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Cliff Asness has an amazing background. He graduated with dual degrees from the University of Pennsylvania: a BS in Economics from the Wharton School and a BS in Engineering from the Moore School of Electrical Engineering. After that, he went to University of Chicago and received an MBA with high honors as well as a Ph.D. in Finance. At University of Chicago, Asness was the research assistant to Eugene Fama, the influential efficient market theorist and empiricist. Before founding AQR Capital Management in 1997, Asness worked as a managing director and director of quantitative research in the Asset Management Division of Goldman Sachs. Today, his AQR Capital manages approximately $25 billion in assets. Asness has authored articles about different financial topics and received many awards for his papers. He has also been awarded the James R. Vertin Award from the CFA Institue, which is “presented periodically to recognize individuals who have produced a body of research notable for its relevance and enduring value to investment professionals.”

We like Asness. We think he is a great hedge fund manager and is worth following. Below we compiled a list of top 20 positions in the 13F portfolio of AQR Capital as of September 30.

Company Name

Ticker

Value

Activity

EXXON MOBIL CORP

XOM

171953

46%

CHEVRON CORP NEW

CVX

118044

17%

MICROSOFT CORP

MSFT

113819

15%

APPLE INC

AAPL

110643

81%

PROGRESS ENERGY INC

PGN

108156

52%

A T & T INC

T

107612

27%

JOHNSON & JOHNSON

JNJ

107098

5%

CONSTELLATION ENERGY

CEG

103018

69%

PROCTER & GAMBLE CO

PG

102674

25%

B J S WHOLESALE CLUB

BJ

97261

439%

WAL MART STORES INC

WMT]

86257

10%

CONOCOPHILLIPS

COP

85426

20%

PFIZER INC

PFE

81848

45%

NALCO HOLDING CO

NLC

80033

New

MEDCO HEALTH SOLNS

MHS

77431

535%

DISCOVER FINANCIAL

DFS

75748

14%

MOTOROLA SOLUTIONS

MSI

71684

15%

INTL BUSINESS MACHS

IBM

70670

34%

AMGEN INC

AMGN

69264

13%

COCA COLA CO

KO

67915

37%

Asness reduced his 13F portfolio’s value from $15.1 billion at the end of June to $13.6 billion at the end of September. He also reduced the number of positions in his fund. The fund sold out many large positions in the third quarter, including Ensco Plc (NYSE:ESV), United States Steel Corp (NYSE:X), and EXCO Resources Inc (NYSE:XCO).

On the other hand, AQR Capital also opened a few new positions in the third quarter. For example, the fund initiated a brand new $80 million position in Nalco Holdings Company (NYSE:NLC). In the first two months of the fourth quarter, the stock returned 10.92%, versus 10.45% for SPY. AQR Capital also bought new stakes in Netlogic Microsystems Inc (NASDAQ:NETL), and Emdeon Inc (NYSE:EM).

AQR Capital’s biggest bets were energy giants Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX). AQR had $172 million invested in XOM, up 46% from the end of June, and $118 million invested in CVX, up 17% from the end of the second quarter. Both stocks outperformed the market in the fourth quarter. XOM returned 11.43% and CVX returned 11.93% so far since the end of September. These two stocks are also very popular among hedge funds. For instance, Ken Fisher’s Fisher Asset Management invested over $500 million in XOM, and Bill Miller’s Legg Mason Capital Management had $125 million invested in CVX.

Other large positions held by Asness’ AQR Capital Management include Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), Progress Energy Inc (NYSE:PGN), AT&T Inc (NYSE:T), Johnson & Johnson (NYSE:JNJ), Constellation Energy Group Inc (NYSE:CEG), and Procter & Gamble Co (NYSE:PG).

Most of Asness’ top stock picks, such as XOM, CVX, MSFT, AAPL and T, are quite popular among hedge funds. Among these positions, XOM and CVX are doing well so far in the fourth quarter. The other three stocks underperformed the market. However, Apple outperformed the market by around 20 percentage points this year and T outperformed during the sharp declines this August and September.

Asness’ large positions are concentrated in energy and technology sectors, which we think are attractively priced. Asness also has large positions in dividend stocks with solid, stable business. Our research has shown that investors are likely to outperform the market over the long term by imitating best stock picks of hedge fund managers such as Cliff Asness.

Source: Solid Stock Picks by AQR's Cliff Asness