Billionaire David Shaw’s Quant Models Love These 15 Stocks

Published on November 13, 2023 at 4:19 pm by Ruchi Gupta in Hedge Funds, News

In this article, we discuss billionaire David Shaw’s quant models that love these 15 stocks. You can skip our detailed analysis of David Shaw’s quant models and go directly to read Billionaire David Shaw’s Quant Models Love These 5 Stocks.

Quantitative investing proved to be the real deal as equity markets fell, with the S&P 500 tanking 19% and the bond market dropping 17% in 2022. Hedge funds and investors that leveraged the unique investing strategy shrugged off the market volatility to post healthy positive average returns of 3.9%, outperforming the overall market. Billionaire David Shaw was one of the investors who outperformed while banking on the unique investment strategy that provides diversification and capital appreciation in a challenging market environment.

Quantitative investing is an investment strategy that uses algorithms to analyze massive amounts of data and then make trades based on the analysis. Valuations, liquidity, yields, volume profiles, earnings, revenues and speed of price changes are some of the metrics analyzed to aid in making informed investment decisions.

A graduate of Stanford University, Shaw is one of the hedge fund managers who have perfected the art of quant investing and generated significant returns. Having founded hedge fund D E Shaw in 1988, the investment firm has become one of the biggest and most successful, relying on quantitative methods and proprietary computation technology to discover sound investment opportunities. The hedge fund holds a portfolio worth $97 billion.

The hedge fund conducts extensive qualitative and quantitative analysis to make private equity investments, targeting opportunities in the real estate, technology, and financial services sectors. In addition, it relies on the strategy to invest in wind power and distressed company financing. The billionaire investor also seeks to identify statistically prospective market inefficiencies through hypothesis formulation to invest in the different sectors.

Shaw’s two most significant funds under the D.E Shaw hedge fund, Composite and Oculus, have generated an annualized net return of 12% thanks to the quantitative investment strategy. Oculus has been one of the best-performing funds, never having posted a single year of negative returns. Overall, the hedge fund has outperformed the industry in achieving a return of over 10%, therefore showcasing the success of the quantitative investment strategy.

The hedge fund invests heavily in the technology sector in the two funds, with the services sector accounting for nearly a third of the portfolio. Basic materials, consumer goods and financial services stakes also account for a significant portion of the portfolio. Microsoft, Nvidia, Apple, and Amazon are some of the most significant holdings that Shaw turns to gain exposure in the technology sector.

David E. Shaw of D.E. Shaw

Quants have become the kingmakers in the $3 trillion hedge fund industry, with nearly all the significant hedge funds allocating considerable resources in the space. Increased adoption of artificial intelligence solutions capable of scanning and analyzing vast troves of data is poised to take quantitative investing to a whole new level.

While D E Shaw has been a force to reckon with on quant investing, it’s not the only hedge fund. Millennium, headed by Izzy Englander; Point72 Management, led by Steve Cohen; and World Quant, led by Igor Tulchinsky, are some hedge funds poised to redefine quant investing in the era of increased AI adoption.

According to Marcos Lopez de Prado, a professor at Cornell University, Quantitative investing is poised to move away from models and focus more on reacting rapidly to new data sets. Powerful artificial intelligence and machine learning systems should make it easy for D.E Shaw and other hedge funds to easily digest the reams of data feeds and discover new investment opportunities.

Our Methodology

Quantitative investing is gaining traction as the development of powerful artificial intelligence tools makes it easy to analyze vast reams of data to make informed investment decisions. Investments in new technologies powered by AI have simplified quant investing. Consequently, Shaw and other hedge fund managers can analyze data and use advanced models to identify optimal moments to make profitable investment transactions.

We have analyzed D.E Shaw 13F holdings and settled on Shaw’s top stock picks based on quantitative investing. The stocks are also popular among other hedge funds owing to their solid underlying fundamentals. We have ranked the stocks in ascending order based on their value in Shaw’s hedge fund.

Billionaire David Shaw’s Quant Models Love These Stocks

15. Royal Caribbean Cruises Ltd. (NYSE:RCL)

Number of Hedge Fund Holders: 45

D.E Shaw’s Stake Value: $395.34 Million

Percent of Portfolio: 0.4%

Headquartered in Miami, Florida, Royal Caribbean Cruises Ltd. (NYSE:RCL) is a cruise company that operates cruises under the Royal Caribbean International, Celebrity Cruises, and Silversea Cruises brands. It has been one of the best-performing stocks in D E Shaw’s portfolio, benefiting from the opening of the global economy post-COVID-19.

Royal Caribbean Cruises Ltd. (NYSE:RCL) has benefited from increased consumer spending as more travellers hit the seas and oceans as part of post-pandemic revenge spending on travel. Likewise, the stock is up by more than 60% for the year, generating significant returns for D E Shaw, which increased its stakes in the second quarter.

Among the 910 hedge funds included in Insider Monkey’s database, 45 had invested in Royal Caribbean Cruises Ltd. (NYSE:RCL) during Q2 2023. D E Shaw, represented by D E Shaw, emerged as the largest shareholder with a $395 million stake.

14. SolarEdge Technologies Inc. (NASDAQ:SEDG)

Number of Hedge Fund Holders: 43

D.E Shaw’s Stake Value: $404.65 Million

Percent of Portfolio: 0.41%

Together with its subsidiaries, SolarEdge Technologies Inc. (NASDAQ:SEDG) designs, develops and sells direct current optimized inverter systems for solar photovoltaic installations worldwide. It offers various solar energy solutions, including inverters, power optimizers, and smart energy management systems.

Amid the increased focus on clean energy and a transition from fossil fuels to try and combat carbon emissions, SolarEdge Technologies Inc. (NASDAQ:SEDG) has panned out to be billionaire David Shaw’s top quant stock picks in the segment. D E Shaw hedge fund increased its stake in the company in the second quarter, affirming its belief about its long-term prospects.

SolarEdge Technologies Inc. (NASDAQ:SEDG) had more hedge fund investors in Q2 2023 than in the previous quarter, according to Insider Monkey’s database. Out of the 910 hedge funds they tracked, 43 of them had stakes in the company, up from 42 in Q1 2023. The largest stakeholder in the company in Q2 2023 was D E Shaw, a hedge fund led by David Shaw, known for its quantitative and algorithmic strategies. The firm had a $404.65 million stake in SolarEdge Technologies Inc. (NASDAQ:SEDG), comprising 1.50 million shares.

13. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Hedge Fund Holders: 111

D.E Shaw’s Stake Value: $425.13 Million

Percent of Portfolio: 0.43%

UnitedHealth Group Incorporated (NYSE:UNH) is a top pick by Shaw. The company offers health plans and services for consumers. It also has Optum, which provides care delivery, wellness, and health software.

While UnitedHealth Group Incorporated (NYSE:UNH) is flat for the year, it remains one of billionaire David Shaw’s top quant stock picks as demand for quality treatment and care will always be there. The company has also paid dividends for 20 consecutive years, affirming its ability to return value to shareholders. Its four-year average dividend yield stands at 1.33%.

UnitedHealth Group Incorporated (NYSE:UNH) had a significant presence in the portfolios of many hedge funds that Insider Monkey monitored. Of the 910 hedge funds in their database, 111 had invested in the company by the end of Q2 2023. This was slightly lower than the 116 hedge funds that had a similar view in the previous quarter. The total value of these investments was over $10.1 billion.

12. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 278

D.E Shaw’s Stake Value: $430.68 Million

Percent of Portfolio: 0.43%

Amazon.com, Inc. (NASDAQ:AMZN) is arguably one of Shaw’s top quantitative investing stocks owing to its prospects as an internet retail giant. The company engages in retail sales of consumer products and subscriptions online and in physical stores. It has also expanded its footprint into the cloud computing business, which accounts for a significant share of its revenues.

Amazon.com, Inc. (NASDAQ:AMZN) also manufactures and sells electronic devices, including Fire tablets, Fire TVs, AND Echo speakers. It has also moved to strengthen its revenue avenues by opening its logistics network to third parties as it looks to become a freight giant and unlock a $100 billion revenue opportunity.

Solid underlying fundamentals explain why Amazon.com, Inc. (NASDAQ:AMZN) is up by more than 42% for the year. While D E Shaw reduced stakes in the second quarter, the transaction appears to be a profit-taking play.

Amazon.com, Inc. (NASDAQ:AMZN) had a significant presence in the portfolios of many hedge funds that Insider Monkey tracked. Out of the 910 hedge funds in their database, 278 of them had invested in the company by the end of Q2 2023. The most prominent investor in the company was Harris Associates, a hedge fund led by Natixis Global Asset Management. The firm had 15.62 million shares of Amazon.com, Inc. (NASDAQ:AMZN) valued at $2.04 billion.

11. Automatic Data Processing, Inc. (NASDAQ:ADP)

Number of Hedge Fund Holders: 50

D.E Shaw’s Stake Value: $436.16 Million

Percent of Portfolio: 0.44%

Automatic Data Processing, Inc. (NASDAQ:ADP) offers strategic cloud-based platforms and human resources outsourcing solutions. It also provides HR outsourcing solutions to small and mid-sized businesses.

While Automatic Data Processing, Inc. (NASDAQ:ADP) has only gained 1.3% year to date, it has proved to be an ideal play for passive income. It has consistently paid dividends since 1975, distributed quarterly. Its dividend yield stands at 2.07%.

Insider Monkey’s database for the second quarter of 2023 showed that 50 hedge funds had a positive view of Automatic Data Processing, Inc. (NASDAQ:ADP). This was slightly lower than the 53 hedge funds that had a similar view in the previous quarter. The biggest investor in the company was Fund Smith LLP, a firm that is run by Terry Smith and focuses on high-quality businesses. The firm had 5.5 million shares of Automatic Data Processing, Inc. (NASDAQ:ADP) valued at $1.2 billion.

10. Palantir Technologies Inc. (NASDAQ:PLTR)

Number of Hedge Fund Holders: 39

D.E Shaw’s Stake Value: $454.51 Million

Percent of Portfolio: 0.46%

Palantir Technologies Inc. (NASDAQ:PLTR) is one of Shaw’s top quantitative investing stocks in technology. The company builds and deploys software applications for the intelligence community that assist in counterterrorism investigations and operations. Palantir Technologies Inc. (NASDAQ:PLTR) also offers platforms that allow users to identify patterns hidden deep within datasets.

Palantir Technologies Inc. (NASDAQ:PLTR) has more than doubled in value after a 150% plus rally benefiting from the artificial intelligence-fuelled rally. The rally has come on the company emerging as an ideal data mining and AI specialist as it continues to develop next-generation algorithms. Its improving financial reels have also strengthened its sentiments.

Palantir Technologies Inc. (NASDAQ:PLTR) had more hedge fund investors in Q2 2023 than in the previous quarter, according to Insider Monkey’s database. Of the 910 hedge funds they tracked, 39 had stakes in the company, up from 31 in Q1 2023. This shows that Palantir Technologies Inc. (NASDAQ: PLTR) is a growing and attractive stock among hedge fund investors. The largest stakeholder in the company was D E Shaw. The firm owned 29.65 million shares of the company, which were valued at $454.51 million.

9. Uber Technologies, Inc. (NYSE:UBER)

Number of Hedge Fund Holders: 144

D.E Shaw’s Stake Value: $491.09 Million

Percent of Portfolio: 0.5%

Uber Technologies, Inc. (NYSE:UBER) has emerged as one of billionaire David Shaw’s top quant stock picks after turning the page and generating its first profit. The technology company which develops and operates proprietary applications for ride-sharing, delivery, and freight services has seen its fortunes improve with the opening of the global economy.

Uber Technologies, Inc. (NYSE:UBER) has started generating solid profits and cash flow as more people use it for transportation and food delivery services. Likewise, the stock has rallied by over 80% year to date, affirming why it is one of Shaw’s top quantitative investing stocks.

Uber Technologies, Inc. (NYSE:UBER) has attracted the interest of many hedge funds Insider Monkey monitored. Out of the 910 hedge funds in their database, 144 of them had invested in the company by the end of Q2 2023. The largest investor in Uber Technologies, Inc. (NYSE:UBER) was Altimeter Capital Management, a hedge fund led by Brad Gerstner, which focuses on the technology and internet sectors. The firm had a $575 million stake in Uber Technologies, Inc. (NYSE:UBER).

8. T-Mobile US, Inc. (NASDAQ:TMUS)

Number of Hedge Fund Holders: 86

D.E Shaw’s Stake Value: $511.20 Million

Percent of Portfolio: 0.52%

T-Mobile US, Inc. (NASDAQ:TMUS) is a telecommunication company that offers mobile communication services. It provides voice messaging and data services to customers in post-paid prepaid wholesale and other services. It also offers wireless services to customers in post-paid, prepaid wholesale and other services.

D.E Shaw started ramping up stakes in T-Mobile US, Inc. (NASDAQ:TMUS) in the third quarter of 2021 and has since been buying and selling, taking advantage of swings in the market. The hedge fund added bolstered stakes in the second quarter to over $500M

By the end of the second quarter of 2023, T-Mobile US, Inc. (NASDAQ:TMUS) had 86 hedge funds in their database that owned stakes in it, which was slightly lower than the 89 hedge funds that invested in it in the previous quarter. The largest investor in the company was Citadel Investment Group, a hedge fund led by Ken Griffin. The firm had stakes worth $847.96 million in T-Mobile US, Inc. (NASDAQ:TMUS).

7. Booking Holdings Inc. (NASDAQ:BKNG)

Number of Hedge Fund Holders: 78

D.E Shaw’s Stake Value: $752.77 Million

Percent of Portfolio: 0.76%

Booking Holdings Inc. (NASDAQ:BKNG) provides travel, restaurant online reservations and related services. It also offers online accommodation reservations, rental cars, and vacation packages. While Booking Holdings Inc. (NASDAQ:BKNG) was heavily battered at the height of the pandemic, it has bounced back with the opening of international borders and travellers looking to recover lost travel time.

Booking Holdings Inc. (NASDAQ:BKNG) remains one billionaire David Shaw’s top quant stock picks as the company continues to benefit from healthy travel demand amid solid consumer spending power and the stock is already up by over 38% year to date.

Booking Holdings Inc. (NASDAQ:BKNG) had attracted the interest of many hedge funds Insider Monkey monitored. Out of the 910 hedge funds in their database 78 had invested in the company by the end of Q2 2023. The largest investor was Guard Cap Asset Management, a hedge fund led by Guardian Capital, which had 314,655 shares of Booking Holdings Inc. (NASDAQ:BKNG) worth $849.67 million.

6. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 81

D.E Shaw’s Stake Value: $861.96 Million

Percent of Portfolio: 0.88%

Based in Bentonville, Arkansas, Walmart Inc. (NYSE:WMT) engages its retail and wholesale business worldwide. Through supercentres, supermarkets, hypermarkets, and warehouse clubs, it offers groceries and consumables. It is also involved in the operation of gasoline stations while also operating a digital payment platform.

Despite the high inflation, Walmart Inc. (NYSE:WMT) has remained resilient, posting solid financial results from strong consumer spending. Consequently, the stock has gained 12% year to date.

At the end of the second quarter of 2023, Walmart Inc. (NYSE:WMT) had a significant presence in the portfolios of many hedge funds Insider Monkey tracked. The company, which is a global retail giant and a leader in e-commerce and innovation, had 81 hedge funds in their database that held stakes in it. The total value of these investments was over $5.4 billion.

Click to continue reading and see Billionaire David Shaw’s Quant Models Love These 5 Stocks.

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Published on May 1, 2024 at by Inan Dogan, PhD

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Published on May 2, 2024 at by Insider Monkey Staff

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