Renaissance Technologies’ New Stock Picks Include The Boeing Company (BA)

Jim Simons, the founder of Renaissance Technologies, has since become a multi-billionaire due to the combination of the hedge fund’s large size, strong returns, and very high fees. Renaissance recently filed its quarterly 13F with the SEC, disclosing many of its long equity positions as of the end of March; while this information is a bit old, we’ve found that 1Fs can be useful sources of information for investors. Our research shows that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year, and of course the stocks top managers have been buying can serve as initial investment ideas to be researched further. Read on for our quick take on Renaissance’s five largest new positions at the end of Q1 (or see the full list of stocks the fund reported owning).

Renaissance initiated a position of 7.9 million shares in EMC Corporation (NYSE:EMC), the $51 billion market cap data storage solutions company. While EMC Corporation (NYSE:EMC) trades at 20 times its trailing earnings, and recent financial results actually show business being about flat, Wall Street analysts expect high growth in earnings per share over the next year and a half. As a result, the forward P/E is 12, and if the company did manage to hit its targets it might be close to being a value stock. Lee Ainslie’s Maverick Capital increased its stake in EMC Corporation (NYSE:EMC) by 70% last quarter, to nearly 11 million shares (check out Ainslie’s stock picks).

The fund bought 2.2 million shares of Virgin Media Inc. (NASDAQ:VMED) during the quarter, seeking to take advantage of the merger arbitrage opportunity being created by Liberty Global Inc. (NASDAQ:LBTYA)’s merger with the company. Many hedge funds like to invest in merger arb plays because the return on the investment (caused by the small difference between the acquired company’s price and the transaction price) depends on whether or not the deal closes and so the returns are independent of broader market indices. Learn more about merger arb strategies.

Macy’s, Inc. (NYSE:M) was another of Renaissance’s new stock picks with the filing disclosing ownership of 2.4 million shares. The department store has actually been doing all right so far in the face of competition from big-box discount stores and the Internet, with revenue up slightly in its most recent quarter compared to the same period in the previous fiscal year and earnings growing 20%. Analyst expectations imply a forward earnings multiple of 11. AQR Capital Management, managed by Cliff Asness, had 1.9 million shares in its portfolio according to that fund’s own 13F (find Asness’s favorite stocks).

Renaissance owned 2.4 million shares of $68 billion market cap pharmaceutical company AbbVie Inc (NYSE:ABBV). With a dividend yield of 3.7%, AbbVie Inc (NYSE:ABBV) is a potential income stock (although the same could be said for many other Big Pharma stocks). While earnings multiples are low the sell-side is actually looking for EPS to decline, and so we’d be cautious in evaluating the company’s business. Billionaire Dan Loeb’s Third Point moved heavily into AbbVie Inc (NYSE:ABBV) between January and March, closing the quarter with a total of nearly 3 million shares (research more stocks Loeb was buying).

Rounding out the hedge fund’s largest new positions is its 1.1 million shares of The Boeing Company (NYSE:BA). The aircraft manufacturer carries trailing and forward P/Es of 19 and 14, respectively, demonstrating that analysts expect earnings to pick up as the Dreamliner aircraft’s safety troubles have passed. Net income was up significantly in the first quarter of 2013 versus a year earlier but this was due to a lower effective tax rate rather than higher pretax income. Viking Global, managed by billionaire Andreas Halvorsen, bought over 12 million shares during Q1 giving the fund over $1 billion invested in the company. See Halvorsen’s stock picks.

Disclosure: I own no shares of any stocks mentioned in this article.