Billionaire Cliff Asness 2023 Portfolio: Top 10 Blue Chip Value Stocks

In this article, we discuss the top 10 blue chip value stocks from billionaire Cliff Asness’ 2023 portfolio. If you want to see more of billionaire Asness’ blue chip value stocks, go to Billionaire Cliff Asness 2023 Portfolio: Top 5 Blue Chip Value Stocks.

Cliff Asness, co-founder and Chief Investment Officer (CIO) at AQR Capital Management, believes that the three-decade streak of US stock markets outperforming the global equities market could be coming to an end. He highlighted the fact that in the last three decades, the US stock markets have become relatively overvalued compared to their peers from the developed world. This can be gauged by the fact that the cyclically adjusted price-to-earnings (CAPE) ratio of US stocks was at an all-time high valuation against their European and Asian peers in 2021 and is still hovering around the same levels. These views were expressed by the billionaire in an article published in The Journal of Portfolio Management on April 28.

Mr. Asness believes that international equities become an attractive proposition when US equities are in decline. This hypothesis is backed by empirical evidence, as international equities have outperformed US equities in 96% of cases when US equity returns were below 6% and in 100% of cases when returns fell below 4%. This observation could be used towards building an effective investment strategy with the US equity markets expected to report weak returns in the coming years due to economic and political turmoil impacting them. The potential benefits of diversifying beyond US equities have also been reiterated by UBS Global Wealth Management CIO Mark Haefele.

Mr. Asness has a rich experience in the equity markets as he played an important role in developing a mathematical model to identify patterns in the stock market during the early 1990s when he was part of the quantitative research team at Goldman Sachs. At the same time, he was completing his PhD in finance at the University of Chicago. By the mid-1990s, a team under the leadership of Mr. Asness started an internal hedge fund at Goldman Sachs that generated a healthy return of 140% for its investors during the first year of its operations. This fund was eventually launched by the diversified financial services firm as the Goldman Sachs Global Alpha Fund, and within a short span of two years, Mr. Asness was leading the quantitative research team and was responsible for managing $7 billion.

In 1998, Mr. Asness embarked on a new chapter and started AQR Capital Management as a co-founder alongside David Kabiller, John Liew, and Robert Krail. AQR Capital Management soon became one of the biggest hedge funds in the world. In 2011, the hedge fund made a transition from being a quantitative hedge fund that only catered to institutional investors to an investment firm that provided mutual funds and private funds for retail investors. AQR Capital Management underwent a challenging period between 2018 and 2020 as it underperformed the broader market and reported poor returns. However, the investment firm staged a comeback in 2021 at a time when the S&P 500 Index experienced a yearly decline of 20%. Numerous funds at AQR Capital reported record performance. The long-running Absolute Return strategy yielded a return of 55% before fees. AQR Capital Management has assets under management (AUM) of roughly $100 billion as of Q1 2023. Some of the popular stocks in Cliff Asness’ AQR Capital Management’s portfolio include Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META).

Cliff Asness of AQR Capital Management

Our Methodology

We picked the top 10 blue chip value stocks with a P/E ratio of less than 15 from the Q1 2023 portfolio of Cliff Asness’ AQR Capital Management. These stocks have been ranked in ascending order of the hedge fund’s stake in them. Furthermore, we have included the number of hedge fund holders for each stock as of Q1 2023.

10. Toll Brothers, Inc. (NYSE:TOL)

Trailing P/E Ratio: 5.74x

Cliff Asness’ AQR Capital Management’s Holdings: $153,226,909

Percentage of Cliff Asness’ AQR Capital Management’s Portfolio: 0.33%

Number of Hedge Fund Holders: 37

Toll Brothers, Inc. (NYSE:TOL) is a Pennsylvania, United States-based building company. AQR Capital Management initiated a position in the stock in Q1 2011, with around 67000 shares. Presently, the hedge fund owns over 2.5 million shares in the company.

On May 23, an analyst at Credit Suisse increased the price target on Toll Brothers, Inc. (NYSE:TOL)  from $63 to $73 and maintained an Outperform rating on the stock after the company posted strong Q2 2023 results. Toll Brothers, Inc. (NYSE:TOL) stock offers an annual forward dividend yield of 1.27% as of May 23.

Here’s what Baron Funds said about Toll Brothers, Inc. (NYSE:TOL) in its Q4 2022 investor letter:

“Toll Brothers, Inc. (NYSE:TOL) is the leading luxury homebuilder in the U.S. with a capable management team as well as a large and valuable owned land portfolio. Toll Brothers is more insulated than its peers from elevated mortgage rates because 20% of the buyers of Toll homes pay 100% in cash.

At its year-end 2022 price of only $49.92/share, the company is valued at only 0.83 times our estimate of 2023 tangible book value of $60/share. Historically, Toll Brothers’ shares have been valued, on average, at 1.4 times book value and a peak multiple of approximately 2.0 times tangible book value. If the shares recover in the next few years and trade only to the company’s long-term average multiple of 1.4 times book value, Toll Brothers’ share price would increase 82% to $91 per share.”

9. Verizon Communications Inc. (NYSE:VZ)

Trailing P/E Ratio: 7.36x

Cliff Asness’ AQR Capital Management’s Holdings: $188,597,085

Percentage of Cliff Asness’ AQR Capital Management’s Portfolio: 0.41%

Number of Hedge Fund Holders: 59

On April 26, Verizon Communications Inc. (NYSE:VZ) was given a target price of $45 along with an Outperform rating at TD Cowen. Analysts at the investment firm highlighted that the positive perception of the brand aided the company in raising prices. This could play an integral role in helping Verizon Communications Inc. (NYSE:VZ) achieve its financial targets and meet guidance for the year. In Q1 2023, the company reported an increase in subscribers by 633,000. Furthermore, Verizon Communications Inc. (NYSE:VZ) anticipates a year-over-year (YoY) wireless service top-line expansion of 2.5% to 4.5% for the rest of 2023. Meanwhile, the company forecasts adjusted EPS to be in the range of $4.55 to $4.85. The midpoint of $4.70 is in line with the consensus forecast.

8. General Motors Company (NYSE:GM)

Trailing P/E Ratio: 5.02x

Cliff Asness’ AQR Capital Management’s Holdings: $195,983,416

Percentage of Cliff Asness’ AQR Capital Management’s Portfolio: 0.43% 

Number of Hedge Fund Holders: 73

General Motors Company (NYSE:GM) has revealed that it will launch an all-electric edition of its luxury full-size Cadillac Escalade SUV later this year. The announcement was made by the Detroit, Michigan-based auto manufacturer on May 22. The launch is aligned with General Motors Company’s (NYSE:GM) vision of becoming an all-electric vehicle manufacturer by the end of this decade. The company is leveraging its Ultium platform for its current and upcoming electric vehicles. The present fuel-powered Escalade is priced at $80,000 currently. However, the all-electric Hummer EV has been priced at $110,000, and this reflects that the all-electric Cadillac Escalade could be priced even higher.

7. 3M Company (NYSE:MMM)

Trailing P/E Ratio: 10.57x

Cliff Asness’ AQR Capital Management’s Holdings: $209,881,024

Percentage of Cliff Asness’ AQR Capital Management’s Portfolio: 0.46%

Number of Hedge Fund Holders: 51

3M Company (NYSE:MMM) is a Saint Paul, Minnesota-based industrial conglomerate. The company is working on simplifying its supply chain and increasing its focus on high-growth industries like electric vehicles, home improvement, and semiconductors. 3M Company (NYSE:MMM) is also streamlining its operations to control costs. The company has announced that it will reduce its headcount by 6,000 employees globally. This round of layoff is on top of the 2,500 job cuts announced at the start of the year. These job cuts would reflect a decline in global headcount by 10%. These changes are expected to result in savings of $700 million to $900 million and improve the company’s margins. During Q1 2023, 3M Company (NYSE:MMM) reported an EPS of $1.97, beating analysts’ estimates of $1.58. 3M Company (NYSE:MMM) offers an attractive annual forward dividend yield of 5.90% as of May 23.

6. Chevron Corporation (NYSE:CVX)

Trailing P/E Ratio: 8.47x

Cliff Asness’ AQR Capital Management’s Holdings: $236,987,068

Percentage of Cliff Asness’ AQR Capital Management’s Portfolio: 0.52%

Number of Hedge Fund Holders: 64

Chevron Corporation (NYSE:CVX) is a California, United States-based oil and gas multinational company. The company announced on May 22 that it intends to acquire PDC Energy, Inc. (NASDAQ:PDCE) in an all-stock deal for $6.6 billion or $72 per share. Some experts think this deal could face challenges from antitrust regulators in getting approvals. Tim Rezvan at KeyBanc sees the move as a surprise as PDC Energy decided to sell its business at an 11% premium only. If the deal is approved, the number of operators in the DJ Basin will fall from four to three.

Berkshire Hathaway was the leading hedge fund investor in Chevron Corporation (NYSE:CVX) during Q1 2023.

Here’s what Madison Funds said about Chevron Corporation (NYSE:CVX) in its Q4 2022 investor letter:

“This quarter we are highlighting Chevron Corporation (NYSE:CVX) as a relative yield example in the Energy sector. CVX is a leading integrated oil company with exploration, production, and refining operations. It is the second largest oil company in the United States with more than 70% of production volumes from oil and liquid-linked natural gas. We believe it has a sustainable competitive advantage due to its scale and low-cost position. It has a large acreage position in the Permian Basin, which is a high-quality oil field. CVX was an early mover in the Permian and did not overpay to enter the oilfield; 75% of its position has a no or low royalty rate, which gives it a cost advantage over competitors.

Our thesis is that free cash flow growth per share is expected to accelerate due to disciplined capital spending, rising Permian production volumes, and stock repurchases. The company has also made important investments in low-carbon areas like greenhouse gas reduction, carbon capture, hydrogen, and renewable fuels which we believe will pay off later in the decade as the world transitions more to renewable energy sources…” (Click here to read the full text)

In addition to Chevron Corporation (NYSE:CVX), some of the notable stocks in Cliff Asness’ 2023 portfolio include Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META).