Billionaire David Siegel’s Top 10 Stock Picks

Published February 2, 2021 at 4:07 pm EST Updated September 7, 2026 at 1:22 pm EDT

In this article we discuss quant billionaire David Siegel’s top 10 stock picks.

Billionaire David Mark Siegel is an American investor, hedge fund manager and computer scientist. A computer enthusiast since childhood, Siegel is a big believer in using data, AI and machine learning in investing. He has a PhD in computer science from MIT, where he conducted research at the Artificial Intelligence Laboratory. Siegel is the cofounder of Two Sigma Investments, a quantitative hedge fund that oversees $60 billion in funds.

Siegel argues that investing needs to adapt the scientific method. In his famous piece for the WSJ titled “Quant’s Best Strategy Is From the 17th Century,” the billionaire said:

“It may be tempting to take for granted our ability to do each of these well, but don’t be fooled. Using the power of advanced algorithms and huge data sets to uncover valuable economic, behavioral, or market insights takes a classically scientific mind-set. That means basing the entire endeavor—from data collection to trade execution and beyond—on the formulation of carefully crafted hypotheses, followed by a recurring process of measurement, learning, and adjustment.”

“Looking out into the future, it is in fact quite hard to predict what might go wrong. No one anticipated that the pandemic was going to be around the corner and have the kind of global impact that it had,” the billionaire said in a CNBC segment. When asked about what could be the biggest risk possible that our society and the market economy may face for the next 5 to 10 years, he said: “I am quite concerned about the impact of the changing nature of work on the overall human experience.”

Billionaire David Siegel's Top 10 Stock Picks

David Siegel of Two Sigma Advisors

Two Sigma uses different technological techniques for its trading activities such as distributed computing, artificial intelligence, and machine learning where it processes a massive quantity of data to come up with a specific projected price for a certain security.

Seigel said that society today is building a world that is not meant for humans. “That’s what I mean by the human experience. We are supposed to be building a world that we like. Everything around us is for the purpose of us. We want to have an enjoyable life, we want to live in an environment that we find pleasant, we want to have rewarding careers, we want to have an education that is enlightening. There are all these wonderful things that we can create that will make our lives rewarding and enjoyable. But that will only happen if that’s exactly what we’re focusing on doing, ” he said.

One of the big winners in today’s world during the pandemic was the tech companies. People were able to maximize the use of technology and almost everyone was able to adapt to the changes that our present situation requires. A lot of new investments were placed in technology and these tech companies were able to accumulate a large sum of wealth either through IPO’s or prior to the company’s specific developments.

Asked about what he would suggest to a government official or to a tech company owner about things that should be created that is more meant for humans, he mentioned that a lot of people focus on the Gross Domestic Product (GDP) or the overall value of goods and services that are put together within a certain country during a particular time, as a metric to measure if people are creating a better place or doing good within their own societies. According to him, majority of us humans believe that if GDP is going up, then we seem to think that we are doing a great job. “But I think that GDP is an overly simple measure and is just one number. Quality of life is not necessarily measured or exactly correlated with GDP. In addition, GDP isn’t measuring how the rewards are actually deviated up. They might have very inequitable growth. At the very least I think everyone can agree that as society evolves into something much more influenced by technology, the benefits really have to go to a broad range of people. It can’t just go to a very small minority of the population.”

Siegel also talked about how difficult it is to measure the productivity that is present in our economy today. “It turns out that how society is doing, is just like how a business is doing, that is very hard to capture in one number. Ultimately, there are a lot of different things that you would actually need to measure to get a picture or a snapshot of how we are doing. Things concerning health, things concerning happiness and satisfaction.” In addition to that, Siegel stated that we need to measure how fairly things are being divided up among people. “So the short answer here is that, the measurement of the health of a society is a very hard problem and because it’s a hard problem, people try to oversimplify it down to 1 or 2 numbers which I think is quite inappropriate.”.

Speaking about the possible negative impact of technology on occupying people’s jobs, Siegel said: “I’m not worried about there being a lack of jobs in the future. There is plenty of work for people to do. We’re not going to run out of work. The question is that, will this be a work that people want to do? And will it be a work that pays well enough?”

For David Siegel, people can get rid of traditional employment to a large extent and one way to do that is thru creating online applications that can basically lessen the need for human work. “A good example might be Uber (UBER). You don’t really need to do much. If you want to be an Uber driver, you can get the app, and then the app will tell you what to do. It will tell you who to pick up, it will automatically collect the fares for you,” he stated while adding that people might enjoy these perks to some extent because it gives them the flexibility to work when they want to, but on the other hand, for some people, driving is a meaningful career but they aren’t really learning a new skill here and they are only bound at the algorithms that Uber has put on its application. “I’m not here singling out Uber, what I’m really trying to focus on is that we have the ability through technology to change the nature of work and these changes may not be good for people.”.

“A key part of this is to raise awareness,”. For Siegel, people should not be ‘innocent bystanders’, and that as the world changes around us, we need to be part of the process of making these changes occur in a way that we like. “If we feel that essentially we are detached from, in other words, the world will change and we don’t have any agencies, it will become something(like that) and we have to put up with what it is, I think we’re going to have a bad outcome. On the other hand, if we become essentially part of the transition, by paying attention to who are we electing and how democratic functions operate and through our own personal education, then that will lead to a better outcome,” stated Siegel.

As per Siegel, fundamentally, investments and businesses need to operate putting essentially the health of their business first. “I don’t think we can have this expectation that somehow, through corporate social responsibility, we’re going to solve all the problems of our society. It’s never worked that way in the past. That being said, I do believe that there are investment opportunities out there that will deliver excellent returns that take into account the workforce and the impact that investing will have on society.”.

Finally, Siegel talked about how big the opportunities for humans are waiting just around the corner to make our own lives better than what it was before. “I like to really emphasize that the opportunities are enormous. I am not afraid that AI is going to rule the world. I don’t think that we are on a path that is terribly regrettable. I’m quite the opposite. I’m extremely optimistic. I just think that we need to have a level of caution that makes sure that we don’t go in a direction that is really not what we want, so we have to be purposeful about this. The good news is that the technology that we are talking about here today is truly remarkable and will continue to bring enormous benefit to society.”

With Siegel’s investment ideology and philosophy in mind, let’s take a look at some of his biggest stock holdings by examining Two Sigma’s 13F holdings disclosed for the third quarter of 2020.

10. Paypal Holdings Inc (NASDAQ: PYPL)

Two Sigma loaded up on PayPal in the third quarter, increasing its hold in the payments company by a whopping 9000%. The hedge fund now owns 1.87 million PayPal shares, having a total worth of $369.25 million. BTIG analyst Mark Palmer recently upgraded PayPal stock to Buy from Neutral, citing the company’s Bitcoin and crypto service. The analyst thinks that crypto could add more than $1 billion to PayPal annual revenues by 2022.

Overall, 150 elite hedge funds tracked by Insider Monkey held stakes in PayPal entering the fourth quarter.

Wedgewood Partners said the following about PayPal in their Q4 2020 Investor Letter:

“PayPal continued its torrid pace of payment volume growth, up +38% during the quarter, driven by over 15 million new accounts (almost double the pre-pandemic rate) and continued increases in transactions per account. This led to +25% growth in revenue and hefty margin expansion as the Company continues to effectively leverage its fixed cost base. PayPal’s addressable market continues to be a multitrillion dollar opportunity, with the Company particularly focused on the faster growing and more lucrative e-Commerce channel.”

9. Merck & Co., Inc. (NYSE: MRK)

Two Sigma decreased its stake in Merck by 14% in the third quarter. Still, the fund owns 4.48 million shares of the pharmaceutical company. The total value of this stake is $371 million. The company recently said it will discontinue development of its SARS-CoV-2/COVID-19 vaccine candidates, V590 and V591. The company announced positive interim data from the Phase 2a trial in adults evaluating the safety of its oral islatravir tablet for preventing HIV infections in people who are at risk of contracting the virus.

A total of 80 hedge funds in Insider Monkey’s database held stakes in Merck entering the fourth quarter, up from 76 funds a quarter earlier.

Related Article: Top 5 Stocks Warren Buffett Just Bought

8. Procter & Gamble Co (NYSE: PG)

Two Sigma shed 27% of its stake in Procter & Gamble in the third quarter, ending the period with 2.74 million shares, worth $380.83 million. Last month, Stifel lowered Procter & Gamble stock rating to Hold from Buy, citing weaknesses in household and personal products sector. The company recently reported organic sales growth of 8%, versus the consensus estimate of 6.4%.

Donald Yacktman’s Yacktman Asset Management is one of the leading hedge funds having stakes in Procter & Gamble, with 3.14 million shares of the company.

7. AbbVie Inc (NYSE: ABBV)

Illinois-based AbbVie is one of billionaire Siegel’s top 10 stock picks. Siegel’s hedge fund entered the fourth quarter with 4.35 million shares of the company, worth $381.1 million. In January, Mizuho analyst Vamil Divan gave a Buy rating for AbbVie, with a price target of $117. The analyst brushed aside market’s concerns about the company’s impending loss of exclusivity for Humira in the U.S. The analyst is bullish on the company’s synergies and aesthetics business.

A total of 82 hedge funds tracked by Insider Monkey reported owning stakes in AbbVie, as of the end of the third quarter.

6. Tesla Inc (NASDAQ: TSLA)

Tesla is receiving love from David Siegel, as Two Sigma upped its hold in the company by 226% in the third quarter. The hedge fund now owns 955,935 shares of the company. The value of these shares is $410.11 million. Tesla shares jumped on Feb. 1 after Piper Sandler gave a $1200 price target to the stock. The firm said that Tesla has now resolved its scalability and profitability issues, and the stock can no longer be overlooked.

A total of 67 hedge funds of the 816 tracked by Insider Monkey held stakes in Tesla entering the fourth quarter. The total value of these shares is $8.2 billion (see Billionaire Chamath Palihapitiya: Tesla Can Triple or Double so Don’t Sell a Share)

5. Target Corporation (NYSE: TGT)

Two Sigma slashed its stake in Target by 25% in the third quarter. The fund now owns 2.75 million Target shares, having a total value of $432.96 million. UBS in January said that Shipt is one of the biggest assets of Target and the company could utilize it smartly in the future. UBS compared Shipt to DoorDash and said that both serve as 3P logistics providers to consumer companies. Shipt grew 300% over the holidays, the report noted. Target in January said its comp sales in November and December jumped 17.2%, Comparable digital sales in the period rose 102%.

As of the end of the third quarter, 57 hedge funds tracked by Insider Monkey held long positions in Target.

Read: Is Target (TGT) A Good Stock To Buy Now?

4. Cisco Systems, Inc. (NASDAQ: CSCO)

David Siegel turned heavily bullish on Cisco in the third quarter, as his hedge fund increased its stake in the company by 117%. Two Sigma now owns over 11 million Cisco shares, having a total worth of $433.66 million. Overall, hedge fund sentiment remained flat for Cisco in the third quarter, as 59 funds moved into the fourth quarter with Cisco on their portfolios.

Cisco is currently in the news after it announced plans to buy Acacia (NASDAQ:ACIA) for $115 per share, The companies expect to complete the deal by the end of the first calendar quarter of 2021.

Heartland Opportunistic Value Fund said the following about Cisco in its Q3 Investor Letter:

“A handful of Information Technology (IT) names have been grabbing most of the investment headlines lately, however, as a whole, the sector has been a mixed bag from a performance standpoint. The Russel 3000® Value Index highlights the dynamic where the group ended the period mostly flat. Our holdings in the space outperformed marginally but also contained a key detractor, Cisco Systems, Inc. (CSCO).

Cisco, the world’s leading computer networking provider, was down for the period after revenues from its Products and Applications business lines weakened as IT departments postponed network spending in response to COVID-19. Sales from its security line were up roughly 14% but strength in the segment wasn’t large enough to offset weakness elsewhere. Impressively, they held operating margin on a 9% revenue decline.

Wall Street’s reaction to the weak results were mixed. Some credited the company for executing well in the face of an unprecedented macro pressure on its clients, while others cited results as an indicator that Cisco is struggling in its transformation from a predominantly hardware-oriented business to one that generates recurring-revenue through software and services.

The challenges faced by Cisco strike us as a temporary setback to what has been ongoing progress in its transition to a model that generates recurring revenue and is less tied to the IT spending cycle.

We believe the positive strides made in previous quarters will resume. With the recent setback, shares are trading at an attractive 12x earnings, while generating a nearly 4% dividend yield and a free cash flow/enterprise yield of nearly 10%.”

3. Lowe`s Companies Inc (NYSE: LOW)

Two Sigma sold 12% of its existing stake in retailer Lowe’s in the third quarter. The fund now owns 2.65 million shares of the company, worth over $440 million. On Feb. 1, KeyBanc Capital Markets downgraded Lowe’s stock to Sector Weight from Overweight. The firm said in its note that while it remains positive on Lowe’s CEO Marvin Ellison’s transformation of the company operations, it sees risk ahead, especially in the DIY segment. The firm is also concerned about the stock valuation.

A total of 83 hedge funds out of the 816 tracked by Insider Monkey reported having stakes in Lowe’s at the end of the third quarter.

Pershing Square Capital Management said the following about Lowe’s in their Q2 2020 Investor Letter:

“Earlier this year, Lowe’s began to experience a significant acceleration in demand, as U.S. consumers in lock down began to invest more in their homes, which has contributed to Lowe’s year-to-date stock price increase of 40%. In recent months, Lowe’s sales have reflected unprecedented demand across the home improvement sector. Lowe’s has also benefitted from actions taken over the prior year to improve the company’s competitive position, driving additional share gains.

Lowe’s second quarter results reflected extraordinary 35% U.S. comparable sales growth, substantial operating margin expansion, and robust earnings growth. While comparable sales growth has moderated somewhat in recent months, demand patterns continue to be well above historical averages. Although it is difficult to know how much longer the elevated demand environment will persist, we believe the pandemic has provided Lowe’s with a unique opportunity to showcase its improved merchandising, greater in-stock levels, and excellent customer service to a growing base of customers. This should drive greater customer frequency and loyalty, leading to correspondingly higher same-store-sales and profit margins over the long term.

In 2020, beyond adapting the business for surging demand and the associated operational strains imposed by Covid-19, Lowe’s continues to invest behind critical strategic initiatives, including improving omnichannel capabilities. Management completed the re-platforming of its ecommerce platform earlier this year, and will now focus on enhancing online features and functionality, thereby improving the overall user experience. Lowe’s is also accelerating investments in its supply chain initiatives, a critical element of the company’s longer-term business transformation. We believe that Lowe’s continues to make substantial progress toward achieving each of management’s high-priority initiatives, which will aid Lowe’s future competitive position.

In recent quarters, Lowe’s management has begun to acknowledge its medium-term 12% operating margin target as “not the end point,” but rather “a stop along [Lowe’s] journey,” and has further noted that they believe Lowe’s “can do better than that over time.” As Lowe’s revenue productivity and margins begin to approach its best-in-class peer Home Depot, which achieved a greater than 14% profit margin last year, it will generate significant increases in profit, which, when coupled with the company’s likely soon-to-be-relaunched, large share repurchase program should lead to accelerated future earnings-per share growth.

Despite Lowe’s significant stock price appreciation, it currently trades at approximately 19 times our estimate of Lowe’s next-twelve-month earnings (vs. Home Depot at 25 times), a valuation which does not reflect its potential for significant future profit improvement. As a result, we believe that Lowe’s share price has the potential to appreciate substantially as the company continues to make progress on its business transformation.”

2. Home Depot Inc (NYSE: HD)

In the third quarter, Two Sigma cut its position in Home Depot by 8%, ending the period with 1.74 million shares of the company, worth $482.2 million. Home Depot is seeing a surge in demand as people confined to their homes in the coronavirus are spending more money and time fixing and upgrading their houses. In the third quarter, the company said its comp sales jumped 24.1%.

As of the end of the third quarter, 73 hedge funds tracked by Insider Monkey held positions in Home Depot, down from 85 funds a quarter earlier.

Ensemble Capital Management said the following about HD stock in their Q4 Investor Letter:

“A notable detractor from our performance came from our investment in Home Depot. Home Depot reported outstanding results during 2020, with the stock outperforming the S&P 500 for the full year. But after strong second and third quarter performance, the stock was down slightly in the fourth quarter, declining approximately 4%. We believe that home improvement spending will remain elevated in the years ahead as housing activity continues to rebound after years of lower than normal rates of Americans moving.”

1. Microsoft Corporation (NASDAQ: MSFT)

David Siegel’s hedge fund ended the third quarter with 3.4 million shares of the Redmond software giant. The total value of this stake is $715.53 million. The position accounts for 2% of Two Sigma’s portfolio. Two Sigma is one of the 234 hedge funds tracked by Insider Monkey that are bullish on MSFT, as of the end of the third quarter. The collective value of these stakes is $42.1 billion.

In its fiscal second-quarter earnings, Microsoft issued guidance for fiscal third quarter which was above expectations. Revenue for the Productivity and Business Processes segment is expected to total $13.35 billion -13.6 billion, above the consensus estimate of $12.9 billion.