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 | 23271 | 1% | 8.35% | |
EXXON MOBIL CORP | 17771 | -24% | -15.86% | |
INTL BUSINESS MACHINES | 15816 | 25% | 0.12% | |
AMAZON.COM INC | 15094 | 1% | -5.07% | |
PROCTER & GAMBLE CO | 14406 | -3% | -4.49% | |
DOW CHEMICAL | 12837 | -7% | -21.89% | |
VERIZON | 12422 | 2% | -6.69% | |
UNITED PARCEL SERVICE | 12033 | 58% | -15% | |
SALESFORCE.COM INC | 11764 | NEW | -13.93% | |
EXPRESS SCRIPTS INC | 11509 | 78% | -16.47% | |
MCKESSON CORP | 11282 | NEW | -12.16% | |
PRECISION CASTPARTS | 11010 | 0% | -11.33% | |
GOLDMAN SACHS | 10499 | -9% | -17.09% | |
JOHNSON CONTROLS | 9814 | 89% | -23.55% | |
NORTHEAST UTILITIES | 9125 | 4% | -9.21% | |
CONOCOPHILLIPS | 8875 | -6% | -13.38% | |
HOME DEPOT INC | 8419 | 116% | -21.29% | |
ONEOK INC | 8256 | -1% | -13.53% | |
MEDCO HEALTH SOL | 8223 | 10% | -7.96% | |
BANK OF AMERICA | 8114 | -8% | -38.23% | |
EL PASO CORP | EP | 7444 | 71% | -13.02% |
COLGATE-PALMOLIVE | 7373 | -5% | -7.67% | |
CONSOLIDATED EDISON | 7312 | NEW | -2.20% | |
GENERAL ELECTRIC CO | 7071 | NEW | -19.99% | |
EQUIFAX INC | 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. (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 (BAC) position and 17.09% in his Goldman Sachs (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 (JCI), losing 23.55%, Dow Chemical (DOW), losing 21.89%, and Home Depot Inc (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.
