Top 10 Stocks To Buy Now According To Secretive Billionaire Quant Hedge Fund Manager

Published December 19, 2020 at 7:00 pm EST Updated August 19, 2026 at 11:55 am EDT

In this article, we will review the top 10 stocks to buy now according to secretive billionaire quant hedge fund manager.

Secretive billionaire quant hedge fund manager John Overdeck and David Siegel back in 2001 founded quantitative trading powerhouse Two Sigma Advisors that currently oversees $35 billion in assets under management. The quant king John Overdeck is the main brain behind the quantitative stock trading strategies because of his mathematical background. He won a silver medal in the International Mathematical Olympiad when he was only 16 years old.

John Overdeck earned a B.S. in Mathematics and an M.S. degree in Statistics from Stanford University. He was ranked the highest earning hedge fund manager in 2019. After achieving a B.S. in Mathematics and an M.S. in Statistics from Stanford University, the secretive billionaire quant hedge fund manager worked as Managing Director at D.E. Shaw & Co, and as Vice President and technical assistant at Amazon.com, Inc. (NASDAQ: AMZN).

John Overdeck of Two Sigma Advisors

He is a member of Forbes’ list of 400 wealthiest Americans in 2020, with a net worth of more than $6.5 billion.

The other co-founder David Siegel has also been playing a key role in enhancing returns of the computer-powered hedge fund since 2001. David Siegel earned a Ph.D. in Computer Science degree from the Massachusetts Institute of Technology and worked as a Chief Information Officer at D.E. Shaw & Co, and Tudor Investment Corp.

The algorithmic trading techniques worked strongly for John Overdeck and David Siegel in the past years as their fund turned into one of the biggest hedge funds in the US. Surprisingly, the quant hedge fund has been lagging behind this year as the market crash triggered by the coronavirus pandemic has jolted their computer powered algorithms.

The risk-premia strategy of Two Sigma saw a loss of 11.5% this year. The firm’s absolute-return fund fell 2.7%, while its absolute-return macro fund dropped 23%.

“Quants rely on data from time periods that have no reflection of today’s environment,” said Adam Taback, chief investment officer of Wells Fargo Private Wealth Management, to Bloomberg. “When you have volatility in markets, it makes it extremely difficult for them to catch anything because they get whipsawed back and forth.”

Two Sigma might be struggling this year, but its historical track record is impressive. Two Sigma’s Compass Enhanced fund returned more than 30% annually during the 5 years between 2009 and 2014. We are coming out of another economic contraction stronger than we came out of the the 2008-2009 financial crisis. So, if Two Sigma repeats the same performance, its investors will see their portfolios nearly quadruple over the next 5 years. In any case, we believe we can locate long-term winners among Two Sigma’s top 10 stock picks.

While John Overdeck and David Siegel’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Let’s start examining the top 10 stocks to buy according to secretive billionaire hedge fund manager to see how the computer-powered trading strategies are employed to tackle higher volatility levels.

10. PayPal Holdings (NASDAQ: PYPL)

The payment transfer company PayPal (PYPL) is one of the most favorite stocks of Two Sigma Advisors over the years. The quant hedge fund has been holding PayPal stock since the first quarter of 2016, but the firm’s computer-powered techniques pushed the quant fund to enhance the stake in the digital payment transfer company in the latest quarter.

The firm has raised its stake in PayPal by 9000% in the third quarter to 1.8 million shares valued at $369 million, accounting for 1.05% of the overall portfolio.

PayPal has been one of the best performers so far this year as the digital payment transfer company saw massive growth in user base and payment transfer volumes. Shares of PayPal holding jumped 105% in the last twelve months.

The Insider Monkey report shows that hedge funds are bullish on PayPal: “Paypal Holdings was in 150 hedge funds’ portfolios at the end of September. The all-time high for these statistics prior to this quarter was 144. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high. There were 144 hedge funds in our database with PYPL positions at the end of the second quarter. Our calculations also showed that PYPL currently ranks 8th among the 30 most popular stocks among hedge funds.”

Polen Capital briefly shared its thoughts about PayPal in its Q3 investor letter:

“We continue to have high conviction in MasterCard and Visa, which we trimmed last quarter, and chose to rebalance our weights as we added to our position in PayPal. PayPal’s value proposition to merchants and consumers continues to expand in the current environment, and we believe this will have a lasting positive impact on the business. At the end of the quarter, our collective position in Visa, MasterCard, and PayPal was more than 13%, an increase in our aggregate weight from the start of the year.”

9. Merck & Co (MRK)

The pharmaceutical company Merck & Co has been a permanent member of Two Sigma’s portfolio. The quant hedge fund first initiated a stake in Merck during the fourth quarter of 2010. Although the billionaires’ hedge fund has sold 13% of stake in the latest quarter, the pharmaceutical giant still stands at the 9th place in our list of the top 10 stocks to buy now.

The stake currently accounts for 1.06% of the portfolio valued at $371 million. The shares of Merck underperformed this year due to pandemic related challenges.

Although it is not in the Insider Monkey’s 30 popular stocks among hedge fund managers, the report still shows hedge funds are showing interest in Merck: “Merck was in 80 hedge funds’ portfolios at the end of the third quarter of 2020. The all-time high for this statistics is 84. MRK investors should pay attention to an increase in hedge fund interest of late. There were 76 hedge funds in our database with MRK positions at the end of the second quarter.”

Saturna Capital opined on MRK in its Q1 letter saying that BMY and “Merck benefited from low valuations, strong balance sheets, and attractive dividends going into the crisis, minimizing the negative fallout.”

8. The Procter & Gamble Company (NYSE: PG)

The secretive billionaire quant hedge fund manager has slashed its stake in Procter & Gamble Company by 26% in the latest quarter. Despite that, Two Sigma Advisors hold a massive stake in PG. The firm first initiated a position in consumer staples company during the second quarter of 2012 and it is currently ranked as the eighth largest holdings valued at $380 million.

In addition to more than 70% share price growth in the past five years, PG’s average dividend growth in the past five years stood around 3.13%.

Procter & Gamble Company is not in the list of the top 30 most popular stocks among hedge funds. However, the report shows increased activities during the third quarter: “The Procter & Gamble Company has seen an increase in activity from the world’s largest hedge funds recently. The Procter & Gamble Company was in 75 hedge funds’ portfolios at the end of the third quarter of 2020. The all-time high for this statistics is 79. There were 73 hedge funds in our database with PG positions at the end of the second quarter.”

7. AbbVie Inc. (NYSE: ABBV)

The secretive billionaire quant hedge fund manager continues showing confidence in AbbVie Inc. (NYSE: ABBV). The firm has raised its stake by 4% in the latest quarter to 4.3 million shares valued at $381 million, making it the 7th stock in our list of the top 10 stocks to buy now.

Shares of AbbVie soared more than 17% in the last twelve months. It’s a good stock to hold because of its dividend growth potential. The company has raised dividends at an average of 20% in the past five years. ABBV is also among Warren Buffett’s top 10 dividend stock picks.

Despite billionaire quant hedge fund manager’s confidence, Insider Monkey says, “ABBV has experienced a decrease in hedge fund sentiment recently. AbbVie Inc was in 82 hedge funds’ portfolios at the end of the third quarter of 2020. The all-time high for this statistics is 89.

6. Tesla, Inc (NASDAQ: TSLA)

The world’s largest electric vehicle company Tesla (NASDAQ: TSLA) is the fifth-largest stock holding of billionaire quant hedge fund manager. Although the firm has sold 34% of shares in the latest quarter to capitalize on massive share price gains, Two Sigma’s stake in the electric vehicle company jumped from 0.93% of the portfolio to 1.17% of the portfolio.

Tesla stock price rallied almost 783% since the beginning of 2020, thanks to increasing demand for electric vehicles. The company’s strong financial and operational performance added to share price gains. It has generated profits in the past five successive quarters.

Insider Monkey report says, “In Q3 2020, the number of bullish hedge fund positions on Tesla stock increased by about 6% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in Tesla’s growth potential.”

Baron Opportunity Fund laid out the bulls’ case in Tesla in its Q3 letter:

“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, and energy storage solutions. The company reported robust second quarter results, solidly ahead of market expectations, despite the impact of the COVID-19 pandemic and associated macro-economic challenges. Indeed, in the second quarter, Tesla delivered almost 91,000 total vehicles – with strong unit level economics of 25.4% GAAP automotive gross profit margins – and another quarter of GAAP profitability and solid free cash flow (above $400 million). Moreover, Tesla recently announced a record of nearly 140,000 total vehicle deliveries for the third quarter. Despite global COVID-19 disruptions, our long-term expectations remain high due to Tesla’s differentiated products and healthy unit economics. Tesla has announced capacity expansions in Shanghai, China; Berlin, Germany; and Austin, Texas to support its short-term path to 1 million vehicles and its long-term goal of 20 million. Just a couple of weeks ago, Tesla held its Battery Day event, and presented a grand vision around its battery innovation and expanding its competitive advantages, including massively increasing internal battery production capacity (100 gigawatt-hours by 2022 and 3,000 by 2030), improving battery range (about 50%), and significantly lowering battery costs (cost per kilowatt-hour to decline by over 50%). We remain confident that Tesla will leverage its brand, technology leadership, and the electric vehicle secular trend to achieve sustainable long-term growth.”

5. Target Corporation (NYSE: TGT)

General merchandise stores chain Target Corporation (NYSE: TGT) is among the permanent members of the secretive billionaire quant hedge fund manager portfolio since 2015. However, Two Sigma sold 24% of its stake in the latest quarter to capitalize on the share price rally. Target Corporation shares jumped almost 30% this year, extending the five years gains to 130%.

In addition to share price gains, the general merchandise stores chain also offers hefty dividends to investors. It has raised dividends in the past 52 straight years. Insider monkey says, “Target Corporation was in 57 hedge funds’ portfolios at the end of the third quarter of 2020. The all-time high for this statistics is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high.”

4. Cisco Systems (NASDAQ: CSCO)

The technology company Cisco Systems (NASDAQ: CSCO) underperformed this year, but the billionaire quant hedge fund Two Sigma sees the dip as a buying opportunity. The firm has raised its stake in Cisco by 116% in the latest quarter to 11 million shares valued above $433 million.

It is the fourth largest stock investment of the quant hedge fund, accounting for 1.24% of the overall portfolio. Meanwhile, other investors aren’t looking so optimistic about Cisco. According to Insider Monkey, CSCO isn’t among the 30 most popular stocks among hedge funds.

Brown Advisory is bullish on CSCO saying that “Networking equipment provider Cisco Systems gained after reporting solid quarterly results amid a challenging economic environment. The company’s security and video conferencing products are in greater demand due to the ongoing work-from-home trend, suggesting an improved business growth outlook for the remainder of the year.”

Amana Mutual Fund also made some bullish comments in its Q1 letter:

“Along with growing e-commerce, another result of shelter-in-place will likely be a greater appreciation of the possibilities of video conferencing. As a company that sees itself as defining the future of the internet, while featuring negligible debt and an attractive dividend, Cisco has proven relatively resilient.”

3. Lowe’s Companies (NYSE: LOW)

Despite an 11% decline in Lowe’s stake during the third quarter, the home improvement corporation Lowe’s Companies is the third-largest stock investment of the quant hedge fund manager. Lowes stake accounts for 1.26% of the overall portfolio valued at $440 million. It is the permanent member of the secretive billionaire quant hedge fund manager portfolio since 2015.

Lowe’s shares soared 37% in the last twelve months, enlarging five years’ gains to 118%. The company also offers dividends to investors, which makes it a good stock to hold in a portfolio.

In a previous article we shared Pershing Square’s detailed comments about LOW. Here is an excerpt from that article:

“In 2020, beyond adapting the business for surging demand and the associated operational strains imposed by Covid-19, Lowe’s continues to invest behind critical strategic initiatives, including improving omnichannel capabilities. Management completed the re-platforming of its ecommerce platform earlier this year, and will now focus on enhancing online features and functionality, thereby improving the overall user experience. Lowe’s is also accelerating investments in its supply chain initiatives, a critical element of the company’s longer-term business transformation. We believe that Lowe’s continues to make substantial progress toward achieving each of management’s high-priority initiatives, which will aid Lowe’s future competitive position.

In recent quarters, Lowe’s management has begun to acknowledge its medium-term 12% operating margin target as “not the end point,” but rather “a stop along [Lowe’s] journey,” and has further noted that they believe Lowe’s “can do better than that over time.” As Lowe’s revenue productivity and margins begin to approach its best-in-class peer Home Depot, which achieved a greater than 14% profi t margin last year, it will generate signifi cant increases in profi t, which, when coupled with the company’s likely soon-to-be-relaunched, large share repurchase program should lead to accelerated future earnings-pershare growth.

Despite Lowe’s signifi cant stock price appreciation, it currently trades at approximately 19 times our estimate of Lowe’s next-twelve-month earnings (vs. Home Depot at 25 times), a valuation which does not refl ect its potential for signifi cant future profi t improvement. As a result, we believe that Lowe’s share price has the potential to appreciate substantially as the company continues to make progress on its business transformation.”

2. Home Depot (NYSE: HD)

The home improvement retailer Home Depot (NYSE: HD) has been in the Two Sigma Advisor’s portfolio since 2013. The home improvement stock has generated massive returns for the quant hedge fund in the past year both in the form of share price gains and dividends. This is the second-largest stock investment of a billionaire hedge fund, according to the latest filings.

Shares of Home Depot soared 25% this year, and are up 104% in the last five years. It has raised dividends in the past 11 straight years, with a five-year dividend growth average of 23%.

Ensemble Capital shared its bullish HD thesis in a recent investor letter:

“Home Depot, Inc. (3.7% weight in portfolio): Home Depot is a newer addition to the Fund. However, we’ve followed the home improvement space for many years and we’re particularly excited about the opportunity ahead for Home Depot. In the years since the housing bust, the company has managed to increase revenue by 60% and earnings by 240% even while only increasing their store count by just 2%. This sort of disciplined execution has led to the company exhibiting returns on invested capital far above most other established retailers, although Starbucks, another holding of ours also generates very high returns on capital.

As discussed during our notes on First American (above), we do expect housing activity to come to a standstill in the near term. However, Home Depot is deemed an essential business and their stores remain open. With ultra-low interest rates enabling cash out refinancing and with a homeowner’s deck that needed repairs prior to the Coronavirus still needing to be repaired after this is over, we expect an explosion of pent up demand to come back to the home improvement sector when the crisis has passed. Just as housing transactions were growing rapidly in January and February, most leading indicators of home improvement activity were also accelerating going into this period.

As anyone who owns a house knows, it is often easy to overlook cosmetic issues in a house you’ve lived in a long time or defer maintenance on small items. But after being stuck in their homes for a month or two, it would not surprise us at all if many homeowners emerge with a long list of items they want to fix. And while Home Depot is the leader in their category and we feel confident they can get through this crisis, the same cannot be said of the large number of local hardware stores which collectively still have a meaningful portion of home improvement market share.”

1. Microsoft Corporation (NASDAQ: MSFT)

The technology giant Microsoft Corporation (NASDAQ: MSFT) is the largest stock pick of the secretive billionaire quant hedge fund manager portfolio. The firm has been holding MSFT shares over the last ten years. Indeed, the hedge fund has raised its stake by 41% in the latest quarter. The investment is accounting for 2.05% of the overall portfolio valued at $716 million.

Several other hedge funds are also optimistic about Microsoft’s performance. According to Insider Monkey, MSFT ranks #2 among the 30 most popular stocks among hedge funds.

The report further says, “Microsoft was in 234 hedge funds’ portfolios at the end of September. The all-time high for this statistics is 235. MSFT investors should pay attention to an increase in activity from the world’s largest hedge funds of late.