We recently published a list of Renaissance Technologies Portfolio: 10 Best Stocks To Buy. In this article, we are going to take a look at where Airbnb, Inc. (NASDAQ:ABNB) stands against the other best stocks to buy which are part of the Renaissance Technologies portfolio.
Renaissance Technologies is an American hedge fund that specializes in systematic trading and employs statistical and mathematical tools to drive its investment programs. As of March 2024, the fund managed discretionary assets over $89 billion, according to their Form ADV. It was founded in 1982 by Jim Simons, a mathematician who worked as a code breaker for the US National Security Agency during the Cold War.
Simons is considered among the pioneers of quantitative investing. At the time of his death in May 2024, he had an estimated net worth of $31.4 billion, making him the 51st richest person in the world. His use of mathematical models and algorithms to drive long-term investment returns earned him a legacy that rivaled the likes of Warren Buffet and George Soros.
His signature Medallion generated average annual returns of 66% for three decades between 1988 and 2018, earning more than $100 billion in profits during the period. The fund started with charging a 5% fixed fee and also had performance charges of 20%, which were later increased to 44% in 2002. Despite those cuts, Medallion earned annual returns of around 39% on average.
The fund was closed to outside investors in 1993 and has since then only been available to past and current employees, and their families. Renaissance Technologies does have other funds that are open to outsiders, such as Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA).
Simons stepped down from active management of Renaissance Technologies in 2010 and resigned as its executive chairman in 2021. Peter Brown is the current CEO of the capital market company. He graduated with a B.A. in Mathematics from Harvard University and also holds a Ph.D. in Computer Science from Carnegie Mellon University. Brown’s father, Henry B.R. Brown, invented the Reserve Primary Fund in 1970, which was the first money market fund to be set up.
Brown is committed to the use of mathematical models to discover and unlock the value of stocks in the market. However, Renaissance hedge funds that are open to outside investors have been shrinking for some while. According to a recent report in the Financial Times, RIEF currently manages around $19.6 billion, significantly down from $35.8 billion in 2020. The collapse of RIDA and Renaissance Institutional Diversified Global Equities (RIDGE) has been even worse. The two funds were merged this year. In 2019, RIDA managed about $15 billion, while RIDGE had a portfolio of $14.3 billion. Today, the combined fund manages only $3.6 billion.
As a result, Renaissance’s external assets under management have declined from $65.1 billion in 2019 to $23.2 billion today. Much of the exodus happened following the coronavirus pandemic and was driven by a shock performance by the hedge fund as the stock market rattled. In contrast, the Medallion Fund, which is limited to past and current employees, gained 76% in 2020 despite Covid-19. This is because the fund indulges in high-frequency trading with a lower capacity, a strategy that is strikingly different from those applied for external funds.
However, the performance of external funds is beginning to stabilize after the lows over the last few years. RIEF is up 19.8% this year, while RIDA has also gained 17.4%. Though financial experts believe the improvement is owed more to the fund’s performance, rather than flows.
Methodology
We scanned Renaissance Technologies’ 13F portfolio, as of June 30, 2024 and picked the top 10 stocks according to their stake value. The figures were sourced from Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Airbnb, Inc. (NASDAQ:ABNB)
Stake Value as of Q2 2024: $515,755,026
Airbnb, Inc. (NASDAQ:ABNB) is an American company that operates an online market place to connect people looking to rent out their properties with people who are looking for accommodation for their short-and-long-term homestays across various regions of the world. It is headquartered in San Francisco, California.
During Q2 2024, the company reported a total of 125 million nights booked, resulting in an 11% year-over-year increase in revenue which reached $2.75 billion. Net income for the quarter stood at $555 million, with a net income margin of 20%. However, Airbnb missed analysts’ earnings expectations and reported an EPS of $0.86 against forecasts of $0.92 per share.
Concerns regarding a travel slowdown has led to some bearish sentiment around the stock. Airbnb, Inc. (NASDAQ:ABNB) has warned about short booking windows ahead during Q3, with an increasing number of travelers booking at the last minute amid economic uncertainty. Domestic travel in the US has also been pressured since the start of the year, as American consumers become cautious about their spending.
Despite that, most investors remain bullish on Airbnb, Inc. (NASDAQ:ABNB) primarily due to the company’s intrinsic value in being a revolutionary force in the travel industry. Being a leading player in the short-term rental market, it also benefits from strong brand recognition and loyalty. As a result, 63 hedge funds held a stake in the company, as of Q2 2024, according to Insider Monkey’s database. This was up from 56 at the end of Q1.
Factors driving the company’s favorable outlook include its strong financial position. Airbnb, Inc. (NASDAQ:ABNB) generated a free cash flow of $1 billion during the second quarter, which took its 12-month trailing free cash flow to $4.3 billion. The solid cash position is likely to allow the company increased room to grow in international markets, especially in Asia Pacific and Latin America.
Airbnb, Inc. (NASDAQ:ABNB) is one of the best stocks to buy from the Renaissance Technologies portfolio. The hedge fund had an investment of over $515 million in the company as of June 30, 2024, which represented 0.87% of the portfolio.
Overall, ABNB ranks 8th among the Renaissance Technologies Portfolio: 10 Best Stocks To Buy. While we acknowledge the potential of ABNB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ABNB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.