We track 13F filings from hedge funds and other notable investors for a variety of purposes. First, we can use the included information- many of each fund’s long positions in U.S. equities as of the end of the most recent quarter- to develop investment strategies; we have found that the most popular small cap stocks among hedge funds beat the S&P 500 by 18 percentage points per year, and we think that other strategies are possible as well. We also like to look through individual filings to see top managers’ picks in a number of areas, including stocks with high dividend yields. Read on for our quick take on five of Cliff Asness’s AQR Capital Management’s picks as of the end of December which pay yields of 3.5% or higher going by current prices and recent dividend levels (or see the full list of stocks the fund reported owning)
One of AQR’s five largest positions by market value was its 5.3 million shares of AT&T Inc. (NYSE:T). The telecommunications company pays a high dividend yield of 4.7%, and also stands out for a low beta of 0.4. As such it could be a good pick for income or defensive investors. While earnings have been a little low recently compared to the stock’s valuation, forecasts from Wall Street analysts imply a forward P/E of 14 which would actually be somewhat attractive pricing. Billionaire Ken Fisher’s Fisher Asset Management reported a position of 6.1 million shares in its own 13F (find Fisher’s favorite stocks).
The fund was a heavy buyer of Hudson City Bancorp, Inc. (NASDAQ:HCBK), a $4 billion market cap bank concentrated in the New York City area, increasing its stake to a total of over 13 million shares. The yield here is just short of 4%, and there is at least something of a value case for Hudson City Bancorp as the stock trades at a discount to the book value of its equity (though the earnings multiples are not particularly low for a bank in the current environment). Clint Carlson’s Carlson Capital was also buying the stock in Q4 (research more stocks Carlson was buying).
Verizon Communications Inc. (NYSE:VZ) was another of Asness’s high yield picks, with the filing disclosing ownership of 2.4 million shares. As with AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) is highly insulated from movements in broader market indices and returns considerable cash to shareholders through dividends (the yield is 4.1%). Verizon is currently speculated to be seeking to acquire Vodafone Group Plc (ADR) (NYSE:VOD)’s minority stake in Verizon Communications Inc. (NYSE:VZ) Wireless to give it 100% ownership of the highly valuable asset. Renaissance Technologies, whose founder Jim Simons is now a billionaire, was another major shareholder of Verizon at the end of December (check out Renaissance’s stock picks).
AQR owned 1.1 million shares of Philip Morris International Inc. (NYSE:PM) per the 13F. Cigarette companies tend to generate considerable cash flow, and Philip Morris (which was formed when the old Philip Morris was split; this company concentrates on international operations while Altria Group Inc (NYSE:MO) markets the brand’s products in the U.S.) is no exception with a dividend yield of 3.5%. Some other cigarette companies pay higher yields, though in theory the international focus gives Philip Morris more growth prospects. D.E. Shaw, managed by billionaire David Shaw, increased its stake to almost 3 million shares.
Disclosure: I own no shares of any stocks mentioned in this article.
