The Secret Stock Picks Of This Multi Billion Quant Hedge Fund

Includes: AAPL, AMGN, GS, JPM, XOM
by: Insider Monkey

By Alex Oleinic

Numeric Investors is a $7.7 billion quant-focused investment manager located in Boston, and is yet another fund that has disclosed its first quarter equity holdings in its latest 13F filing with the SEC. Generally, all institutional investors who exercise investment discretion of over $100 million are required to file 13F forms within 45 days after the end of each quarter.

Why should we pay attention?

We are looking at the top five picks of Numeric Investors in terms of stake value, because quantitative studies have shown that it can benefit everyday investors by watching hedge fund sentiment. It has been discovered that "piggybackers" who track a specific hedge fund activity can outpace the broader indices by an average of 18 percentage points annually (learn the secrets of this strategy here).

Let's get started

JPMorgan Chase (NYSE:JPM) represents the most valuable holding in the equity portfolio of Numeric Investors. The position contains 3,057,027 shares, worth $145.1 million, which is higher than the 2.9 million-share, $126 million position disclosed in the previous filing. For the first three months of 2013, JPMorgan Chase posted a net income of $6.5 billion, and an EPS of $1.59. This compares favorably against a profit of $4.9 billion and earnings of $1.19 per share one year earlier. JPMorgan Chase also said that its board plans to raise the bank's common stock dividend to $0.38 in the second quarter, up from $0.30 per share. Shares have already returned 11% year-to-date, and are still an attractive investment moving forward.

Then follows Amgen (NASDAQ:AMGN), in which the fund disclosed a position of 1,162,600 shares last quarter. The value of the current stake in Amgen amounts to $119.2 million. In the previous 13F, Numeric Investors reported holding 1,139,700 shares, worth about $98.2 million. Amgen is trading at a forward P/E of above 12 and has a year-to-date return of 22.2%. In the first quarter of 2013, the adjusted net income and adjusted EPS of Amgen increased by annual rates of 16% and 22% respectively, to $1.5 billion and $1.96.

The best of the rest

Goldman Sachs (NYSE:GS) also represents a major position in Numeric Investors' equity portfolio. In its latest 13F, Numeric reported owning 780,080 shares of the company, compared to 777,760 shares at the end of the last year. The value of the holding advanced to $114.8 million, from $99.2 million. The year-to-date return of Goldman Sachs' stock amounts to 16.8%, even more impressive than what JPMorgan Chase shares have returned. Goldman Sachs' net Q1 revenues amounted to $10.09 billion, and net earnings totaled $2.26 billion. At the same time, diluted earnings per common share increased to $4.29 per share, versus $3.29 a year ago; it's easy to see why the quant-fund is bullish.

Exxon Mobil (NYSE:XOM) is the fourth most valuable stock in the equity portfolio of Numeric Investors. The fund disclosed holding 927,100 shares worth $83.5 million. The fund was bullish on Exxon during the first three months of 2013, with the position surging from 67,270 shares disclosed at the end of 2012. In the first 2013 quarter, the EPS of Exxon assuming dilution advanced by 6% on the year to $2.12, and the stock is still trading at a forward P/E of just 11.0x.

Cupertino conviction

Last but certainly not least, Apple (NASDAQ:AAPL) was also the beneficiary of a bullish bet by Numeric, as the fund raised its stake by 45,550 shares to 183,040 in the first quarter. The value of the holding in the most recent 13F amounts to $81 million, up from $73.2 million posted in the previous filing. Apple is one of the most popular stocks in the hedge fund industry and can be found in the equity portfolio of about 130 of the top 450 hedge funds, according to our database. Interestingly, Apple has a year-to-date return of about -14%, though shares have rebounded of late. For the second quarter of its fiscal 2013, Apple reported a net income of $9.5 billion, or $10.09 per share, down from a year earlier when net income amounted to $11.6 billion.

Final thoughts

Numeric Investors reported 710 holdings in their latest 13F, which is smaller compared to 752 positions disclosed at the end of December. However, seeing that the top five most valuable stakes in the equity portfolio of the fund represent some of the biggest companies from very profitable sectors of the economy (technology, oil, banking), we can see a strong conviction in Numeric's decision-making process. Learn more about why it's important to pay attention to the smart money.

Disclosure: I am long AAPL.

Business relationship disclosure: This article is written by Insider Monkey's writer, Alex Oleinic, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.