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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

AAPL

3.9%

553

681

GENERAL ELECTRIC CO

GE

11.2%

431

92

WARNER CHILCOTT PLC IRELAND

WCRX

6.1%

417

407

MYLAN INC

MYL

10.9%

399

333

GOOGLE INC

GOOG

-2.7%

354

155

APACHE CORP

APA

9.3%

279

318

INTERNATIONAL BUSINESS MACHS

IBM

12.2%

278

124

MICROSOFT CORP

MSFT

-6.1%

265

138

VERTEX PHARMACEUTICALS INC

VRTX

37.5%

262

215

SIMON PPTY GROUP INC NEW

SPG

7.0%

258

227

DEVON ENERGY CORP NEW

DVN

16.6%

257

214

PROCTER & GAMBLE CO

PG

-3.1%

238

167

EL PASO CORP

EP

28.9%

207

164

ABBOTT LABS

ABT

6.4%

192

237

CISCO SYS INC

CSCO

-12.5%

191

95

EXXON MOBIL CORP

XOM

18.2%

191

159

ENDO PHARMACEUTICALS HLDGS I

ENDP

14.4%

188

170

BAIDU INC

BIDU

47.0%

176

160

FORD MTR CO DEL

F

-8.7%

168

224

HESS CORP

HES

10.2%

147

125

DAVITA INC

DVA

24.7%

140

197

ACTIVISION BLIZZARD INC

ATVI

-9.1%

138

142

JOHNSON & JOHNSON

JNJ

-3.0%

130

100

JPMORGAN CHASE & CO

JPM

11.2%

126

291

CARDINAL HEALTH INC

CAH

10.6%

122

108

LOWES COS INC

LOW

7.4%

121

134

WELLS FARGO & CO NEW

WFC

2.2%

120

183

AVALONBAY CMNTYS INC

AVB

5.6%

116

128

COVIDIEN PLC

COV

15.7%

115

98

FREEPORT-MCMORAN COPPER

FCX

-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.

Source: D.E. Shaw's Favorite Long-Term Stock Picks