In this article, we’ll explore the top 10 stock picks of William Harnisch’s Peconic Partners.
Established in 1997, Peconic Partners is a hedge fund manager based in New York, under the leadership of William Harnisch. The firm manages both its capital and that of its clients, using long/short equity hedge fund strategies. It also follows a thematic investment approach with a structured and consistent methodology, aiming to achieve positive returns over the long term regardless of market conditions.
Peconic Partners’s stock selection approach is driven by its deep experience. The Peconic Partners investment strategy has a history spanning over 40 years, originating with its predecessor firm. Peconic Partners’ long-term track record, history of capital appreciation, and past ability to generate alpha are testaments to the vision, insight, and patience derived from their experience.
William Harnisch of Peconic Partners LLC
William Harnisch is the Chief Investment Strategist at Peconic Partners. He managed Peconic Partners from the late 1970s until 1997 when the long-only business was sold to a privately-held financial services firm aiming to expand its asset management business. However, William Harnisch and his partners retained exclusive ownership of the hedge business. In December 2004, he and the current Peconic team formed Peconic Partners, continuing the successful and disciplined hedge fund strategy practiced since the late 1970s.
Mr. Harnisch’s career began in 1968 at Chase Manhattan Bank. He later joined Forstmann-Leff Associates (FLA), managing assets exceeding $5 billion and entering the hedge fund business in 1986. In 1997, he sold FLA’s long-only business and in 2004, he founded Peconic Partners to concentrate on hedged products. William Harnisch holds a B.B.A. from Baruch College and is a Chartered Financial Analyst. He is active in philanthropy through the William F. Harnisch Foundation and is a board member of the Baruch College Fund. His market insights have been featured in the Wall Street Journal and Barron’s.
In 2023, Peconic Partners LLC regained the top spot on HedgeFollow’s Top 20 Best Performing Hedge Funds list. Despite challenges like rising inflation and market volatility, Peconic Partners delivered a remarkable 191.50% performance over three years. This achievement is significant as many money managers struggled during a surprising market rally. While only 38% of large-cap mutual funds beat the market in 2023, and long-short hedge funds saw minimal gains, Peconic Partners excelled. For the fourth year in a row, the New York-based fund achieved an annual gain of 38%, three times higher than the S&P 500’s performance.
In late December of 2023, Mr. Harnisch increased bets against the SPDR S&P 500 ETF Trust and took short positions in expensive industrial stocks and consumer-product makers that have raised prices aggressively. This caused the fund’s net leverage to decrease from 50% to 33% in a few weeks, and it has continued to drop in early 2024.
Our Methodology
The companies mentioned in this article come from Peconic Hedge Fund’s top 10 stock picks at the end of the first quarter of 2024. To give readers a thorough understanding of these companies, we’ve included analyst ratings and other relevant details. We also mention the number of hedge fund investors in each company. Why focus on the stocks that hedge funds invest in? Our research shows that mimicking the top picks of the best hedge funds can lead to market-beating returns. Our quarterly newsletter’s strategy, which selects 14 small-cap and large-cap stocks each quarter, has returned 275% since May 2014, outperforming its benchmark by 150 percentage points. (see more details here)
10. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) is a leading global e-commerce platform and major player in cloud computing through Amazon Web Services (AWS), benefiting from the increasing use of cloud services by businesses. Amazon.com, Inc. (NASDAQ:AMZN) is also expanding its offerings in AI, logistics, and digital streaming, which supports its growth and market opportunities. With accelerating growth in AI cloud and advertising, management anticipates a significant increase in capital expenditure for FY2024, primarily to expand AWS infrastructure.
Amazon.com, Inc. (NASDAQ:AMZN) has demonstrated strong financial performance, with revenue rising to $514 billion in 2023 from $469 billion in 2022, and profit margins improving. Analysts note that Amazon.com, Inc. (NASDAQ:AMZN)’s EV/Sales ratio is in line with its 5-year average, and its non-GAAP P/E ratio for FY2024 is consistent with the Nasdaq 100 index. While Amazon.com, Inc. (NASDAQ:AMZN) focuses on high-growth areas like AI, cloud computing, and advertising, retail sales still account for 82.5% of its revenue. As of the end of Q1 2024, Peconic Partners had a $718K position in Amazon.com, Inc. (NASDAQ:AMZN).
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“In his annual letter to shareholders, CEO Andy Jassy underscores Amazon.com, Inc.’s (NASDAQ:AMZN) commitment to “primitive services” over the last 20 years – creating foundational building blocks that empower rapid development of higher level products and services. Examples include developing core functionalities like payments and search, which eventually led to the Fulfilled by Amazon service, or developing logistics infrastructure, which led to the Buy with Prime service. Amazon is adopting the same approach to the next front, GenAI, from custom AI chips and training/deployment services to empower companies to construct their own core GenAI models, to their Bedrock service which allows customers to use pre-existing models to more quickly develop applications, to Amazon developing their own applications for internal use (think Alexa and a new shopping AI called Rufus).
Amazon’s dominance comes not just from its scale but also from a relentless “customer obsession,” exemplified by its focus on building services that empower customers. This positions Amazon to capture significant shares of the growing retail and cloud markets. With a 45% share of online retail, which only makes up 25% of total retail sales, Amazon is well-placed for growth. The company’s expansion into the grocery sector, backed by investments in same-day delivery, shows promise. Currently, Amazon holds a 20% share of the grocery market, a segment that constitutes 34% of US retail sales but is only 12% penetrated. As online retail trends towards 40-50% penetration, Amazon’s growth potential is meaninful. Similarly, in the cloud sector, only 10% of IT spending has shifted to the cloud, with AWS holding a 35% market share.”
