Not Even Jim Simons’ Mathematical Models Could Pick Winning Stocks In Q3

Renaissance Technologies, led by Jim Simons, disclosed a total of 3,196 positions in its latest 13F filing for the reporting period of June 30. The fund’s public equity portfolio was valued at $44 billion on that date. Our calculations showed that the hedge fund’s long positions in 1,567 stocks with a market cap of at least $1 billion delivered a weight average returns loss of 6.02% in the third quarter, dragging the quant fund’s stock pick returns down to a loss of 2.1% for the first three quarters of the year, using the same method of calculation. RenTec, which was founded in 1982, is legendary for its pioneering use of high frequency trading, exploiting inefficiencies in the stock market and delivering monster returns. RenTec delivered an average return of 71.8% before fees from 1994 through mid-2014. Previously, we analyzed the fund’s new tech positions, including Microsoft Corporation (NASDAQ:MSFT) and Alibaba Group Holding Ltd (NYSE:BABA). In this article, we’ll take a look at RenTec’s top five stocks, in terms of value, and study their third quarter returns.

We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 118%, over two-times greater returns than the S&P 500 during the same period (see more details).

Colgate-Palmolive Company (NYSE:CL)

Shares Owned by RenTec (as of June 30): 12,590,800

Value of RenTec’s Shares (as of June 30): $823.6 million

Percentage of RenTec’s Public Equity Portfolio (as of June 30): 1.88%

Third Quarter Returns: -0.2%

Colgate-Palmolive Company (NYSE:CL) is a consumer products company, with a $58.82 billion market cap, which has suffered a 6.87% decrease in its stock price year-to-date. Recently, analysts at Deutsche Bank cut their price target for Colgate-Palmolive Company (NYSE:CL)’s stock to $65.00 from $74.00, and have a ‘Hold’ rating on it. Another investment firm that sees value in the stock is First Eagle Investment Management, which holds 4.81 million shares as of June 30.

Novo Nordisk A/S (ADR) (NYSE:NVO)

Shares Owned by RenTec (as of June 30): 14,087,000

Value of RenTec’s Shares (as of June 30): $771.4 million

Percentage of RenTec’s Public Equity Portfolio (as of June 30): 1.75%

Third Quarter Returns: -0.9%

Novo Nordisk A/S (ADR) (NYSE:NVO) had disappointing third quarter returns compared to its recent performance, though it still outperformed the market. The stock of the $114.4 billion market cap healthcare company, which is engaged in the development of pharmaceutical products, has increased by 30.4% year-to-date despite the third quarter setback. Novo Nordisk A/S (ADR) (NYSE:NVO) recently received approval from the Food and Drug Administration for two injectable insulin drugs, Tresiba and Ryzodeg. Tresiba, which is marketed in 30 countries, is expected to generate annual sales of $2.4 billion by 2020, according to Reuters. Another shareholder betting big on the company is Ken Fisher’s Fisher Asset Management, which holds 12.30 million shares as of the end of the second quarter.

Alaska Air Group Inc. (NYSE:ALK)

Shares Owned by RenTec (as of June 30): 6,045,200

Value of RenTec’s Shares (as of June 30): $389.5 million

Percentage of RenTec’s Public Equity Portfolio (as of June 30): 0.88%

Third Quarter Returns: 2.4%

Alaska Air Group Inc. (NYSE:ALK) operates Alaska Airlines and Horizon Air Industries, and has a market cap of more than $10 billion. The company’s stock has increased by over 32% year-to-date, and was one of the rare stocks to post positive returns in the third quarter. For the second quarter of 2015, Alaska Air Group Inc. (NYSE:ALK) reported net income of $230 million, representing a 46% increase over the prior-year quarter. Another firm we track that loves Alaska Air Group Inc. (NYSE:ALK) is Paul Reeder and Edward Shapiro’s PAR Capital Management, which owns 4.55 million shares as of June 30.

Domino’s Pizza Inc. (NYSE:DPZ)

Shares Owned by RenTec (as of June 30): 3,336,184

Value of RenTec’s Shares (as of June 30): $378.3 million

Percentage of RenTec’s Public Equity Portfolio (as of June 30): 0.86%

Third Quarter Returns: -4.5%

Domino’s Pizza Inc. (NYSE:DPZ) is a pizza retail chain with a market cap of $5.9 billion. The company beat Wall Street’s expectations for its second quarter by reporting income of $45.9 million, or diluted EPS of $0.81, versus the Street’s estimate of $0.79 per share. The reported diluted EPS was up by 20.9% year-over-year. However, Domino’s Pizza’s third quarter results, released this morning, missed EPS estimates of $0.74 by $0.07. Domino’s Pizza Inc. (NYSE:DPZ) is also a favorite stock of Andy Brown’s Cedar Rock Capital, which holds 2.17 million shares as of June 30.

Linear Technology Corporation (NASDAQ:LLTC)

Shares Owned by RenTec (as of June 30): 8,094,500

Value of RenTec’s Shares (as of June 30): $358 million

Percentage of RenTec’s Public Equity Portfolio (as of June 30): 0.81%

Third Quarter Returns: -8.1%

Linear Technology Corporation (NASDAQ:LLTC) is a technology company that designs, manufactures, and markets a line of analog integrated circuits worldwide. For the fiscal fourth quarter of 2015, ended June 28, the company’s net income increased by $3.0 million from a year ago to $132.7 million. Revenues were $379.5 million, up from $365.4 million reported a year earlier. Among the largest shareholders of Linear Technology Corporation (NASDAQ:LLTC) in our database is David Blood and Al Gore’s Generation Investment Management, which holds 2.35 million shares of the company.

Disclosure: None