 30): 6.07 million
– Total Value of Holding (as of June 30): $513.86 million

Procter and Gamble has maintained very stable earnings over the years, including $10.51 billion in net income during its 2016 fiscal year, which could be why AQR likes the company. Given its stable earnings and 59-straight years of dividend raises, it’s not surprising that 56 bullish funds in our system held shares of the company at the end of June. Count AQR as one of the bulls, as the fund raised its position in Procter & Gamble Co (NYSE:PG) by 28% during the second quarter, to over 6.00 million shares, just in time to catch a big part of Procter and Gamble’s 13% year-to-date rally.

Disclosure: None