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Jim Simons' Medallion Fund is the best hedge fund we have come across. The fund's returns are so spectacular that Jim Simons became one of the richest people on the planet. Medallion Fund employs high-frequency trading and exploits inefficiencies in the stock market. One strategy they use takes advantage of the inefficiencies in the execution of large transactions.

One of their algorithms determines whether a very large order is executed and front-runs it. As a result Medallion experiences high transaction costs and high expenses. That's why they charge a 5% fixed fee. On top of that they charge a performance fee. That fee had been 20%, but after 2000 it was increased initially to 36% and then to 44%.

According to 13F filings, Jim Simons’ Renaissance Technologies had at least 2,800 securities with a total value of $25.6 billion as of June 30, 2011. We prepared a list of 25 stocks that Jim Simons has initiated new positions during the second quarter of 2011 (see Simons’ top holdings here).

Stock

Value

P/E

Dividend Yield

Return

(Millions)

(52 Weeks)

PROCTER & GAMBLE (NYSE:PG)

253

16.4

3.3%

8.89%

JPMORGAN CHASE (NYSE:JPM)

200

7.1

3.0%

-15.37%

NOVARTIS (NYSE:NVS)

125

13.2

4.2%

4.86%

VERIZON (NYSE:VZ)

114

16.4

5.5%

22.28%

CHEVRON CORP NEW (NYSE:CVX)

78

8.7

3.1%

31.07%

ST JUDE MED INC (NYSE:STJ)

74

16.3

1.9%

18.62%

RESEARCH IN MOTION (RIMM)

72

3.8

0.0%

-48.78%

APPLIED MATLS (NASDAQ:AMAT)

57

8.0

2.8%

7.43%

KLA-TENCOR (NASDAQ:KLAC)

50

8.4

3.6%

30.25%

COOPER INDUST (CBE)

49

13.3

2.4%

4.11%

GREEN MOUNTAIN COFFEE ROASTERS (NASDAQ:GMCR)

49

105.9

0.0%

204.80%

HESS CORP (NYSE:HES)

49

7.5

0.7%

12.71%

SUNCOR ENERGY (NYSE:SU)

46

13.9

1.5%

-4.38%

LYONDELLBASELL (NYSE:LYB)

42

7.2

2.4%

54.06%

CERNER CORP (NASDAQ:CERN)

42

43.5

0.0%

71.26%

ADOBE SYS INC (NASDAQ:ADBE)

38

13.7

0.0%

-22.15%

WESTERN UN CO (NYSE:WU)

38

11.2

1.9%

-1.49%

LEVEL 3 (NYSE:LVLT)

37

0.0

0.0%

56.44%

HUDSON CITY BANCORP (NASDAQ:HCBK)

37

0.0

5.3%

-47.57%

JUNIPER NETWORKS (NYSE:JNPR)

36

19.2

0.0%

-32.86%

HOLOGIC INC (NASDAQ:HOLX)

36

0.0

0.0%

-0.06%

VALEANT (NYSE:VRX)

35

0.0

0.0%

57.89%

DOW CHEM CO (NYSE:DOW)

34

13.0

3.5%

8.14%

SONY CORP (NYSE:SNE)

34

0.0

1.5%

-33.70%

PPG INDS INC (NYSE:PPG)

34

12.4

2.9%

12.12%

Procter & Gamble is a multinational company providing a wide variety of consumer goods worldwide. PG recently traded at $64.33 and has a 3.26% dividend yield. PG gained 8.89% during the past 12 months. The stock has a market cap of $176.8 billion and P/E ratio of 16.37. Simons had $253 million invested in PG shares. Warren Buffett has the largest position in PG. Buffett had $4.9 billion invested in PG shares. Ken Fisher, Bill Miller and D.E. Shaw also have large PG positions in their portfolios.

JPMorgan Chase & Co. provides various financial services worldwide. JPM recently traded at $33.43 and has a 2.99% dividend yield. JPM lost 15.37% during the past 12 months. The stock has a market cap of $130.3 billion and P/E ratio of 7.14. Simons had $200 million invested in JPM shares. Eighty five hedge funds owned JPM during the second quarter. Hedge funds own about 4% of JPM shares. Lee Ainslie’s Maverick Capital, Jonathan Jacobson’s Highfields Capital, and Andreas Halvorsen’s Viking Global are among the hedge funds with huge JPM positions.

Novartis provides healthcare solutions. Its portfolio includes medicines, preventive vaccines and diagnostic tools, generic pharmaceuticals and consumer health products. NVS recently traded at $56.05 and has a 4.22% dividend yield. NVS gained 4.86% during the past 12 months. The stock has a market cap of $128.3 billion and P/E ratio of 13.22. Simons had $125 million invested in NVS shares.

Verizon Communications is a large telecommunications company operating worldwide. VZ announced to raise its annualized dividends per share from $1.95 to $2.00 next month, boosting its dividend yield to 5.59%. VERIZON recently traded at $36.72 and has a 5.45% dividend yield. VZ gained 22.28% during the past 12 months. The stock has a market cap of $103.9 billion and P/E ratio of 16.39. Simons had $114 million invested in VZ shares. Phil Gross' Adage Capital holds nearly $150 million of VZ.

Chevron is an American multinational energy corporation headquartered in San Ramon, California, and active in more than 180 countries. CVX recently traded at $99.63 and has a 3.13% dividend yield. CVX gained 31.07% during the past 12 months. The stock has a market cap of $199.6 billion and P/E ratio of 8.7. Simons had $78 million invested in CVX shares. Phill Gross and Robert Atchinson hold the largest positions in CVX.

St. Jude Medical provides cardiovascular and implantable neurostimulation medical devices worldwide. STJ recently traded at $43.57 and has a 1.93% dividend yield. STJ gained 18.62% during the past 12 months. The stock has a market cap of $14.4 billion and P/E ratio of 16.26. Simons had $74 million invested in STJ shares. Andreas Halvorsen’s Viking Global also increased his STJ holdings by 49% during the second quarter. Halvorsen holds $155 million worth of STJ shares.

Research In Motion Limited provides wireless solutions for the worldwide mobile communications market. RIMM recently traded at $23.93 and lost 48.78% during the past 12 months. The stock has a market cap of $12.5 billion and P/E ratio of 3.8. Simons had $72 million invested in RIMM shares.

Applied Materials Inc. is a U.S. company that provides equipment products and software to several manufacturing industries worldwide. AMAT recently traded at $11.57 and has a 2.77% dividend yield. AMAT gained 7.43% during the past 12 months. The stock has a market cap of $15.2 billion and P/E ratio of 7.98. Simons had $57 million invested in AMAT shares. Ken Fisher has the largest AMAT position, holding more than $500 Million of the stock.

Jim Simons’ new positions have either outperformed the market significantly or underperformed significantly. This implies that Jim Simons employs momentum and mean-reversion strategies. Simons is one of our favorite hedge fund managers, and we believe investors can beat the market over the long term by imitating his top stocks picks.

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

Source: Jim Simons' Q2 Stock Picks