Several weeks after the end of each quarter, hedge funds and other major investors file their 13Fs with the SEC to disclose many of their long equity positions in U.S. stocks as of the end of the previous quarter. Even though the information in 13Fs is a bit old, we have found that it is possible to use these filings to develop profitable investment strategies (for example, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year). We also like to see what top fund managers such as billionaire David Shaw of D.E. Shaw are doing- their picks can serve as initial investment ideas. Read on for our thoughts on five of D.E Shaw’s largest holdings by market value at the end of March and compare these picks to previous filings.
The fund reported a large position in the class B shares of Berkshire Hathaway Inc. (NYSE:BRK.B), Warren Buffett’s holding company. The stock trades at a considerable premium to the book value of its equity with a P/B ratio of 1.4, reflecting investors’ confidence in Buffett’s ability- and, presumably, the ability of his hand-picked successors- to continue to deliver strong returns. Berkshire Hathaway Inc. (NYSE:BRK.B) has filed its own 13F, with the holding company’s two largest positions in publicly traded stocks being its stakes in Wells Fargo & Co (NYSE:WFC) and The Coca-Cola Company (NYSE:KO). Find more of Buffett’s favorite stocks.
Shaw and his team increased their stake in Occidental Petroleum Corporation (NYSE:OXY) by 16% to a total of 4.6 million shares. Occidental Petroleum Corporation (NYSE:OXY) saw both its revenue and net income decrease in its most recent quarter compared to the same period in the previous year. However, Wall Street analysts are projecting an increase in earnings per share over the next year and a half and going by their projections for 2014 the forward P/E is 12- still a bit high, perhaps, for an oil major. Renaissance Technologies, founded by billionaire Jim Simons, owned 1.8 million shares according to its own 13F (check out Renaissance’s stock picks).
Joining Occidental as an energy stock among D.E. Shaw’s top picks was Anadarko Petroleum Corporation (NYSE:APC), with the filing disclosing ownership of 3.8 million shares. In the first quarter of 2013 Anadarko Petroleum Corporation (NYSE:APC)’s revenue grew 9% versus a year earlier, but net income fell by over 75%- likely reflecting a combination of increased production but poorer conditions in the natural gas market. The sell-side is also looking for a recovery here, and as a result Anadarko is valued at 17 times forward earnings estimates. Billionaire Dan Loeb’s Third Point is another major holder of Anadarko (research more stocks Third Point owns).
Wells Fargo & Co (NYSE:WFC)- which we’d previously mentioned as one of Berkshire’s largest holdings- rounds out our list as D.E. Shaw had 8.7 million shares in its portfolio. Investors are confident in Wells Fargo & Co (NYSE:WFC)’s own assets, giving it a premium to book at a P/B ratio of 1.4. However, the bank is valued very much in line with its peers in earnings terms with trailing and forward earnings multiples of 11. The stock pays a dividend yield of 3% at current prices. Fisher Asset Management, managed by billionaire Ken Fisher, had owned over 18 million shares of Wells Fargo & Co (NYSE:WFC) at the beginning of April.
Disclosure: I own no shares of any stocks mentioned in this article.
