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Charles Clough is the founder and manager of Clough Capital Partners. Clough launched the mutual fund in 2000 after directing global investment strategy at Merrill Lynch for 13 years. Clough is considered one of the top strategists in the U.S., earning a spot on the Institutional Investor All-America Research Team for 12 years, consecutively. To protect his portfolio from market declines, Clough uses put options on index funds (click here to read more on Clough’s strategy).

Charles Clough’s top two positions in his portfolio are put options on S&P 500 ETF (NYSEARCA:IVV) and Japan ETF (NYSEARCA:EWJ). Here are Clough’s top stock picks at the end of June:

Company

Ticker

Value (x1000)

Activity

Return Since June

ISHARES TRUST Puts

IVV

642755

-55%

-12%

ISHARES INC JAPAN Puts

EWJ

220919

-34%

-10%

MICROSOFT CORP Calls

MSFT

103306

10%

-5%

GOODYEAR TIRE & RUBR

GT

100643

8%

-32%

MICROSOFT CORP

MSFT

81111

12%

-5%

NATIONAL OILWELL VARCO

NOV

73475

68%

-20%

BAKER HUGHES INC

BHI

67968

58%

-25%

NATIONAL GRID PLC

NGG

66608

18%

-2%

CITIGROUP INC

C

66578

18%

-28%

APPLE INC

AAPL

62514

231%

11%

BANK OF AMERICA CORP

BAC

60300

23%

-30%

TRANSDIGM GROUP INC

TDG

59454

34%

-6%

HATTERAS FINANCIAL CORP

HTS

47729

-8%

-6%

OWENS ILL INC

OI

47702

82%

-34%

E N S C O PLC

ESV

43058

89%

-19%

SOLAR CAPITAL LTD

SLRC

41630

-6%

-13%

GOLAR L N G LTD

GLNG

35504

16%

-11%

IBM

IBM

32671

-55%

-3%

U S AIRWAYS GROUP

LCC

32607

New

-43%

HELMERICH & PAYNE INC

HP

31870

New

-22%

ANNALY CAPITAL

NLY

31625

-11%

-4%

TIME WARNER INC NEW

TWX

31253

New

-20%

UNITED CONTINENTAL

UAL

30798

New

-25%

LIBERTY MEDIA CORP NEW

LINTA

30667

124%

-13%

GOOGLE INC

GOOG

30449

-56%

3%

Clough has had a -4% negative return on his position in Annaly Capital Management Inc (NYSE:NLY) since June. While the real estate investment company is a favorite of Jim Cramer, host of CNBC’s “Mad Money”, and has a strong reputation for paying higher than average dividends, the stock has yet to produce strong returns. Clough may be less than enthusiastic about Annaly; he reduced his position in the company by 11% last quarter.

Clough had more than $100 in Microsoft’s (OTCQB:MFST) call options. Microsoft has been performing better than the S&P 500 index since David Einhorn’s presentation at the Ira Sohn Investment Conference. Einhorn argued that Microsoft is a very cheap stock and asked for a shake-up in MSFT’s management (click here to read Einhorn’s entire speech). Some hedge funds initiated brand new positions after Einhorn’s presentation. As a result of these purchases Microsoft is the second most popular stock among hedge funds (click here to see the 10 most popular stocks among hedge funds).

Clough’s best performing stock pick was Apple (NASDAQ:AAPL). AAPL returned 11% since the end of June, outperforming the SPY by more than 20 percentage points. Apple is the most popular stock among hedge funds. Google (NASDAQ:GOOG) is another stock favored by hedge funds and the stock gained 3% since the end of June. Unfortunately Clough’s other mega-cap stock picks didn’t perform well. Citigroup (NYSE:C) lost 28%, Bank of America (NYSE:BAC) lost 30%, and IBM lost 3%.

Clough lost even bigger in his Goodyear Tire & Rubber Co (NASDAQ:GT). Goodyear, which is Clough’s largest position that is not a put or call, has lost 32% since the second quarter, in spite of increasing his position in the company 8% last quarter. In contrast, David Tepper (Appaloosa Management) reduced his position in Goodyear by 8%. Tepper may be on to something. After all, he is the 258th richest man in the world and his Appaloosa returned 30% last year.

We like Clough but, as impressive as his performance has been historically, his track record leaves something to be desired for an investor looking to mirror someone. In addition, Clough is famous for having dozens of transactions each quarter, frequently buying more than 50 positions as well as selling more than 50 positions, each quarter. For the private investor, transaction costs alone could erode any gain.

Source: Charles Clough's Top Stock Picks