Billionaire Israel Englander of Millennium Management is taking the unprecedented step of launching a joint venture to keep the largest of his 170 trading teams in the fold. By the end of 2015 Izzy and Igor Tulchinsky, who manages a 400-person team dubbed WorldQuant LLC, will launch the venture. The new venture will allow Tulchinsky, who currently manages about $4 billion of Izzy’s money, to collect outside money in addition to broadening his quantitative trading strategies. His team will continue to manage money for Millennium Management alongside the new, as-yet-unnamed venture. The move is the first such move by Izzy and allows him to retain one of his top teams, while allowing Tulchinsky to achieve more autonomy and money-making capability.
Massive hedge fund like Millennium Management spend immeasureable time and resources conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, while Millennium’s returns have outperformed the market since inception, the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. A portfolio of the 15 most popular small-cap stocks among funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012 in backtesting. The impressive results of this strategy got even better in forward testing after the strategy went live at the end of August 2012. A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 137% and beaten the market by more than 82 percentage points since then, and by 4.6 percentage points in the first quarter of this year (see the details).
Let’s take a look now at Millennium’s top picks heading into 2015 and their performance thus far, beginning with its top long position in NextEra Energy Inc (NYSE:NEE),which reports its latest financial results tomorrow. Analysts are projecting earnings per share (EPS) of $1.28 for NextEra Energy Inc (NYSE:NEE), which recently acquired Hawaiian Electric, the largest utility company in Hawaii, serving 95% of the island state’s residents with power. NextEra Energy Inc (NYSE:NEE) dipped slightly, by 1.39% in Q1, following a big 2014 when it gained over 25%. Millennium’s 3.03 million shares were valued at $322.41 million, the firm’s largest position, though the stake represented just 0.68% of its portfolio, given its massive size. Another billionaire, Daniel S. Och, was the only investor in our database with a larger position in NextEra than Millennium, was only the first of many energy bets in Millennium’s top ten.
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) was Izzy’s top healthcare pick, and it was a solid one with shares returning just under 9% during the first quarter. Izzy’s position of 5.29 million shares was valued at $304.42 million entering 2015. Izzy was just one of several billionaires who were crazy about Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) at the end of 2014, a list which also included George Soros. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)will announce its own earnings one day after NextEra, on Thursday, with Wall Street anticipating EPS of $1.25. Teva has beaten estimates in five of its last six earnings reports.