We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including Renaissance Technologies, the highly successful hedge fund which has made founder Jim Simons a multi-billionaire. We’ve found that 13Fs can be useful in developing investment strategies; for example, the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about our small cap strategy). Even though the most recent 13Fs are often old by now (the most recent ones generally disclose many of a fund’s long equity positions as of the end of March), we can also look for stocks which a fund has owned for a longer period of time and treat these as free initial investment ideas. Read on for our thoughts on five of Renaissance’s largest positions from its most recent filing which it also owned at least $100 million of at the end of March 2011 (or see the full list of Renaissance’s picks over time).
The fund owned around 11 million shares of Eli Lilly & Co. (NYSE:LLY) according to the filing. The $55 billion market cap drug manufacturer looks interesting from the perspective of an income or defensive investor, with a beta of 0.4 and a dividend yield of 3.8%. We would note that earnings per share are expected to be lower in 2014 than they have been on a trailing basis, implying a forward P/E of 19; that seems high for a stable company. Eli Lilly & Co. (NYSE:LLY) was one of the five largest single-stock holdings of billionaire Stanley Druckenmiller in his most recent 13F (find Druckenmiller’s favorite stocks).
Another low beta stock that Renaissance has liked over the long term is Colgate-Palmolive Company (NYSE:CL). The personal products company trades at 24 times trailing earnings, which seems high considering how mature its business is; revenue only rose 3% in the first quarter of 2013 versus a year earlier, with net income actually falling. The sell-side expects improvements on the bottom line next year, but even the forward earnings multiple of 19 seems expensive. Lansdowne Partners, which is run by Sir Paul Ruddock and Steve Heinz, owned 3.9 million shares of Colgate-Palmolive Company (NYSE:CL) at the end of the first quarter of 2013.
McDonald’s Corporation (NYSE:MCD) has been another of the fund’s long term stock picks with 4.6 million shares in its portfolio per the most recent filing and 1.8 million shares two years prior. The stock carries trailing and forward P/Es of 19 and 16 respectively, a discount to many other quick services restaurants but expensive in absolute terms as the company has shown little change on both top and bottom lines. We’d note that it is another potential defensive pick with a beta of 0.3. The Bill and Melinda Gates Foundation Trust was another major shareholder in McDonald’s Corporation (NYSE:MCD) (research more stocks the trust owns).
Renaissance disclosed ownership of 2.6 million shares of Novo Nordisk A/S (ADR) (NYSE:NVO), a Danish pharmaceutical company with a market capitalization of $89 billion. That places its valuation at 23 times its trailing earnings. While recent reports have shown significant increases in sales and net income, analysts apparently expect only limited growth in profits for the near to medium term. Fisher Asset Management reported owning 2.7 million shares of Novo Nordisk A/S (ADR) (NYSE:NVO) at the end of March 2013; that asset management firm is run by billionaire Ken Fisher (see more stocks Fisher liked).
Disclosure: I own no shares of any stocks mentioned in this article.
