Citadel Investment Group, a Chicago, Illinois-based hedge fund, was founded by Billionaire Ken Griffin in November, 1990. Mr. Griffin started trading options quite early in life and by the time he was in his senior year at college, he was already managing $1 million of investors’ money. Starting with $4.3 million in assets under management at the time of its inception, Citadel has now grown into a behemoth of an investment firm, managing over $100 billion of investors’ money. The fund recently filed its 13F for the reporting period of June 30, revealing a U.S public equity portfolio worth over $114 billion. Although Citadel runs a fairly diversified portfolio, finance and consumer discretionary stocks are its favorites, with stocks from those sectors constituting 24% and 18% of its equity portfolio respectively. The fund had a turnover rate of 22.77% during the second quarter and its top ten holdings accounted for almost 14% of its equity portfolio. One of the key highlights of Citadel’s latest 13F filing was that the firm reduced its exposure significantly in prominent tech names which included: Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Western Digital Corp (NASDAQ:WDC).
Hedge funds and other big money managers like Mr. Griffin tend to have the largest amounts of their capital invested in large and mega-cap stocks like Apple Inc. (NASDAQ:AAPL) because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 118%, beating the broader market by over 60 percentage points through the end of April (see the details).
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Citadel reduced its position in online giant Amazon.com, Inc. (NASDAQ:AMZN) during the second quarter by 22% to 966,650 shares valued at $419.61 million as of June 30. Amazon.com, Inc. (NASDAQ:AMZN) recently surpassed Wal-Mart Stores, Inc.(NYSE:WMT) to become the world’s largest retailer by market cap. Shares of the online retailer have had a terrific rise in 2015, up by 71.29% year-to-date, led mostly by the strong performance and solid quarterly numbers reported by the company. For the second quarter, the company again blew away analysts’ estimates by reporting EPS of $0.19 on revenue of $23.18 billion, while the Street was expecting the company to report an EPS loss of $0.14 on revenue of $22.39 billion. The company has recently been embroiled in controversy regarding putting undue pressure on its employees to perform according to its expectations. Ken Fisher‘s Fisher Asset Management, which was Amazon.com, Inc. (NASDAQ:AMZN)’s largest shareholder at the end of March among the hedge funds we track, increased its holdings by 1% to over 2.49 million shares during the second quarter.
