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Douglas W. Case, along with his partners, founded Advanced Investment Partners in 1996. Since then, Case has served as the hedge fund’s President, CIO and manager (Read more about Case here). He uses an elaborate system of quantitative analyses and benchmarks to guide the success of Advanced Investment Partners. Case also supports socially responsible investing, meaning that he selects stocks based to a degree on their environmental, social and governance policies (a practice commonly referred to as ESG).

To date, this system has served him well. Since the end of June, his top 25 stocks had a negative 9% return compared to the S&P 500’s negative 11.1%. So, Case may have been losing right now, but he has lost less than the market overall.

Company

Ticker

Value (x1000)

Activity

Return

APPLE INC COM

AAPL

23271

1%

8.35%

EXXON MOBIL CORP

XOM

17771

-24%

-15.86%

INTL BUSINESS MACHINES

IBM

15816

25%

0.12%

AMAZON.COM INC

AMZN

15094

1%

-5.07%

PROCTER & GAMBLE CO

PG

14406

-3%

-4.49%

DOW CHEMICAL

DOW

12837

-7%

-21.89%

VERIZON

VZ

12422

2%

-6.69%

UNITED PARCEL SERVICE

UPS

12033

58%

-15%

SALESFORCE.COM INC

CRM

11764

NEW

-13.93%

EXPRESS SCRIPTS INC

ESRX

11509

78%

-16.47%

MCKESSON CORP

MCK

11282

NEW

-12.16%

PRECISION CASTPARTS

PCP

11010

0%

-11.33%

GOLDMAN SACHS

GS

10499

-9%

-17.09%

JOHNSON CONTROLS

JCI

9814

89%

-23.55%

NORTHEAST UTILITIES

NU

9125

4%

-9.21%

CONOCOPHILLIPS

COP

8875

-6%

-13.38%

HOME DEPOT INC

HD

8419

116%

-21.29%

ONEOK INC

OKE

8256

-1%

-13.53%

MEDCO HEALTH SOL

MHS

8223

10%

-7.96%

BANK OF AMERICA

BAC

8114

-8%

-38.23%

EL PASO CORP

EP

7444

71%

-13.02%

COLGATE-PALMOLIVE

CL

7373

-5%

-7.67%

CONSOLIDATED EDISON

ED

7312

NEW

-2.20%

GENERAL ELECTRIC CO

GE

7071

NEW

-19.99%

EQUIFAX INC

EFX

7002

16%

-14.92%

Of Case’s top 25 stock picks, only two have produced positive returns since the end of June 2011. Apple Inc. (NASDAQ:AAPL) returned 8.35% and IBM returned a paltry 0.12%. Apple was one of hedge funds’ most favorite stocks (see the top 10 stocks here). Modest successes in the first half of the year were enough to entice Case to increase his position in both Apple and IBM, but the question remains whether it will be too late to bolster Advanced Investment Partners’ average return.

Case’s largest losses since June were in financial stocks, losing 38.23% via his Bank of America (NYSE:BAC) position and 17.09% in his Goldman Sachs (NYSE:GS) position. Finance stocks are notoriously low right now and many hedge fund investors are snapping them up in the hopes that they will be able to make a tidy fortune when the stocks rebound. Perhaps Case bought a position in these stocks a little early but they will come back up as the economy improves. Case did reduce his position in these companies, by 8% and 9% respectively, but he didn’t pull out, indicating he may have optimism for their future.

However, that doesn’t explain away the other losses. Case also sustained severe losses in companies like Johnson Controls Inc (NYSE:JCI), losing 23.55%, Dow Chemical (NYSE:DOW), losing 21.89%, and Home Depot Inc (NYSE:HD), losing 21.29%. Hopes for these companies may be high; Viking Global’s Andreas Halvorsen is a fan of Johnson Controls, and Thomas Steyer’s Farallon Capital (the 14th largest hedge fund in the world) has made a small fortune through his position in Home Depot. It seems like Case may be on the losing end of things at least for awhile.

The reason Case was able to beat the market during the past 6 weeks is that his high conviction stock picks were very successful. Four out of his top five stock picks outperformed the market. Investors are cautioned against mirroring Advanced Investment Partners entire portfolio right now unless they are willing to take a gamble. However, we believe investors can achieve superior returns over the long-term by imitating Case’s top stock picks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Advanced Investment Partners' Top 25 Stock Picks