We recently published a list of Renaissance Technologies Portfolio: 10 Best Stocks To Buy. In this article, we are going to take a look at where Meta Platforms, Inc. (NASDAQ:META) stands against the other best stocks to buy which are part of the Renaissance Technologies portfolio.
Renaissance Technologies is an American hedge fund that specializes in systematic trading and employs statistical and mathematical tools to drive its investment programs. As of March 2024, the fund managed discretionary assets over $89 billion, according to their Form ADV. It was founded in 1982 by Jim Simons, a mathematician who worked as a code breaker for the US National Security Agency during the Cold War.
Simons is considered among the pioneers of quantitative investing. At the time of his death in May 2024, he had an estimated net worth of $31.4 billion, making him the 51st richest person in the world. His use of mathematical models and algorithms to drive long-term investment returns earned him a legacy that rivaled the likes of Warren Buffet and George Soros.
His signature Medallion generated average annual returns of 66% for three decades between 1988 and 2018, earning more than $100 billion in profits during the period. The fund started with charging a 5% fixed fee and also had performance charges of 20%, which were later increased to 44% in 2002. Despite those cuts, Medallion earned annual returns of around 39% on average.
The fund was closed to outside investors in 1993 and has since then only been available to past and current employees, and their families. Renaissance Technologies does have other funds that are open to outsiders, such as Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA).
Simons stepped down from active management of Renaissance Technologies in 2010 and resigned as its executive chairman in 2021. Peter Brown is the current CEO of the capital market company. He graduated with a B.A. in Mathematics from Harvard University and also holds a Ph.D. in Computer Science from Carnegie Mellon University. Brown’s father, Henry B.R. Brown, invented the Reserve Primary Fund in 1970, which was the first money market fund to be set up.
Brown is committed to the use of mathematical models to discover and unlock the value of stocks in the market. However, Renaissance hedge funds that are open to outside investors have been shrinking for some while. According to a recent report in the Financial Times, RIEF currently manages around $19.6 billion, significantly down from $35.8 billion in 2020. The collapse of RIDA and Renaissance Institutional Diversified Global Equities (RIDGE) has been even worse. The two funds were merged this year. In 2019, RIDA managed about $15 billion, while RIDGE had a portfolio of $14.3 billion. Today, the combined fund manages only $3.6 billion.
As a result, Renaissance’s external assets under management have declined from $65.1 billion in 2019 to $23.2 billion today. Much of the exodus happened following the coronavirus pandemic and was driven by a shock performance by the hedge fund as the stock market rattled. In contrast, the Medallion Fund, which is limited to past and current employees, gained 76% in 2020 despite Covid-19. This is because the fund indulges in high-frequency trading with a lower capacity, a strategy that is strikingly different from those applied for external funds.
However, the performance of external funds is beginning to stabilize after the lows over the last few years. RIEF is up 19.8% this year, while RIDA has also gained 17.4%. Though financial experts believe the improvement is owed more to the fund’s performance, rather than flows.
Methodology
We scanned Renaissance Technologies’ 13F portfolio, as of June 30, 2024 and picked the top 10 stocks according to their stake value. The figures were sourced from Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of developers working in unison to create the company’s messaging application.
Meta Platforms, Inc. (NASDAQ:META)
Stake Value as of Q2 2024: $527,481,878
Meta Platforms, Inc. (NASDAQ:META) is one of the largest technology companies in the world. Headquartered in Menlo Park, California, it owns numerous popular social media platforms such as Facebook, WhatsApp, Instagram, and Threads. According to CEO Mark Zuckerberg, an estimated 3.2 billion people use at least one of Meta’s apps every day.
The company reported a stellar quarter in Q2 2024, with revenue soaring 22% to a total $39.1 billion, fueled by a strong show again by Meta’s Family of Apps which contributed $38.7 billion of the share. Most of this was advertisement revenue, led by online commercial vertical and gaming. Net income for the quarter was reported at $13.5 billion, which resulted in an EPS of $5.16, smashing analysts’ expectations of $4.72 per share.
The ability to generate robust advertisement revenue despite the global economic slowdown has been the catalyst behind Meta Platforms, Inc. (NASDAQ:META)’s growth. This has boosted investor confidence and resulted in a YTD share price appreciation of over 64%. Another factor driving the positive wave around the stock has been the heavy capital investment in artificial intelligence projects by the company, which has resulted in the successful launch of new products such as Meta Quest 3 and Ray-Ban Meta Glasses, whose demand has outpaced Meta’s expectations.
Meta Platforms, Inc. (NASDAQ:META) is one of the best stocks to buy now, with 219 hedge funds having investments in the company, according to Insider Monkey’s database for Q2 2024. This includes Renaissance Technologies which had a stake volume of over $527 million, as of June 30, 2024, accounting for 0.89% of its portfolio. There is also a consensus among Street analysts on the stock’s Strong Buy rating.
While the company looks set for long-term growth, there may be some headwinds on the horizon that could impact the stock’s short-term performance. One of them is the slowdown in revenue anticipated for Q3. Last year, much of the revenue was driven by a surge in Reels impressions and an increasing number of China-based advertisers on its social media platforms. That is unlikely to happen this year. Meta Platforms, Inc. (NASDAQ:META) also plans on spending a staggering $40 billion on further capital expenditure this year, which could adversely affect its short-term financials, and subsequently, its share price.
Overall, META ranks 7th among the Renaissance Technologies Portfolio: 10 Best Stocks To Buy. While we acknowledge the potential of META as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.