Jim Simons‘ quant fund Renaissance Technologies recently filed its 13F form with the SEC. Founded in 1982 RenTec is one-of-a-kind hedge fund. Its Medallion fund employs high frequency trading and exploits inefficiencies in the stock market. As far as Medallion’s performance is concerned, the fund delivered an average return of 71.8% before fees, from 1994 through mid-2014. The fund’s worst year in the last 15 years or so was a 21% gain after fees. Rentec was recently in the news, as it managed to get a tax break for its employees who could invest in the Medallion fund in a tax-advantaged, fee-free manner in the form of a retirement plan. The fund currently has about $65 billion in regulatory assets under management and the market value of its public equity portfolio stood at $43.89 billion at the end of June. The fund made a total of 479 new purchases during the June quarter, chief among them being huge stakes in Microsoft Corporation (NASDAQ:MSFT), Alibaba Group Holding Ltd (NYSE:BABA), and QUALCOMM, Inc. (NASDAQ:QCOM).
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 118% over the last 35 months and outperformed the S&P 500 Index by 60 percentage points (see the details here).
During the second quarter, RenTec acquired some 6.94 million shares of Microsoft Corporation (NASDAQ:MSFT), with the position valued at $306.21 million as of June 30. The $373.75 billion software giant has been shrugging off its past sluggishness under its CEO Satya Nadella, who’s been now been on the job for well over a year. Some of the positive trends for Microsoft Corporation (NASDAQ:MSFT) include the growth of its commercial cloud revenue for six straight quarters, the launch of Windows 10, and various cost-cutting measures implemented under Nadella. So far this year the software giant’s stock price has appreciated by 1.18%. Stifel Nicolaus recently upgraded Microsoft, which is one of the biggest software companies in the World, to ‘Buy’ from ‘Hold’, setting a price target of $55 on the stock, upside potential of 17%. Jeffrey Ubben‘s ValueAct Capital is the largest stockholder of Microsoft Corporation (NASDAQ:MSFT) within our database, holding some 75.27 million shares valued at $3.06 billion.
A total of 2.16 million shares of Alibaba Group Holding Ltd (NYSE:BABA) valued at $177.39 million were acquired by RenTec during the second quarter. This year has been tough for the $188.71 billion e-commerce juggernaut as its stock price has slid by more than 28% on a year-to-date basis. Alibaba Group Holding Ltd (NYSE:BABA) has failed to deliver on The Street’s expectations for its fiscal first quarter, which ended in June, as it reported revenues of $3.27 billion, which were $120 million lighter than estimates and which marked a 28% slide on a year-over-year basis. The top line growth was the slowest in three years. The EPS of $0.59, however, was $0.01 ahead of estimates. Among the funds that we trac, Viking Global, which is led by Andreas Halvorsen, is a prominent shareholder of Alibaba Group Holding Ltd (NYSE:BABA), though it reduced its holding in the company by 13% during the June quarter to 6.04 million shares valued at $497.05 million.
RenTec initiated a position in QUALCOMM, Inc. (NASDAQ:QCOM) of some 939,300 shares valued at $58.83 million, and representing 0.13% of its portfolio. So far this year the stock of the $97.46 billion semiconductor company providing wireless telecommunications and services has depreciated by nearly 17%. In comparison, the Communication Equipment industry has posted average gains of 1.38% during the same period. That might be about to change considering Morgan Stanley’s recent upgrade of QUALCOMM, Inc. (NASDAQ:QCOM) to ‘Overweight’ from ‘Equal-Weight’ with a price target of $75 providing about 23% upside to the current trading levels. Analysts are very positive about the company’s new product in the graphics arena, Snapdragon 820, which they believe is ahead of smartphone graphics silicon currently powering Samsung and Apple devices. Barry Rosenstein‘s JANA Partners has QUALCOMM, Inc. (NASDAQ:QCOM) at the top of its equity portfolio after adding some 281,700 shaers to the holding in the second quarter, giving the fund 28.82 million shares of the company valued at $1.80 billion. Rosenstein is also actively seeking change at the company through his large activist position.