In this article, we discuss the top 10 stock picks of John Overdeck and David Siegel’s Two Sigma Advisors.
Two Sigma Advisors was co-founded by John Overdeck and David Siegel in 2001. The New York-based hedge fund has a portfolio valued at $38.5 billion, with discretionary assets under management of $76 billion as per the 13F filings from Q3 2021. The investment portfolio at Two Sigma Advisors is concentrated in the healthcare, finance, information technology, consumer discretionary, and communications sectors.
John Overdeck completed his Bachelor’s in Mathematics and earned a Master’s in Statistics from Stanford University, and started his career at D.E. Shaw & Co, where he rose through the ranks to eventually become the managing director. He also spent two years working at Amazon.com, Inc. (NASDAQ:AMZN), as vice president and technical assistant to Jeff Bezos. In his time at the company, Overdeck was also incharge of the customer relationship management and customer technology at Amazon.com, Inc. (NASDAQ:AMZN). He left Amazon.com, Inc. (NASDAQ:AMZN) to start his own hedge fund in 2001.
On the other hand, David Siegel is a computer scientist, having graduated from Princeton and holding a PhD in computer science from Massachusetts Institute of Technology, where he specialized in artificial intelligence. At Two Sigma, he uses AI and multiple algorithms to uncover the value in big data, which directs him to make strategic and data-driven decisions regarding investments. Both co-founders are actively involved in multiple philanthropic endeavors.
David Siegel of Two Sigma Advisors
The most notable stocks from Two Sigma Advisors’ Q3 portfolio include Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below.
Our Methodology
We used the investment portfolio of John Overdeck and David Siegel’s Two Sigma Advisors to create a list of the firm’s top 10 stock picks as of Q3 2021.
Top Stocks Picks of John Overdeck and David Siegel’s Two Sigma Advisors
10. Charter Communications, Inc. (NASDAQ:CHTR)
Two Sigma Advisors’ Stake Value: $402,286,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.04%
Number of Hedge Fund Holders: 74
Charter Communications, Inc. (NASDAQ:CHTR), a Connecticut-based telecommunications and media company, offers multiple products and services under its brand, Spectrum, including broadband, cable television, digital telephone, HDTV, internet security, and VoIP phone. Two Sigma Advisors holds a $402.2 million stake in Charter Communications, Inc. (NASDAQ:CHTR), which accounts for 1.04% of the firm’s total Q3 securities.
Chris Hohn’s TCI Fund Management is the leading Charter Communications, Inc. (NASDAQ:CHTR) stakeholder, with 10.35 million shares valued at $7.53 billion. As per Insider Monkey’s records, 74 hedge funds reported owning stakes in Charter Communications, Inc. (NASDAQ:CHTR) at the end of Q3, worth $18.79 billion.
Charter Communications, Inc. (NASDAQ:CHTR) posted Q3 results on October 29. EPS in the period totaled $6.50, beating estimates by $0.71. The $13.15 billion revenue also outperformed estimated revenue by almost $200 million.
After strong Q3 results but weak subscribers, the company’s performance was deemed mixed by Loop Capital analyst Alan Gould, who lowered the price target on Charter Communications, Inc. (NASDAQ:CHTR) to $730 from $815 on November 22, and kept a Hold rating on the shares.
In addition to Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Charter Communications, Inc. (NASDAQ:CHTR) is a notable stock from Two Sigma Advisors’ Q3 portfolio.
Here is what ClearBridge Investments has to say about Charter Communications, Inc. (NASDAQ:CHTR) in its Q1 2021 investor letter:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where Charter trailed after generating robust returns earlier in the recovery.”
9. Meta Platforms, Inc. (NASDAQ:FB)
Two Sigma Advisors’ Stake Value: $403,771,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.04%
Number of Hedge Fund Holders: 248
Mark Zuckerberg’s tech corporation, Meta Platforms, Inc. (NASDAQ:FB), posted its Q3 earnings on October 25. EPS for the quarter was reported as $3.22, exceeding estimates by $0.04.
John Overdeck and David Siegel’s Two Sigma Advisors owns 1.18 million Meta Platforms, Inc. (NASDAQ:FB) shares, worth $403.77 million as of the third quarter, representing 1.04% of the firm’s portfolio. The hedge fund increased its stake in Meta Platforms, Inc. (NASDAQ:FB) by almost 765% as compared to the prior quarter.
The leading Meta Platforms, Inc. (NASDAQ:FB) stakeholder is Ken Fisher’s Fisher Asset Management, holding a $2.5 billion position in the company. A total of 248 funds in the database of hedge funds tracked by Insider Monkey reported owning stakes in Meta Platforms, Inc. (NASDAQ:FB) as of Q3 2021, worth over $38.5 billion. This is compared to 266 funds being bullish on the tech giant in the preceding quarter, with total stakes amounting to $42.3 billion.
Here is what Jefferies Group has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q3 2021 investor letter:
“While still early, FB is in the process of building the platforms that will ultimately support the development of the Metaverse. We look at FB’s position through the lens of 4 current investment initiatives: 1) Oculus VR hardware, 2) Smart glasses, 3) Augmented Reality lenses, and 4) “Horizon Workrooms” Oculus Virtual Reality hardware: Since acquiring Oculus in 2014 ($2B deal), FB has been focused on developing best-in-class hardware and complementary software & services to support VR experiences. The Oculus Quest 2 is FB’s newest VR headset; it retails at $299 and allows users to play games, try fitness classes, play sports, and watch concerts in virtual environments. Most importantly, Quest 2 is linked to users’ Facebook accounts, which means users can seamlessly connect with friends in virtual environments to play games or spend time together. We believe one of FB’s biggest differentiators in VR is its large array of non-gaming experiences that were designed for Oculus. For instance, users can explore extreme terrain in National Geographic Explore VR, join virtual fitness classes, or simulate being a chef. As FB’s hardware continues to improve and becomes less cumbersome, we would expect a flywheel of greater developer and user adoption of VR…” (Click here to see the full text)
8. Apple Inc. (NASDAQ:AAPL)
Two Sigma Advisors’ Stake Value: $442,173,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.14%
Number of Hedge Fund Holders: 120
Apple Inc. (NASDAQ:AAPL), a multinational tech corporation specializing in consumer electronics and computer software, is one of the top stocks from Two Sigma Advisors’ Q3 portfolio. The hedge fund holds 3.12 million Apple Inc. (NASDAQ:AAPL) shares, worth $442.1 million as of September this year, representing 1.14% of the total 13F securities.
UBS analyst David Vogt, on November 24, kept a Buy rating with a $175 price target on Apple Inc. (NASDAQ:AAPL), stating that demand for the company’s products remains strong and supply chain challenges are likely easing up since there are shorter wait times for Apple Inc. (NASDAQ:AAPL) products.
Apple Inc. (NASDAQ:AAPL) posted Q3 earnings on October 28, with EPS for the quarter being $1.24, in line with analysts’ estimates.
Warren Buffett’s Berkshire Hathaway is the leading Apple Inc. (NASDAQ:AAPL) stakeholder, with a $125.5 billion position in the company. Overall, 120 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL) as of Q3 2021, with total stakes amounting to $146 billion as per Insider Monkey’s records.
Here is what ClearBridge Investments has to say about Apple Inc. (NASDAQ:AAPL) in its Q1 2021 investor letter:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
7. Intel Corporation (NASDAQ:INTC)
Two Sigma Advisors’ Stake Value: $444,077,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.15%
Number of Hedge Fund Holders: 66
Intel Corporation (NASDAQ:INTC) reported on October 21 its Q3 results. EPS for the quarter came in at $1.67, topping estimates by $0.61.
Intel Corporation (NASDAQ:INTC) is a multinational tech corporation engaged in manufacturing semiconductors, integrated graphics, microprocessors, and consumer electronics, among other related products.
John Overdeck and David Siegel’s Two Sigma Advisors, as of September this year, owns 8.33 million shares in Intel Corporation (NASDAQ:INTC), worth $444 million, representing 1.15% of the firm’s total investments.
Northland analyst Gus Richard upgraded Intel Corporation (NASDAQ:INTC) to Market Perform from Underperform with a $49 price target on November 1.
One of the leading Intel Corporation (NASDAQ:INTC) stakeholders is Seth Klarman’s Baupost Group, with 19.74 million shares valued at $1.05 billion. Of the 867 hedge funds monitored by Insider Monkey as of Q3 2021, 66 funds were long Intel Corporation (NASDAQ:INTC), down from 78 funds in the preceding quarter.
Here is what Alger Spectra Fund has to say about Intel Corporation (NASDAQ:INTC) in their Q1 2021 investor letter:
“Short exposure to Intel also detracted from performance. Intel designs and manufactures semiconductors for the computing and communications industries. Intel’s proprietary intellectual strength and manufacturing prowess versus the competition is deteriorating, which is causing the company to lose market share and profit opportunities. The short position detracted from portfolio returns as the share price reacted positively to the announcement of Pat Gelsinger being hired as chief executive officer, a stronger-than-anticipated quarterly earnings report driven by unusually robust PC sales that we believe are unsustainable and the unveiling of “Intel Unleashed,” a new long-term program to help improve manufacturing and spur innovation. This program involves opening two fabrication plants in Arizona, which confirms Intel’s commitment to continue as an integrated design manufacturer. Importantly, Intel continues to experience issues with its next generation server chips which are disadvantaging Intel versus the competition.”
6. Eli Lilly and Company (NYSE:LLY)
Two Sigma Advisors’ Stake Value: $467,992,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.21%
Number of Hedge Fund Holders: 62
Eli Lilly and Company (NYSE:LLY) is an American pharmaceutical company engaged in clinical trials and research for creating unique medicines and treatments for Alzheimer’s, cancer, diabetes, immunology, pain management, and COVID-19. Eli Lilly and Company (NYSE:LLY)’s medicines are distributed across 120 countries, with clinical research conducted in more than 55 countries.
John Overdeck and David Siegel, via Two Sigma Advisors, own over 2 million shares in Eli Lilly and Company (NYSE:LLY), worth almost $468 million as of Q3, representing 1.21% of the firm’s stock portfolio. The hedge fund increased its stake dramatically in Eli Lilly and Company (NYSE:LLY) in Q3 by 6720%, when compared to the previous quarter.
At the end of the third quarter of 2021, 62 hedge funds were bullish on Eli Lilly and Company (NYSE:LLY), with Rajiv Jain’s GQG Partners being one of the leading stakeholders, owning a position worth almost $377 million in the company.
Truist analyst Robyn Karnauskas on November 24 raised the price target on Eli Lilly and Company (NYSE:LLY) to $301 from $262 and kept a Buy rating on the shares, as she was positive about the major pharma industry as a whole.
In addition to Meta Platforms, Inc. (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Eli Lilly and Company (NYSE:LLY) is a notable stock from Two Sigma Advisors’ Q3 portfolio.
Here is what Baron Funds has to say about Eli Lilly and Company (NYSE:LLY) in its Q2 2021 investor letter:
“We started a position in Eli Lilly and Company, a large-cap pharmaceutical company. We think Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to high single-digit revenue growth and mid-teens earnings growth over the next five years. Lilly’s pipeline includes donanemab, a potential blockbuster drug which the company is developing for Alzheimer’s disease and which recently received Breakthrough Therapy Designation by the FDA.”
5. Merck & Co., Inc. (NYSE:MRK)
Two Sigma Advisors’ Stake Value: $471,713,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.22%
Number of Hedge Fund Holders: 77
Merck & Co., Inc. (NYSE:MRK), a New Jersey-based multinational pharmaceutical company, is one of the top stock picks from the Q3 portfolio of John Overdeck and David Siegel’s Two Sigma Advisors, with the hedge fund owning 6.28 million Merck & Co., Inc. (NYSE:MRK) shares, worth $471.71 million, representing 1.22% of the total investments for the third quarter.
As of September 2021, 77 hedge funds monitored by Insider Monkey were long Merck & Co., Inc. (NYSE:MRK), with stakes valued at $4.55 billion. This is compared to 79 funds being bullish on the stock in the preceding quarter, with a total stake value of $5.29 billion. Arrowstreet Capital is one of the leading Merck & Co., Inc. (NYSE:MRK) stakeholders from the third quarter, with 6.56 million shares amounting to $493.25 million.
Merck & Co., Inc. (NYSE:MRK), on October 28, posted its Q3 results. EPS in the third quarter equaled $1.75, beating estimates by $0.20. The revenue was up 4.80% from the prior-year quarter at $13.15 billion, outperforming estimates by $833.53 million.
Truist analyst Robyn Karnauskas on November 24 raised the price target on Merck & Co., Inc. (NYSE:MRK) to $95 from $92, and kept a Buy rating on the shares as part of a broader research note on major pharma.
Here is what Artisan Partners has to say about Merck & Co., Inc. (NYSE:MRK) in its Q1 2021 investor letter:
“In Q1, we initiated a position in Merck, a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. We purchased Merck when the stock came under pressure in part on concerns that the newly minted Biden administration could implement regulatory changes and lower drug costs in the pharmaceutical industry. Recent, but anticipated changes to Merck’s management team have also weighed on shares, as have concerns over the company’s heavy reliance on immunotherapy treatment Keytruda. Notably, Merck is not getting much credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions. While Merck is undergoing a period of transition, we think the company’s fundamentals are strong and believe changes to management should be a catalyst for improvement.”
4. Visa Inc. (NYSE:V)
Two Sigma Advisors’ Stake Value: $498,823,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.29%
Number of Hedge Fund Holders: 143
Visa Inc. (NYSE:V), a multinational financial technology company facilitating the electronic transfer of funds, posted its Q3 results on October 26. The EPS came in at $1.62, beating estimates by $0.08. The $6.56 billion revenue gained almost 29% year-over-year, outperforming estimated revenue by $45.89 million.
Two Sigma Advisors holds a $498.8 million position in Visa Inc. (NYSE:V) as of Q3, which accounts for 1.29% of the fund’s total 13F securities. Citing attractive stock valuation, UBS analyst Rayna Kumar assumed coverage of Visa Inc. (NYSE:V) with a Buy rating and a $275 price target on November 17.
Insider Monkey’s Q3 database tracks the movement of 867 elite hedge funds, of which a total of 143 funds were bullish on Visa Inc. (NYSE:V) at the end of September, down from 162 funds holding stakes in the company in the preceding quarter. The leading Visa Inc. (NYSE:V) stakeholder is TCI Fund Management, with a $4.44 billion stake in the company.
Here is what Polen Capital has to say about Visa Inc. (NYSE:V) in its Q3 2021 investor letter:
“Visa Inc. faced pressure as some believe these “old payment infrastructure” businesses will be disrupted by newer fintech companies using blockchain, buy now, pay later (BNPL), or other innovations to provide better/cheaper payment services. However, we believe that some of these technologies have meaningful limitations which could benefit existing payment networks. For example, BNPL transactions are often funded with cards and turn a one-time transaction into many smaller ones with more transaction fees for Visa. Just like with regulation, we continually monitor for competition and technological disruption. As of now, we do not see a significant risk in the foreseeable future to this company.”
3. Johnson & Johnson (NYSE:JNJ)
Two Sigma Advisors’ Stake Value: $527,944,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.36%
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE:JNJ), one of the leading multinational healthcare corporations, is one of the top stock picks of Two Sigma Advisors, with the hedge fund owning 3.26 million Johnson & Johnson (NYSE:JNJ) shares as of September, worth almost $528 million, representing 1.36% of the firm’s Q3 portfolio.
Johnson & Johnson (NYSE:JNJ) is a popular stock among the smart money, with 88 funds owning stakes in the company as of Q3 2021, according to Insider Monkey’s database of elite hedge funds. The leading Johnson & Johnson (NYSE:JNJ) stakeholder is Terry Smith’s Fundsmith LLP, with 7.2 million shares valued at $1.16 billion.
Johnson & Johnson (NYSE:JNJ), on October 19, announced a Q3 EPS of $2.60, beating estimates by $0.25. The $23.34 billion revenue was up 10.70% year-over-year, but missed analysts’ consensus estimates by almost $380 million.
Here is what Distillate Capital has to say about Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
2. Alphabet Inc. (NASDAQ:GOOG)
Two Sigma Advisors’ Stake Value: $603,643,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.56%
Number of Hedge Fund Holders: 156
Alphabet Inc. (NASDAQ:GOOG), recognized for being the parent company of Google, represents 1.56% of the total 13F securities at Two Sigma Advisors as of Q3 2021, with the hedge fund owning 225,786 Alphabet Inc. (NASDAQ:GOOG) shares, worth $603.6 million.
On October 26, the Q3 EPS for Alphabet Inc. (NASDAQ:GOOG) totaled $27.99, topping estimates by $4.75. Revenue for the quarter came in at $65.12 billion, up 41.03% year-over-year.
One of the leading Alphabet Inc. (NASDAQ:GOOG) stakeholders from the third quarter is Harris Associates, holding a position worth over $5 billion in the company. Overall, 156 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG) at the end of Q3, with a total stake value of over $28.5 billion.
Despite tougher comps, Alphabet Inc. (NASDAQ:GOOG) is set to deliver a strong Q4 performance after solid results in the third quarter, according to Jefferies analyst Brent Thill on October 27. He raised the price target on Alphabet Inc. (NASDAQ:GOOG) stock to $3,500 from $3,325 and kept a Buy rating on the shares.
Here is what Oakmark Funds has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2021 investor letter:
“Alphabet, a U.S. communication services provider, was once again a top contributor for the quarter, solidifying its rank as a top contributing stock for the one-year period. The company’s financial results repeatedly exceeded expectations. In particular, its revenue grew faster than expected and its margin trends improved across all segments. In addition, management has executed $24.4 billion of stock repurchases so far in 2021. After further examination, we recently increased our estimate of Alphabet’s intrinsic value based on the company’s better than expected operating leverage and its notable efficiency improvements. As a result, we continue to believe that Alphabet is trading at a significant discount to its intrinsic value.”
1. Microsoft Corporation (NASDAQ:MSFT)
Two Sigma Advisors’ Stake Value: $943,163,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 2.44%
Number of Hedge Fund Holders: 250
Wells Fargo analyst Michael Turrin on November 22 initiated coverage of Microsoft Corporation (NASDAQ:MSFT), a Big Five US tech corporation, with an Overweight rating and a $400 price target. The analyst is positive that despite being one of the largest global tech companies, Microsoft Corporation (NASDAQ:MSFT) has a bright future ahead, with massive potential for growth.
Microsoft Corporation (NASDAQ:MSFT) is the largest holding in the Q3 portfolio of Two Sigma Advisors, with the firm owning 3.34 million Microsoft Corporation (NASDAQ:MSFT) shares, worth $943.1 million, representing 2.44% of the firm’s total investments.
Fisher Asset Management is the largest Microsoft Corporation (NASDAQ:MSFT) stakeholder as of September end, with 25.5 million shares worth over $7 billion. Overall, a total of 250 out of the 867 elite funds monitored by Insider Monkey were bullish on Microsoft Corporation (NASDAQ:MSFT) at the end of Q3, with stakes amounting to $65.8 billion.
Microsoft Corporation (NASDAQ:MSFT) posted its Q3 earnings on October 26. EPS in the period came in at $2.27, topping estimates by $0.19. Revenue for the third quarter totaled $45.32 billion, up almost 22% from the preceding-year quarter, outperforming estimates by $1.33 billion.
Here is what Alger has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2021 investor letter:
“Microsoft Corporation was among the top contributors to performance during the third quarter. Microsoft is a Positive Dynamic Change beneficiary of corporate America’s transformative digitization. Microsoft’s enterprise cloud product, Azure, is rapidly growing and accruing market share. Microsoft reported that Azure grew 51% in the second quarter. This high unit volume growth is a primary driver of the company’s higher share price, but the company’s strong operating execution has enabled margin expansion that has also helped to increase forward earnings estimates. We believe Microsoft’s subscription-based software offerings and cloud computing services have a durable growth profile because they enhance customers’ growth initiatives and help them to diminish costs. Additionally, investors appreciate Microsoft’s strong free cash flow generation and its return of cash to shareholders in the form of dividends and share repurchases.”
You can also take a look at Martin Taylor’s Crake Asset Management Portfolio: Top 10 Stock Picks and 10 Safest Stocks To Buy Now.
Follow Insider Monkey on Twitter
Suggested articles:
- Top 10 Stocks to Invest in According to Alan Fournier’s Pennant Capital
- George Soros Stock Portfolio: Top 10 Large-Cap Stock Picks
- 10 Tech Stocks Chinese Billionaire Chen Tianqiao Loves
Disclosure: None. Top 10 Stock Picks of John Overdeck and David Siegel’s Two Sigma Advisors is originally published on Insider Monkey.
