D.E. Shaw & Co, founded in 1988 by David Elliot Shaw, is one of the largest quant funds in the world. Its latest 13F portfolio had $39 Billion in stocks and options. Usually it’s not practical to imitate quantitative hedge funds like D.E. Shaw or Jim Simons’ Renaissance because they hold most of their holdings for less than a few weeks. By the time they report their holdings, they probably don’t even have them in their portfolios. However, in some cases they make longer term investments and these can be replicated by small investors who can’t invest in these funds because they aren’t wealthy enough.
We analyzed D.E. Shaw’s SEC filings and compiled the list of their longer term investments. D.E. Shaw had at least $90 Million invested in each of these stocks at the end of September and $113 Million invested at the end of December. Clearly these are very large positions that aren’t initiated to profit from a short-term arbitrage opportunity. We also verified that the fund had the top five stocks in its portfolio at the end June. Here is how D.E. Shaw’s long-term stock picks performed since the end of December:
Ticker | Return | Value (December) | Value (September) | |
APPLE INC | 3.9% | 553 | 681 | |
GENERAL ELECTRIC CO | 11.2% | 431 | 92 | |
WARNER CHILCOTT PLC IRELAND | 6.1% | 417 | 407 | |
MYLAN INC | 10.9% | 399 | 333 | |
GOOGLE INC | -2.7% | 354 | 155 | |
APACHE CORP | 9.3% | 279 | 318 | |
INTERNATIONAL BUSINESS MACHS | 12.2% | 278 | 124 | |
MICROSOFT CORP | -6.1% | 265 | 138 | |
VERTEX PHARMACEUTICALS INC | 37.5% | 262 | 215 | |
SIMON PPTY GROUP INC NEW | 7.0% | 258 | 227 | |
DEVON ENERGY CORP NEW | 16.6% | 257 | 214 | |
PROCTER & GAMBLE CO | -3.1% | 238 | 167 | |
EL PASO CORP | EP | 28.9% | 207 | 164 |
ABBOTT LABS | 6.4% | 192 | 237 | |
CISCO SYS INC | -12.5% | 191 | 95 | |
EXXON MOBIL CORP | 18.2% | 191 | 159 | |
ENDO PHARMACEUTICALS HLDGS I | 14.4% | 188 | 170 | |
BAIDU INC | 47.0% | 176 | 160 | |
FORD MTR CO DEL | -8.7% | 168 | 224 | |
HESS CORP | 10.2% | 147 | 125 | |
DAVITA INC | 24.7% | 140 | 197 | |
ACTIVISION BLIZZARD INC | -9.1% | 138 | 142 | |
JOHNSON & JOHNSON | -3.0% | 130 | 100 | |
JPMORGAN CHASE & CO | 11.2% | 126 | 291 | |
CARDINAL HEALTH INC | 10.6% | 122 | 108 | |
LOWES COS INC | 7.4% | 121 | 134 | |
WELLS FARGO & CO NEW | 2.2% | 120 | 183 | |
AVALONBAY CMNTYS INC | 5.6% | 116 | 128 | |
COVIDIEN PLC | 15.7% | 115 | 98 | |
FREEPORT-MCMORAN COPPER | -4.3% | 113 | 173 |
These 30 stocks returned 8.9% since the end of December, vs. SPY’s 6.1% return. Our methodology of picking D.E. Shaw’s long term stock picks seems to be working. These stocks beat the market by 2.8 percentage points in three months. D.E. Shaw’s largest position was Apple, which underperformed the market recently. Nearly 200 hundred hedge funds own 4% of Apple’s outstanding shares. Hedge fund stars like David Einhorn, John Griffin, Stephen Mandel,Chase Coleman and John Burbank all own AAPL in their portfolios.
D.E. Shaw’s other largest positions aren’t really hedge fund favorites. Fortunately, they outperformed the market. For example General Electric is one of the largest stocks in the U.S., but prominent hedge funds don’t have GE in their portfolios. D.E. Shaw had the largest stake among hedge funds with a $431 Million position. Bruce Berkowitz, Ken Fisher, and Phill Gross’ Adage Capital had between $250 and $300 invested in GE.
D.E. Shaw had the largest position in WCRX with a $400+ Million investment. Paul Tanico’s Castlerock is the only other hedge fund with a large investment in WCRX. We like D.E. Shaw’s large long-term stock picks and will be following them closely. These are uncommon stock picks and they also manage to beat the market.
Disclosure: I am long MSFT.
