While many hedge funds struggled during 2014, Ken Griffin‘s Citadel Investment Group delivered strong results with its flagship fund, Citadel Wellington up by about 18%. Since 20% of Citadel Investment Group’s holdings were in the the information technology sector, it makes it worthwhile to look at Griffin’s picks among tech stocks. Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Priceline Group Inc (NASDAQ:PCLN) are the top candidates in this regard.
Ken Griffin founded Citadel Investment Group in 1990 with $4.2 million in assets under management. As of December last year, the market value of the fund alone stood at $82.66 billion. His flagship fund delivered returns of 2.73% during January this year, against the backdrop of a 3% decline in S&P 500 during the same month. Griffin’s resilience in the investment world is awe-inspiring. Even after losing losing 55% during the financial crisis, the investment manager came back with a bang, delivering 20% returns in 2011 alone. Apart from technology, two other pronounced sectors in his portfolio include consumer discretionary, with 22% of holdings and finance accounting for another 15% of his positions. His portfolio remains well diversified as top 10 holdings only constitute 7.79% of the market value of his equity holdings.
Following the top picks of distinguished portfolio managers like Griffin might seem like a natural choice for any retail investor. However, our research has shown that it is not these large cap companies wherein lies the possibility of exceptional returns, but rather the small cap picks of hedge funds. After analyzing 13F filings between 2009 and 2012 we discovered that 50 of the most popular hedge fund picks during this period underperformed the S&P 500 by nearly 7.0 basis points per month. On the other hand if you take 15 most popular small cap stocks among hedge funds during the same period, they outperformed the market by nearly 1.0 percentage point during the same period.
Facebook Inc (NASDAQ:FB) received a bump of about 681,400 shares during the fourth quarter, taking Citadel’s stake of the social network company to 5.24 million shares valued at $408.6 million. The company represented 4.8% of the fund’s portfolio value at the end of 2014. Facebook Inc (NASDAQ:FB) has also become increasingly popular among the hedge funds that we track, with 118 funds having an aggregate investment of $7.9 billion in the company as compared to 104 funds with $8.92 billion in the previous quarter. Philippe Laffont of Coatue Management owned 7.18 million shares valued at $598.97 million.
While still rejoicing the 2 million active advertisers mark that Facebook reached last month, Facebook Inc (NASDAQ:FB) is hit by a possible class action lawsuit. A federal judge has ruled that the company must replenish the funds used by children on the website without their parents’ knowledge. Facebook’s photo video sharing platform, Instagram has been recently the focus of quite a few analysts, who have been giving it a valuation of more than $30 billion.
Griffin purchased 1.13 million shares of Amazon.com, Inc. (NASDAQ:AMZN) during the fourth quarter , to put the total stake at 1.15 million shares valued at $358.75 million. This made Amazon the second largest technology holding in Citadel’s portfolio. The $172.66 billion company is up by about 19% year to date. Among the billionaires that we track, five had total investments worth $1.47 billion in the company. David Shaw of D E Shaw is one of them with a stake of some 818,300 shares valued at $253.96 million.
Amazon.com, Inc. (NASDAQ:AMZN)’s fourth quarter financial results were impressive and involved an Earnings per Share (EPS) of $0.45, which beat the estimates by $0.28 and revenues of $29.33 billion, which were 15% higher on a year over basis, fell short of estimates by $340 million.
Citadel held about 9.7 million shares valued at $1.07 billion equivalent of of Apple Inc. (NASDAQ:AAPL) ‘Put’ options. Griffin decreased the stake by 13% during the fourth quarter. The fund also held ‘Call’ options underlying 5.67 million Apple shares valued at $625.79 million. Apple Inc. (NASDAQ:AAPL) held a special event this week in which it announced its partnership with HBO Now service, which provides a great promotion opportunity for Apple TV. Besides launching Apple Watch and a new MacBook with Retina display, which is the company’s thinnest and lightest to date, Tim Cook also announced that sales for the new iPhone 6 in the first quarter will top 50 million units, a 20% increase on a year over year basis.
Billionaire activist investor, Carl Icahn held a stake of 52.76 million Apple shares valued at $5.82 billion, which was also the highest holding among the hedge funds that we track. With a market cap of $722.53 billion, Apple Inc. (NASDAQ:AAPL) is up by nearly 63% during the last 52 weeks.
Derivative position on Priceline Group Inc (NASDAQ:PCLN) was decreased to a Put position equivalent to 666,400 shares valued at $759.84 million at the end of 2014. On the othe hand, Stephen Mandel of Lone Pine Capital held a long position with 1.40 million shares valued at $1.59 billion at the end of 2014. The online travel company is up by about 3.5% year to date. The company made several acquisitions during 2014 including OpenTable.com which has opened up the fast growing mobile reservations arena for Priceline Group Inc (NASDAQ:PCLN). However, Priceline still hasn’t been able to grow in the U.S. market on a rate comparable to Expedia Inc (NASDAQ:EXPE). ‘Name your own price’, Priceline’s platform where buyers make suggestions regarding the price of a product, added 40% to Priceline Group Inc (NASDAQ:PCLN)’s revenues in 2012 but could only contribute with 26% in 2014.
Disclosure: none
