Joe DiMenna is the managing director of Zweig-DiMenna Associates, which he co-founded between in 1984 with Martin Zweig. He currently serves as the Chief Investment Officer of the firm while Zweig serves as the Chief Portfolio Officer. Zweig-DeMenna Associates is considered to be one of the longest-lived hedge funds in the world, having been in existence for around 35 years, and having been established at a time when hedge funds weren’t as popular as they are now.
The story of Joe DiMenna is quite inspiring, as he initially served as a research assistant for Martin Zweig while he was still in college. Zweig was considered ahead of his time as he focused on in depth quantitative and economic research based on hard data, and was even acknowledged as the creator of several important market indicators such as the put / call ratio. DiMenna approached Zweig to be his research assistant and with time, convinced Zweig to begin a hedge fund in a period when there were less than 10 such funds with just a few hundred million in assets under management. That compares to today where there are thousands of such funds with some funds managing more money than the GDP of many countries.
Photo by Chris Liverani on Unsplash
Zweig-DiMenna Associates currently boasts a portfolio worth more than half a billion dollars, with the total value being around $526.4 million. The fund is dominated by the basic materials industry, while the services and technology sector makes up a large chunk of the portfolio too. Despite being run by legends in the field, the fund hasn’t really performed that brilliantly over the past 15 years, especially in 2009, when the fund lost 3.5%, even as all other funds were recouping their 2008 losses. Zweig-DiMenna Associates has done better than many funds in the latest quarter of 2022, however, despite the market volatility.
Methodology
We used Zweig-DiMenna Associates’ Q1 portfolio according to 13F filings and picked the top 10 stocks for this analysis. We also included the number of hedge fund holders in our database that also held shares in the same stock.
Top 10 Stock Picks of Zweig-DiMenna Associates
10. Teck Resources Limited (NYSE:TECK)
Zweig-DiMenna Associates’ Stake Value: $12.340 million
Number of Hedge Fund Holders: 56
Teck Resources Limited (NYSE:TECK) is one of Canada’s largest mining companies, and is engaged in the mining of coal, zinc, copper, lead, silver and gold, among other minerals.
According to Deutsche Bank, the target share price of Teck Resources Limited is $45, which is a price cut from $47 initially. However, it is worth noting that Teck Resources Limited has seen its share price rise by 12% year to date, which in the current economic climate, is quite newsworthy on its own. If inflation continues, some commodity stocks could benefit from higher prices.
Alongside Amazon.com, Inc. (NASDAQ:AMZN), Occidental Petroleum Corporation (NYSE:OXY), and Marathon Oil Corporation (NYSE:MRO), Teck Resources Limited is one of Zweig-DiMenna Associates’ top stocks.
9. Palo Alto Networks, Inc. (NASDAQ:PANW)
Zweig-DiMenna Associates’ Stake Value: $12.684 million
Number of Hedge Fund Holders: 87
Palo Alto Networks, Inc. (NASDAQ:PANW) is a cybersecurity company which is headquartered in California. Palo Alto Networks, Inc.. The average price expectation of Palo Alto Networks, Inc. from various analysts is $654.79, while its current price is below $550.
“The portfolio also saw solid performance from cybersecurity names Palo Alto Networks (NYSE:PANW) which is gaining prominence as the risk of global cyberattacks increases as part of the Russian offensive. On an individual stock basis, leading contributors to absolute returns in the first quarter included positions in Palo Alto Networks.”
8. Freeport-McMoRan Inc. (NYSE:FCX)
Zweig-DiMenna Associates’ Stake Value: $12.684 million
Number of Hedge Fund Holders: 87
Freeport-McMoRan Inc. (NYSE:FCX) is another mining company which makes the list of the top 10 stock picks of Zweig-DiMenna Associates. Freeport-McMoRan Inc. has seen its share price spiral, losing close to 32% YTD as copper prices have declined from the beginning of the year.
In its Q1 2022 investor letter, Carillon Town advisors mentioned Freeport-McMoRan Inc.. Here is what they said:
“Supply chains eased for some goods, but remained challenged for many commodities including energy, agriculture, and fertilizer due to war and general scarcity, and also in many consumer products as semiconductors remained in short supply. Copper and gold producer Freeport- McMoRan (NYSE:FCX) rose as copper prices remained strong due to supply shortages and growing use in renewable energy systems and electric vehicles.”
7. Ovintiv Inc. (NYSE:OVV)
Zweig-DiMenna Associates’ Stake Value: $13.151 million
Number of Hedge Fund Holders: 44
The unique sounding Ovintiv Inc. (NYSE:OVV) is a new addition to the top 10 stock picks of Zweig-DiMenna Associates, making up nearly 2.5% of the entire portfolio.
In May, Ovintiv Inc. lifted its dividend by 25%, and the company has sold some assets in Uinta and Bakken for approximately $250 million.
Miller Value Partners mentioned Ovintiv Inc. in its Q4 2021 investor letter. Here is what is said:
“The outlook for high multiple favorites depends to a great degree on interest rates. Warren Buffett likened interest rates to the force of gravity for asset prices. At current low levels, high valuations on long-duration assets can be justified. If interest rates move up, the adjustment will be painful. Market action early in the new year, with the swift moves up in interest rates and down in the Nasdaq, offers a taste of the medicine.
We underwrite all our names to have sufficient upside even if risk-free rates move up to 3% (a scenario, not a forecast!). As we evaluate the opportunity set, we find more attractive prospects in the classic value names. We often hear that people think value investing is dead, which only strengthens our conviction. Our gross exposure to classic value has risen from 44% a year ago to 62% currently.”
6. Texas Instruments Incorporated (NASDAQ:TXN)
Zweig-DiMenna Associates’ Stake Value: $13.982 million
Number of Hedge Fund Holders: 46
Texas Instruments Incorporated (NASDAQ:TXN) is considered to be among the top 10 semiconductor companies in the world.
In its Q4 2021 investor letter, Davis Funds mentioned Texas Instruments Incorporated. Here is what it said:
“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel, Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”
Much like Texas Instruments Incorporated, Amazon.com, Inc., Occidental Petroleum Corporation, and Marathon Oil Corporation are also among Zweig-DiMenna Associates’ top stocks.
5. Southwestern Energy Company (NYSE:SWN)
Zweig-DiMenna Associates’ Stake Value: $14.261 million
Number of Hedge Fund Holders: 35
With a 21% increase in Zweig-DiMenna Associates’ portfolio, Southwestern Energy Company (NYSE:SWN) is one of the top 10 stock picks of Zweig-DiMenna Associates. Southwestern Energy Company is a natural gas exploration and production company, and has more than 21 trillion cubic feet of natural gas reserves. The company recorded nearly $6.7 billion in revenue in 2021.
Greenlight Capital published its Q1 2022 investor letter, where it mentioned Southwestern Energy Company. Here is what is said:
“SWN is the second largest producer of natural gas in the U.S. The company is well-situated to satisfy growing domestic and export demand. Over the short, medium and long term, Europe now intends to reduce its reliance on Russian energy and increase its use of U.S. LNG. Based on its 2021 year-end reserves – which assumed a $3.60/MMBtu long-term natural gas price – SWN has a PV-104 value of $13.83 per share. By the end of the first quarter, the U.S. natural gas 5-year forward curve averaged $4.28/MMBtu, while international seaborne LNG was close to $20/MMBtu. Over the intermediate term, with the benefit of substantial global investment in infrastructure, we expect prices for U.S. and international natural gas to converge. We acquired our shares at an average price of $6.58. SWN shares ended the quarter at $7.17.”
4. Amazon.com, Inc. (NASDAQ:AMZN)
Zweig-DiMenna Associates’ Stake Value: $15.798 million
Number of Hedge Fund Holders: 271
There is little need to introduce one of the biggest companies in the world, in Amazon.com, Inc.. Amazon.com, Inc. is rarely out of the news for one thing or the other, though it is often in the news because of its working conditions for employees, or lack thereof.
Just like most tech stocks in 2022, Amazon.com, Inc. has seen its share price plummet YTD, dropping more than 23%. If Amazon profits continue to grow, however, the stock could increase.
Amazon.com, Inc. was mentioned by Oakmark Funds in its Q2 2022 investor letter. Here is what it said:
“Amazon (NASDAQ:AMZN) is the leading e-commerce and cloud-computing provider in the world. Two-thirds of U.S. households are Amazon Prime subscribers, and over half of all online product searches now start on Amazon. We believe the company’s strong customer loyalty and massive infrastructure are significant barriers to entry in a growing e-commerce market. Separately, Amazon Web Services (“AWS”) controls nearly half of the market in cloud computing. We believe AWS has become utility-like in nature and scale and we expect healthy growth moving forward as IT workloads continue moving to the cloud. More recently, concerns about rising investment spending have weighed on the stock-as they have in times past-providing us another opportunity to purchase shares at a very attractive price. At our purchase price and valuing AWS like its peers, an investor isn’t paying much of anything for the immensely valuable e-commerce franchise.”
3. Cenovus Energy Inc. (NYSE:CVE)
Zweig-DiMenna Associates’ Stake Value: $17.116 million
Number of Hedge Fund Holders: 44
Another Canadian company that makes the list of top 10 stock picks of Zweig-DiMenna Associates in Cenovus Energy Inc. (NYSE:CVE). Cenovus Energy Inc. acquired Husky Energy in 2021 for C$3.9 billion.
Cenovus Energy Inc. has performed brilliantly in 2022, increasing by close to 50% in the year as energy prices have increased.
In its Q4 2021 investor letter, L1 Capital mentioned Cenovus Energy Inc.. Here is what it said:
“Detailed, bottom-up stock research remains the investment team’s primary focus and the core driver of portfolio performance. 2021 once again demonstrated the team’s ability to identify ‘winners’ through extensive company and industry research across a diverse range of sectors. Key contributors included Cenovus Energy, (due to) recovering oil price leading to improved investor sentiment, consensus earnings upgrades and strong free cashflow generation.”
2. Occidental Petroleum Corporation (NYSE:OXY)
Zweig-DiMenna Associates’ Stake Value: $20.081 million
Number of Hedge Fund Holders: 67
Occidental Petroleum Corporation is one of the many energy companies which has performed brilliantly in 2022, and is the best performing stock in Zweig-DiMenna’s portfolio, having gained 135% in 2022 YTD.
Occidental Petroleum Corporation has recently seen Warren Buffet’s Berkshire Hathaway increase its stake to 20% of the total outstanding shares of Occidental Petroleum Corporation.
In its Q3 2021 investor letter, Smead Capital Management mentioned Occidental Petroleum Corporation. Here is what it said:
“Oil stocks dominated our winners for the quarter. We showed that we have unlimited ability to tempt fate by buying into Occidental Petroleum (OXY) this year after it was our biggest loser of 2020. It gained 16.64% during the third quarter.”
1. Marathon Oil Corporation (NYSE:MRO)
Zweig-DiMenna Associates’ Stake Value: $21.563 million
Number of Hedge Fund Holders: 43
Topping the list of top 10 stock picks of Zweig-DiMenna Associates is Marathon Oil Corporation, which makes up 4% of the total portfolio, after an increase in holding by 84% in the first quarter. Marathon Oil Corporation is an exploration and production company which has benefited from higher oil prices.
Carillon Tower Advisers recently published its Q1 2022 investor letter, where Marathon Oil Corporation was mentioned. Here is what it said:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Marathon Oil (NYSE:MRO) increased its quarterly dividend and executed an impressive share buyback that blew by the target it originally announced.”
See also 15 Best Security Stocks to Buy Now and 10 Best Vanguard Stocks to Buy Now
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This article is originally published at Insider Monkey.
