The fourth-quarter stock market rally appears to overshadow the disappointing previous quarter that had a noticeable impact on the equity portfolios of most hedge funds and other money managers. The deadline for submitting the 13F filings for the September quarter is November 16, so hedge funds have a few more days at their disposal to compile these much-awaited public filings. Winton Capital Group, founded by David Harding in 1997, is one of the investment firm tracked by Insider Monkey that recently filed its 13F filings for the third quarter. Winton Capital seeks for investment opportunities by employing a thorough statistical analysis and mathematical modelling of historical data. The British quantitative investment management firm currently has more than $30 billion in assets under management and oversees an equity portfolio with a market value of $12.64 billion as of September 30. The value of the firm’s equity portfolio increased quarter-on-quarter from $10.89 billion, but it is not entirely clear what stands behind this lift. The following article will lay out a list of Winton’s top tech stock picks at the end of the third quarter and will also discuss their performance over the past few months.
Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read the details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
#5 International Business Machines Corp. (NYSE:IBM)
Shares Owned by Winton Capital Group (as of September 30): 716,208 shares
Value of Holding (as of September 30): $103.83 million
International Business Machines Corp. (NYSE:IBM) represents the twelfth-largest equity holding of Winton Capital at the end of the third quarter. The British investment firm upped its position in the struggling technology company by 85,191 shares between July and September. IBM has been on a decline over the past few years, a fact reflected in its stock performance as well. The tech giant’s revenues have been on a steady decline since 2011, whereas its earnings per share have been higher each year except for 2014. The shares of IBM are dirt cheap at the moment, considering their price-to-earnings ratio of 9.30, which compares to the median of 23.41 for the S&P 500 companies. However, some tend to believe that IBM has spent too much of its cash on buyback programs, which should have been used to grow its businesses instead. Meanwhile, the stock is down nearly 16% since the beginning of the year. Warren Buffett of Berkshire Hathaway, who owns 79.56 million shares in International Business Machines Corp. (NYSE:IBM) as of June 30, has recently asserted that he had no intention of disposing his investment in IBM.
#4 Intel Corporation (NASDAQ:INTC)
Shares Owned by Winton Capital Group (as of September 30): 3.60 million shares
Value of Holding (as of September 30): $108.40 million
It seems that the mathematical models employed by Winton Capital propelled the investment firm to increase its exposure to Intel Corporation (NASDAQ:INTC) in the third quarter. The quantitative asset management firm lifted its stake in Intel by 198,341 shares during the three-month period ended September 30. The shares of Intel are slightly over 8% in the red year-to-date, but several financial services hubs suggest that there is more upside for the stock in the upcoming months. Earlier this year, the world’s largest chip company acquired chip maker Altera Corporation (NASDAQ:ALTR) for $16.7 billion, in an attempt to strengthen its ‘data centers’ business (which is supplying chips that power the world’s data centers). Thus, it seems that the company has been successful in finding growth opportunities beyond the sluggish PC market. Ken Fisher’s Fisher Asset Management reported owning 19.36 million shares of Intel Corporation (NASDAQ:INTC) in the 13F filing for the September quarter.