In mid May, Cliff Asness’s AQR Capital Management filed its 13F with the SEC, disclosing many of the fund’s long equity positions in U.S. stocks as of the end of March. We track 13Fs from hundreds of hedge funds as part of our work developing investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy). It can also be useful to review top picks from individual managers and use these names as a source of free investment ideas. Read on for our quick take on Cliff Asness’s AQR Capital Management’s five largest holdings from the filing or see the full list of Asness’s stock picks.
The top pick in AQR’s portfolio was Exxon Mobil Corporation (NYSE:XOM) with the filing disclosing ownership of 3.2 million shares. In the current market environment the oil majors are generally trading around 10 times earnings, and in the case of Exxon Mobil Corporation (NYSE:XOM) the forward P/E is 11. While the company’s earnings were about flat last quarter compared to the first quarter of 2012, its revenue was down by over 10%. The Bill and Melinda Gates Foundation Trust was the largest holder of Exxon Mobil Corporation (NYSE:XOM) out of the filers we track, with 7.6 million shares in its portfolio at the end of Q1 (research more stocks the trust owns).
The fund reported owning 4.4 million shares of JPMorgan Chase & Co. (NYSE:JPM) at the beginning of April. The 76% gain in the bank’s stock price over the last year has swelled its market capitalization to slightly above the book value of the equity, though on an earnings basis JPMorgan is still arguably a value play. Specifically, the trailing and forward P/E multiples are 10 and 9 respectively and recent quarterly reports show that earnings have been up. JPMorgan Chase & Co. (NYSE:JPM) made our list of the ten most popular stocks among hedge funds in the first quarter of 2013 (see the full top ten list).
AQR slightly increased its stake in The Procter & Gamble Company (NYSE:PG) to a total of 2.6 million shares. The personal products company is a classic example of a defensive stock, with a beta of 0.3, a dividend yield of just over 3%, a market cap over $200 billion, and strong brand names. However, demand for safe assets has bid up the company’s earnings multiples into the high teens, even though The Procter & Gamble Company (NYSE:PG)’s stability should mean that the business has limited growth prospects. Warren Buffett’s Berkshire Hathaway is another major shareholder in Procter & Gamble (find Buffett’s favorite stocks).
Pfizer Inc. (NYSE:PFE) rounds out our list of Asness’s top stock picks. As with many other large pharmaceutical companies- as well as many of AQR’s favorite stocks in general- Pfizer Inc. (NYSE:PFE) pays an attractive dividend yield (3.5% in this case). The stock also trades at 13 times trailing earnings, and so requires little growth going forward in order to justify the current valuation; although revenue has been down, the company may be worth a look. Pfizer was billionaire Ken Fisher of Fisher Asset Management’s top pick for 2013, and that fund owned almost 31 million shares as of the end of March (here are more stocks Fisher owned).
Disclosure: I own no shares of any stocks mentioned in this article.
