Billionaire David Shaw’s Fund Boosts Exposure to Yahoo, Allergan & Others

D. E. Shaw & Co. was founded in 1988 by David E. Shaw, who was a pioneer in the field of computational finance. The firm makes extensive use of systematic and computer driven methods in its trading activity. Shaw no longer plays a role in day-to-day decision making, but retains a role in high-level strategic decisions. D. E. Shaw’s funds are currently run by an Executive Committee, which consists of four members that have been with the firm for two decades. At the end of the first quarter, the firm had more than $85 billion in assets under management, of which $55.7 billion were assigned to its equity portfolio. The fund’s latest 13F filing shows a large exposure to technology and consumer discretionary sectors, which amount to 20% and 19% of the portfolio respectively. In this article we’ll take a look at five noteworthy changes made by D. E. Shaw’s managing committee during the quarter.

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Yahoo! Optimism

D. E. Shaw’s investment in Yahoo! Inc. (NASDAQ:YHOO) dates back to the fourth quarter of 2006, making it one of the oldest position among the current top 10. During the first quarter the fund’s management team boosted their investment by 134% to a little over 19 million shares worth more than $700 million. Activist investor Jeffrey Smith is still betting on Yahoo! Inc. (NASDAQ:YHOO) with his fund, Starboard Value, having increased its stake by 74% to 12.3 million shares valued at $452 million at the end of March. One of Yahoo!’s directors, Smith has been advocating for the company to spin off its interest in e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) for a long time. Since Yahoo!’s management hesitated to do so due to high tax liabilities, Smith launched a proxy fight to remove the entire board of directors and the CEO, Marissa Mayer. The two parties reached an agreement and Starboard was awarded four director seats at the end of April. It is now expected that Yahoo! Inc. (NASDAQ:YHOO) will continue to search for a buyer of its core assets.

Is Allergan Heading Up?

Pfizer Inc. (NYSE:PFE)’s failed takeover of Allergan plc Ordinary Shares (NYSE:AGN) has not deterred D. E. Shaw’s interest in the pharmaceutical giant. According to its latest 13F filing, the fund increased its exposure to Allergan by 153% to 2.29 million shares worth $613 million at the end of the first quarter. Tiger Cub Andreas Halvorsen chose to distance himself from Allergan plc Ordinary Shares (NYSE:AGN) and dumped approximately 20% of Viking Global’s stake, taking it to 4.88 million shares reportedly worth $1.31 billion. Pfizer Inc. (NYSE:PFE) announced it would not complete the $160 billion takeover of Allergan in the beginning of April, as lawmakers closed some loops in the US tax laws that allowed US companies to change their domicile overseas in order to reduce their tax burdens. The stock fell 15% following the announcement and continued to fall until it found support at the $200 level. Shares are currently trading at $226.5 apiece, down 26% for the year.

Head over to the next page to find out about three other stocks D. E. Shaw’s management is bullish on.

Valued at more than $476 million, D. E. Shaw’s stake in Priceline Group Inc (NASDAQ:PCLN) has been almost doubled over the course of the first quarter to 369,668 shares. Stephen Mandel, on the other hand, chose to reduce his exposure to this stock, having trimmed his fund’s stake by 5% during the same period of time. According to its latest 13F filing, Lone Pine Capital holds 791,637 shares of Priceline Group with an estimated value of $1.02 billion. Priceline Group Inc (NASDAQ:PCLN)’s better-than-expected first quarter results were overshadowed by its weak outlook for the second quarter. The company said it expects earnings to range between $11.60 and $12.50 per share, below analysts’ estimates of $14.98 per share. First quarter revenues rose by 17% year-over-year to $2.15 billion, while the profit stood at $10.54 per share. Priceline Group Inc (NASDAQ:PCLN) also reported strong growth numbers: gross bookings were up by 26%, while room nights booked rose by 31% in the first quarter.

Bullish On Banking

D E Shaw’s executive committee is also optimistic about the prospects of Citigroup Inc (NYSE:C) and have upped their interest during the quarter. The fund currently holds 9.4 million shares valued at $392 million according to its latest 13F filing. Harris Associates, run by Natixis Global Asset Management, has built a massive position in Citigroup Inc (NYSE:C) over the course of the first quarter, amassing 28.7 million shares of the banking giant. Worth more than $1.19 billion, Harris Associates’ holding of the stock is the largest among the funds followed by Insider Monkey. The stock fell sharply in the beginning of 2016 and, although they regained some of the lost ground in the recent rally, shares are still down by 9.6% for the year. The stock is currently trading at a P/E ratio of 9, significantly lower than the industry average of 16 as reported by Yahoo! Finance. According to its 2015 annual report, Citigroup Inc (NYSE:C) is now focused on three development directions going forward: physical presence in high-impact locations, the development of its U.S. credit card business and the creation of Citi FinTech, a new unit meant to improve its offer of online banking services.

Big Bet on BofA

The fund’s stake in Bank of America Corp (NYSE:BAC) received a monster 1,200% boost during the first quarter and currently amounts to 25.8 million shares valued at $349 million. The second largest US bank by assets, Bank of America Corp (NYSE:BAC) managed to marginally surpass expectations in the first quarter, as profit fell by 18%. The banking giant posted $20.9 billion in revenues, down by 2.5% year-over-year, and a profit of $2.22 billion or $0.21 per share. The consensus among analysts was $20.3 billion in revenues and earnings of $0.20 per share. The management said the banks operations were affected by the global slump in commodities market, the slowdown of the Chinese economy and uncertainty regarding the pace of Fed’s interest rate increases. Ken Fisher is still betting on BofA and has boosted his investment by 1% heading into the second quarter. His fund, Fisher Asset Management, holds 43.1 million shares worth $603 million as reported in its latest 13F filing.

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