This article discusses the 10 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.
With this in mind, let’s now head over to the best stocks to buy from the Renaissance Technologies portfolio.
An investor looking at a stock market board at a financial exchange with the Polish Equity Market index in the foreground.
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).
Renaissance Technologies Portfolio: 10 Best Stocks To Buy:
10. Tesla, Inc. (NASDAQ:TSLA)
Stake Value as of Q2 2024: $405,935,979
Tesla, Inc. (NASDAQ:TSLA) is an American automotive and clean energy corporation, headquartered in Austin, Texas. The company is a pioneer in the EV industry and has significantly contributed to the global shift toward sustainable transportation through its electric cars.
During Q2 2024, the company generated a revenue of $25.5 billion, up 2.3% year-over-year. However, its profit margin of 5.8% slumped to a five-year low. Net income for the quarter was also down 45% from the same period in 2023 to a total of $1.48 billion with adjusted earnings of $0.52 per share, missing analysts’ forecasts of $0.62.
It was a tumultuous quarter for Tesla, Inc. (NASDAQ:TSLA) financially, where it saw its margins get hammered due to hefty investments ($2.27 billion) in artificial intelligence and steep discounts offered by the company to drive auto sales. Elon Musk also admitted during the Q2 earnings call in July that the entry of new, cheaper competing electric vehicles in the market, has made it ‘a bit difficult’ for Tesla. Moreover, the delay in expansion work at Giga Mexico amid political uncertainty around the outcome of the upcoming presidential elections, and a two-month postponement of Robotaxi’s launch, has led to some investor pessimism around the stock.
On the other hand, there were also numerous positives to take out from the quarter. The company has reported progress in Full Self-Driving technology and expects the 12.5 version to have five times the parameters of 12.4 and merge the highway and city stacks. A more affordable model of Tesla, to compete with other reasonably priced EV alternatives, is also likely to be launched during the first half of 2025. Musk has also announced increase in the capacity of Tesla’s existing factories in the US and expects the Robotaxi to be produced at the headquarters in Giga Texas.
Tesla, Inc. (NASDAQ:TSLA)’s Energy business also proved to be a bright spot, with sales doubling year-over-year to reach around $3 billion. Gross profit margins were also up 6% from last year to reach 24.5% for the quarter. The demand for Tesla’s energy storage solutions is likely to remain strong, say experts, as it is closely tied to the broader infrastructure and technological trends.
Tesla, Inc. (NASDAQ:TSLA) is one of the best stocks to buy from the Renaissance Technologies portfolio. The hedge fund had invested nearly $406 million in the company, as of Q2 2024, representing 0.68% of the portfolio.
9. Broadcom Inc. (NASDAQ:AVGO)
Stake Value as of Q2 2024: $472,213,011
Broadcom Inc. (NASDAQ:AVGO) is a leading developer, manufacturer, and supplier of semiconductor and infrastructure software products. The company is headquartered in Palo Alto, California. It offers a wide range of products and services, including wireless chips, AI networking solutions, and other related accessories for 5G-compatible smartphone manufacturers. Broadcom also sells optical components to companies in the automotive and industrial space.
The company’s diverse revenue stream ensures that it earns hefty revenues across quarters, and this has provided it a major competitive edge in the semiconductors industry. During Q3 2024, revenue increased 47% year-over-year to a total $13.1 billion for the quarter. Profit also surged 44% compared to the same period last year, which enabled the company to post an EPS of $1.24, which beat analysts’ expectations of $1.22 per share. The strong results were driven by a significant increase in AI revenue, the stabilization of non-AI semiconductor sales, and ongoing acceleration in VMware bookings.
Broadcom Inc. (NASDAQ:AVGO) acquired cloud computing company, VMware, in November last year. This is already yielding positive results through increased revenue in the infrastructure software segment. During Q3, the segment generated $5.8 billion in revenues, up 200% from the previous year. Of this, $3.8 billion was contributed by VMware. Investors are confident that the integration of VMware will drive further growth in the company in the times ahead. Mar Vista Focus strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.
Broadcom ended Q3 with $10 billion in cash, which has further fueled bullish sentiment around the stock. The company is also actively striving to address its debt, and as part of these efforts, replaced $5 billion of floating rate notes with new fixed senior notes and used proceeds from the sale of VMware’s End-User Computing business to lower the floating rate by another $4.2 billion. On the other hand, reports of the company being in negotiations with ChatGPT-maker, OpenAI, on the development of a new artificial intelligence chip have also bolstered optimism among investors.
While the expectation of a dip in consolidated gross margins during Q4 due to a higher revenue mix of semiconductors has resulted in concern in some sectors, the overall outlook for the company is positive. There is consensus among Wall Street analysts on the stock’s Strong Buy rating, with a share price upside potential of 9.5%.
During the second quarter of this year, Renaissance Technologies amplified its portfolio by acquiring 294,115 shares of Broadcom Inc. (NASDAQ:AVGO), valued at over $472 million. The company now makes up about 0.8% of the hedge fund’s portfolio, making it one of the best stocks to buy from the Renaissance Technologies portfolio.
8. 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.
7. Meta Platforms, Inc. (NASDAQ:META)
Stake Value as of Q2 2024: $527,481,878
Meta Platforms, Inc. (NASDAQ:META) is one of the largest technology companies in the world. Headquartered in Menlo Park, California, it owns numerous popular social media platforms such as Facebook, WhatsApp, Instagram, and Threads. According to CEO Mark Zuckerberg, an estimated 3.2 billion people use at least one of Meta’s apps every day.
The company reported a stellar quarter in Q2 2024, with revenue soaring 22% to a total $39.1 billion, fueled by a strong show again by Meta’s Family of Apps which contributed $38.7 billion of the share. Most of this was advertisement revenue, led by online commercial vertical and gaming. Net income for the quarter was reported at $13.5 billion, which resulted in an EPS of $5.16, smashing analysts’ expectations of $4.72 per share.
The ability to generate robust advertisement revenue despite the global economic slowdown has been the catalyst behind Meta Platforms, Inc. (NASDAQ:META)’s growth. This has boosted investor confidence and resulted in a YTD share price appreciation of over 64%. Another factor driving the positive wave around the stock has been the heavy capital investment in artificial intelligence projects by the company, which has resulted in the successful launch of new products such as Meta Quest 3 and Ray-Ban Meta Glasses, whose demand has outpaced Meta’s expectations.
Meta Platforms, Inc. (NASDAQ:META) is one of the best stocks to buy now, with 219 hedge funds having investments in the company, according to Insider Monkey’s database for Q2 2024. This includes Renaissance Technologies which had a stake volume of over $527 million, as of June 30, 2024, accounting for 0.89% of its portfolio. There is also a consensus among Street analysts on the stock’s Strong Buy rating.
While the company looks set for long-term growth, there may be some headwinds on the horizon that could impact the stock’s short-term performance. One of them is the slowdown in revenue anticipated for Q3. Last year, much of the revenue was driven by a surge in Reels impressions and an increasing number of China-based advertisers on its social media platforms. That is unlikely to happen this year. Meta Platforms, Inc. (NASDAQ:META) also plans on spending a staggering $40 billion on further capital expenditure this year, which could adversely affect its short-term financials, and subsequently, its share price.
6. VeriSign, Inc. (NASDAQ:VRSN)
Stake Value as of Q2 2024: $538,324,349
VeriSign, Inc. (NASDAQ:VRSN) is a global provider of network infrastructure and domain name registry services, headquartered in Reston, Virginia. The company is the sole registry for the .com and .net domains. It is one of the best stocks to buy from the Renaissance Technologies portfolio, with the hedge fund having investments worth over $538 million in the company as of June 30, 2024.
Its share price has dropped 9.5% year-to-date, driven by a continued decrease in new domain registrations in China, and American registrars prioritizing average revenue per user (ARPU) over customer acquisition. The domain name base declined by 1.8 million names during the second quarter of 2024. New registrations stood at 9.2 million, compared to 10.2 million names in Q2 2023.
Despite that, the company’s financial performance remains robust as businesses continue to expand online presence. Revenue for the quarter reached $387 million, growing 4.1% year-over-year. Operating income was recorded at $266 million, an improvement of 7.1% from last year, while net income for the quarter stood at $199 million, growing from $186 million last year. This helped VeriSign, Inc. post earnings per share of $2.01, beating analysts’ forecasts of $1.93 per share for the quarter.
The overall outlook for the company appears positive, with the management anticipating a return to domain base growth during the second half of 2025, as it launches marketing programs to drive .com registry renewals. The company is also pursuing a new TLD in .web, which has raised investor confidence. Baron Asset Fund stated the following regarding VeriSign, Inc. (NASDAQ:VRSN) in its first quarter 2024 investor letter:
VeriSign, Inc. (NASDAQ:VRSN), a global provider of internet infrastructure and domain name registry services, manages the .com and .net domains. Shares of VeriSign declined because of continued weakness in new domain registrations, stemming largely from weaker demand in China. We believe that VeriSign maintains an exceptional competitive position and the contractual ability to raise prices. Longer term, we are encouraged by VeriSign’s opportunity to win the rights to administer the “.web” domain, produce substantial free cash flow, and generate attractive capital returns as it continues to prioritize share buybacks.
Moreover, the company enjoys a stable financial and liquidity position as it ended the second quarter with $690 million in cash and cash equivalents. Considering these factors, there is consensus among Street analysts on the stock’s Buy rating. They also expect a 17% upside in its share price.
5. United Therapeutics Corporation (NASDAQ:UTHR)
Stake Value as of Q2 2024: $692,748,137
United Therapeutics Corporation (NASDAQ:UTHR) is an American biotechnology company co-headquartered in Silver Spring, Maryland and Research Triangle Park, North Carolina. It develops novel medication to treat lung diseases and is also working on organ transplant technologies for patients in need.
The company posted a record revenue of $715 million during Q2 2024, representing a 20% increase from last year, fueled by substantial worldwide sales growth of all key products, including Tyvaso, Orenitram, Remodulin, and Unituxin. Of the total revenue, $398 million was contributed by Tyvaso, which is the number one prescribed prostacyclin treatment in the United States, when viewing the dry powder inhaler and nebulizer delivery systems together.
United Therapeutics Corporation (NASDAQ:UTHR) sees its business as the ‘three waves of success’ and is optimistic about the prospects of all three. The first is its products which are already leading the market and will carry the company forward till the mid-2020s. Second come its next-generation medications that will drive growth in the latter part of the decade. Third is the company’s organ manufacturing business which aims to transform the treatment for patients undergoing end-stage disease.
The company is currently working on the development of Ralinepag, a drug used to treat pulmonary arterial hypertension, and xenotransplantation products in the organ transplant segment, which offers tremendous potential for patients on regular dialysis. Tyvaso for pulmonary fibrosis is also undergoing clinical trials. United Therapeutics Corporation (NASDAQ:UTHR) believes the approval of these treatments can double the company’s current $3 billion revenue run rate.
At the same time, Chairperson and CEO, Martine Rothblatt, acknowledges that while United Therapeutic is doing all it can to ensure the trials are approved, the stakes remain very high. Trial results against the credibility of these treatments can prove to be a major setback for the company, amid ongoing record growth. Despite the risks, most Street analysts remain bullish on the stock and have consensus on its Buy rating.
According to Insider Monkey’s database, 42 hedge funds had investments in United Therapeutics Corporation (NASDAQ:UTHR) as of Q2 2024, up from 36 in Q1. It is one of the best stocks to buy from the Renaissance Technologies portfolio. The hedge fund had stakes valued at close to $693 million by the end of the second quarter.
