In this article we take a look at billionaire Ken Griffin’s top 10 stock holdings. You can skip our discussion of Ken Griffin’s Citadel’s performance, the GameStop episode and some important stocks bought by Citadel and go directly to Billionaire Ken Griffin’s Top 5 Stock Holdings.
Kenneth Griffin is an American billionaire and hedge fund manager who oversees Citadel LLC, which has over $35 billion in managed funds. A business enthusiast and creative genius since childhood, Griffin went to Harvard College in 1986, where he started investing. Soon, Griffin spotted inefficiencies in the convertible bonds market. To keep track of real-time stock quotes and data, Griffin convinced administrators to install a satellite dish on the roof of college building. Griffin launched his first investment fund just days after his nineteenth birthday, with $265,000.
Ken Griffin’s Role in GameStop Saga?
The billionaire is in the news for his hedge fund’s role in the GameStop saga that is rattling the U.S. markets for over two weeks now. Citadel recently injected close to $2 billion in the embattled hedge fund Melvin Capital after it sustained heavy losses amid the GameStop short squeeze. Citadel’s link to trading app Robinhood is also being questioned and scrutinized widely. Citadel is one of the biggest revenue sources of Robinhood, as the trading app allegedly shares important data with the hedge fund in exchange for money. In the first quarter of 2020, Robinhood received $100 million from Citadel Securities. In a letter to Robinhood CEO Vladimir Tenev, U.S. senator Elizabeth Warren asked the executive to explain his link with Citadel and why his app started to put restrictions on GameStop trading. The letter alleged that the hedge fund pays Robinhood to access data about stocks users on the app are buying and selling.
Short Squeeze: Silver Lining for Griffin?
Ken Griffin is also getting attention from Reddit investors for another reason. As the retail traders begun to buy silver to launch a short squeeze — pushing silver prices to their highest levels since 2013 — several members of the Reddit communities warned people to avoid doing that, as Ken Griffin’s hedge fund is one of the biggest shareholders of the iShares Silver Trust. As of Sept. 30, the fund owns about 6 million shares of the ETF.
A Master at Stock-Picking
Despite the recent controversies, Ken Griffin remains a master at stock-picking. In 2020, his investments in oil, power, natural gas and agriculture markets returned $1 billion. Citadel’s Wellington fund, which invests in stocks, bonds, commodities and other securities, was up 21.2% in 2020 through November, according to a Reuters report. Despite extreme volatility, Citadel gained 27% in 2020 through November, marking the hedge fund’s second consecutive year of double-digit returns. The hedge fund returned over 30% in 2019. Over the last two years, Citadel bought assets several collapsing and distressed hedge funds, including Amaranth Advisors LLC and Sowood Capital Management LP.
Ken Griffin of Citadel Investment Group
With this context in mind, let’s take a look at billionaire Ken Griffin’s top 10 stock holdings. We used the hedge fund’s 13F data for this analysis.
10. Bank of America Corp (NYSE: BAC)
Bank of America ranks 10th on the list of billionaire Ken Griffin’s top 10 stock holdings. Citadel increased its stake in the bank by 25% in the third quarter. The fund now owns 15.48 million shares of the company. The total value of this stake is $372.99 million.
Bank of America on Feb. 3 said it plans to invest $15 billion in affordable housing over the next five years, tripling its commitment to the affordable housing market. With the new plans, the company plans to reach about 60,000 new home buyers.
Related Article: 5 Best Financial Advisory Firms To Buy Now
9. Micron Technology, Inc. (NASDAQ: MU)
Citadel is one of the 79 hedge funds tracked by Insider Monkey having stakes in Micron. The fund owns 8 million shares of the semiconductor company. The total value of this stake is $375.75 million. Micron shares are gaining ground after Samsung said that a strong recovery in the DRAM market is expected.
Micron recently posted upbeat fiscal Q1 results. The company’s CEO Sanjay Mehrotra said that the company is excited about the DRAM industry fundamentals.
Here’s what Bonsai Partners said about MU shares in their Q3 Investor Letter:
“New Investment: Micron Technology (Nasdaq: MU)
Situation Overview
If there’s one investment mistake I’ve made multiple times in my career it’s accepting lower quality businesses available at attractive prices. I hope I’m not repeating this mistake again with Micron.
Acquiring a low-quality business at a great price usually does not lead to great investment returns, but neither does a great business at a low-quality price. You have to have both to earn superior returns.
I view Micron’s share price is quite attractive, but I also believe the business is transitioning from being mediocre to rather good. If that happens, attractive returns should follow.
Historically, Micron has not been kind to shareholders, and its shares are currently priced to reflect this. However, I believe that the nature of the DRAM industry has structurally changed for the better.
From a high-level, what makes Micron attractive is how essential it is to human progress. Without getting too professorial, humanity has had multiple waves of productivity gains over the past 12,000 years.
The first big improvement in productivity came from the agricultural revolution, which allowed humans to shift from hunting and gathering into high productivity farming and the division of labor.
The second wave of human productivity came from the industrial revolution, which harnessed machines to perform repetitive tasks on our behalf.
We are now in the third wave of human productivity: the information age. Like the machines of the industrial revolution, silicon chips are now automating and simplifying information-driven tasks.
Each of these waves relied on certain enabling resources; those that had them thrived, and those that did not fell behind. In the agricultural revolution, the enabling resources were arable land and nutrient-rich grains. In the industrial revolution, it was fossil fuels. And in the information revolution, it is silicon chips.
If you’re wondering why the United States government recently imposed restrictions on Chinese use of U.S. semiconductor technology (such as in the case of Huawei) – this action is like taking control of the world’s oil fields during the industrial revolution. It’s a way to keep China in check and maintain dominance of the global economy.
Micron makes memory; the chips that allow a computing system to store information (either temporarily or on a longer-term basis). Memory chips are quite different from the most commonly thought of semiconductors: logic chips, which have the job of processing data. Memory chips don’t process data, instead, their job is to feed data into processing chips, similar to a hopper in a factory, or a storage unit. Without memory, computers can’t function, and human productivity stalls.
Similar to our investment in Taiwan Semiconductor, the key to Micron is that they are part of a small cadre that controls the means of chip production. For logic chips, most companies create their own designs but outsource their production to Taiwan Semiconductor. In memory chips, production is vertically integrated; the same companies that design the chips also make the chips.
The DRAM industry has significantly consolidated over the past 10 years, and today there are only three players of consequence remaining – Micron, SK Hynix, and Samsung. SK Hynix and Samsung are both Korean, while Micron is American (underscoring Micron’s strategic value to the west).
Each of these memory makers has invested a tremendous amount of capital and expertise into their manufacturing footprint, and without many billions in investment and unincumbered intellectual property, it’s very difficult for a new competitor to emerge. Even though Micron is the third-largest player in DRAM, its capital expenditure budget for the upcoming year is expected to be $9 billion.
Even if you have the money and the intellectual property to reach a cutting edge node, there is tremendous execution required to keep up with market leaders who have decades of experience and know-how. Without that ability, a new player will likely be left behind, chronically unprofitable, and with little to show for its massive investment.
The advantages a Chinese company can bring to the memory business (low cost of labor and lower internal margin requirements) are not meaningful if the unit economics themselves aren’t competitive. In a scale chipmaking operation, the majority of the cost base isn’t due to labor but rather the remaining production costs in each chip (determined by manufacturing yield, technology process, and scale). There is a 20-30% cost difference per chip if you aren’t on-par with your competitors, and this is a 20-40% gross margin industry!
So, from a high level, I was attracted to Micron because it’s an essential business with very high barriers that keep out competitors, but it was also available at a great price.”
Related Article: Pabrai Was Right: Micron, Hitting New Highs as Demand for Memory Chips Rise
8. Bristol-Myers Squibb Co (NYSE: BMY)
New York-based Bristol Myers Squibb is one of billionaire Ken Griffin’s top 10 stock holdings. Griffin’s hedge fund owns 7.11 million shares of the pharmaceutical company, worth $428.41 million. Overall, 124 hedge funds in Insider Monkey’s database of over 800 funds held stakes in the company at the end of September. Bristol shares gained recently after the company shared positive results for its pivotal Phase 3 trial evaluating deucravacitinib for the treatment of moderate to severe plaque psoriasis.
The Oracle of Omaha Warren Buffett’s hedge fund is one of the leading stakeholders in Bristol-Myers. At the end of the third quarter, the fund owned 29.97 million shares of the company, having a total worth of $1.81 billion.
Wedgewood Partners said the following about Bristol shares in their Q4 letter:
“Bristol-Myers Squibb recently reported accelerating sales as much of the medical services industry returned to work. The Company continues to expect double-digit earnings growth over the next few years, driven by existing drugs, in addition to a broad pipeline of new drugs and indications. While the market remains fixated on a couple of patent expirations that could occur over the next several years, we think this is well-known at this point, yet the market still undervalues a couple of key acquisitions the Company has made in the past few years, particularly Celgene, which was acquired for a song.”
Related Article: Is Bristol-Myers Squibb (BMY) Stock a Buy For 2021?
7. Wells Fargo & Co (NYSE: WFC)
Citadel increased its hold in Wells Fargo by a whopping 347% in the third quarter. The fund now owns 18.97 million shares of the financial services firm. The net value of this stake is $446.1 million. Overall, 90 hedge funds tracked by Insider Monkey were bullish on Wells Fargo at the end of the September quarter, up from 86 funds a quarter earlier.
In the fourth quarter, Wells Fargo earned $0.70 beats per share, beating the consensus by $0.07. However, revenue of $17.9 billion missed analysts’ estimates by $100 million.
Related Article: Is Wells Fargo (WFC) Stock a Buy For 2021?
6. Adobe Inc (NASDAQ: ADBE)
Adobe is one of billionaire Ken Griffin’s top 10 stock holdings, as Citadel increased its hold in the company by 63%. The fund now owns 911,695 shares of the company, having a total worth of $447.12 million. Out of the 816 hedge funds tracked by Insider Monkey, 106 held long positions in Adobe at the end of the September quarter. Goldman Sachs recently initiated coverage of Adobe (NASDAQ:ADBE) at a price target of$580.
In the fourth quarter, Adobe posted a non-GAAP EPS of $2.81, beating the analysts’ forecasts by $0.15. Revenue in the quarter jumped 14.4% to reach $3.42 billion, easily beating the Street’s estimates by $60 million.
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Disclosure: None. Billionaire Ken Griffin’s Top 10 Stocks Holdings is originally published at Insider Monkey.
