Two Sigma Advisors 5 Top Stock Picks and their Performance against S&P 500 ETF (SPY)

In this article, we discuss Two Sigma Advisors 5 top stock picks and their performance against S&P 500 ETF (SPY). You can read our detailed analysis of the performance of Two Sigma Advisors go directly to read Two Sigma Advisors Top Stock Picks and their Performance against S&P 500 ETF (SPY).

5. McDonald’s Corporation (NYSE:MCD)

Two Sigma Advisors Equity Stake: $441.61 Million

Year-to-Date Performance: +1.5%

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) YTD Performance: +15.59%

Number of Hedge Fund Holders: 68

McDonald’s Corporation (NYSE:MCD) operates and franchises restaurants that offer hamburgers and cheeseburgers, chicken sandwiches and nuggets, fries, salads, shakes, frozen desserts, and sundaes. As one of the biggest restaurant chains, it also offers beverages and other beverages, as well as a breakfast menu.

McDonald’s Corporation (NYSE:MCD) is one of the consumer cyclical plays that Two Sigma has always turned to navigate the varying economic conditions. While the stock has come under pressure in recent months, it was up by 5.7% in Q1 against a 6% gain for the S&P 500 ETF (SPY) and 6.8% in Q2 against a 9.9% gain. However, McDonald’s Corporation (NYSE:MCD) dropped 11.7% in Q3 against a slide of 3.6% for the ETF. The stock accounts for 1.12% of the Two Sigma Advisors portfolio, with stakes worth $441.61 million.

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4. Microsoft Corporation (NASDAQ:MSFT)

Two Sigma Advisors Equity Stake: $491.1 million

Year-to-date Performance: +50.6%

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) YTD Performance: +15.59%

Number of Hedge Fund Holders: 300

Based in Redmond, Washington, Microsoft Corporation (NASDAQ:MSFT) is a technology company that develops and supports software services, devices, and solutions worldwide. The company offers various software solutions for enterprises, including Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Microsoft 365 Copilot. It also provides cloud computing solutions through Azure and gaming solutions through the Xbox Console.

Even as Two Sigma Advisors has been embroiled in leadership wrangles, Microsoft Corporation (NASDAQ:MSFT) has remained a top pick for gaining exposure to the artificial intelligence boom. Having invested over $13 billion in OpenAI, the company has seen its sentiments improve significantly. Consequently, the stock is up by 50.6%.

Two Sigma Advisors increased its stakes in the company in the second quarter after it gained 18.8% against a 6% gain for the S&P 500 ETF (SPY). Microsoft Corporation (NASDAQ:MSFT) was also up by 19.7% in Q2 against a 9.9% gain for the SPY ETF. However, it dropped 7% in Q3 against a 3.6% drop for the ETF. The hedge fund has been buying and selling the stock since 2010 and accounted for 1.25% of the portfolio as of Q2 2023.

Baron Technology Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2023 investor letter:

“Microsoft Corporation is the world’s largest software company. Microsoft was traditionally known for its Windows and Office products, but over the last five years, it has built an over $60 billion cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. The stock detracted from performance because Microsoft is the Fund’s largest holding and shares retreated 7.0% after strong first half performance. For the June quarter, Microsoft reported better-than-expected Azure results for the third straight period, highlighted by Azure revenue growing 27% in constant currency. Its computing division also beat expectations, with Windows revenue benefiting from an early back-to-school inventory build. Microsoft’s September quarter revenue guidance came in below Street expectations; however, with Azure effectively in line and demonstrating stabilization, but computing seeing the negative sequential impact of the pull-forward in back-to-school purchases. Looking at the big picture, Microsoft continues to execute at a high level, navigating a challenging macro backdrop while aggressively investing in long-term growth, and we remain confident that Microsoft is well positioned to leverage AI over the medium to long term as it infuses Open AI and other generative AI technologies across its entire product portfolio.”

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3. Visa Inc. (NYSE:V)

Two Sigma Advisors Equity Stake: $534.73 Million

Year-to-Date Performance: +17%

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) YTD Performance: +15.59%

Number of Hedge Fund Holders: 171

Visa Inc. (NYSE:V) is a company that Two Sigma uses to gain exposure in the financial services sector, as it operates as a technology company providing a wide array of payment solutions. The company offers credit, debit, and prepaid card products.

Visa Inc. (NYSE:V) has benefited from solid consumer spending power amid a robust economy. Likewise, it remains one of Two Sigma’s top holdings, having gained 8.6% in Q1 against a 6% gain for the S&P 500 ETF (SPY) and 5.3% in Q2 against a 9.9% gain for the ETF. While Visa Inc. (NYSE:V) was down by 2.9% in Q3, it outperformed the SPY ETF, which was down by 3.6%. The quant hedge fund has bought and sold stakes in the company since 2010 and accounted for 1.36% of the portfolio in Q2 2023.

Ensemble Capital Management’s investor letter for the third quarter of 2023 mentioned Visa Inc. (NYSE:V). Here is what is said:

“Mastercard is a company that pretty much everyone has heard of. In fact, when we meet with Ensemble’s clients, we occasionally tell them that we’re nearly certain that they are carrying a Mastercard in their wallet or purse as we speak, and if not, they are carrying a Visa Inc. (NYSE:V). Most people carry both.

People carry Mastercard and Visa because they are accepted nearly everywhere in developed markets. And they are accepted in most emerging economies, at least at locations where higher income people spend money. As a shopper you can show up at a bodega in Peru, a high end hotel in Tokyo, a truck stop in Alabama, or an ice cream cart in Milan, show them a piece of plastic and they’ll let you walk away with goods and services without any worry that they aren’t going to get paid…” (Click here to read the full text)

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2. NVIDIA Corporation (NASDAQ:NVDA)

Two Sigma Advisors Equity Stake: $723.49 Million

Year-to-date Performance: +220%

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) YTD Performance: +15.59%

Number of Hedge Fund Holders: 175

Nvidia Corporation (NASDAQ:NVDA) is a technology company that provides graphics, computing, and networking solutions. The company designs and manufactures graphics processing units for gaming and PCs. The company’s compute and networking segment offers data center platforms and systems for artificial intelligence.

Nvidia Corporation (NASDAQ:NVDA) is one of the stocks that have helped shrug off Two Sigma founder’s squabbles going by its impressive run year to date. The stock gained 93% in Q1 compared to a 6% gain in the S&P 500 ETF (SPY). The stock was also up by 52% in Q2 compared to a 9.9% gain for the ETF and a 2.6% gain in Q3 compared to a loss of 3.6% for the ETF. While Two Sigma Advisors has been buying and selling shares in Nvidia Corporation (NASDAQ:NVDA) since 2010, it started bolstering its position in the second quarter of 2023 as it benefits from the AI boom. It is the second largest holding, accounting for 1.84% of the portfolio.

Here is what Baron Opportunity Fund said about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2023 investor letter:

“NVIDIA Corporation (NASDAQ:NVDA) is a leading semiconductor company that sells chips and software for accelerated computing and gaming. Shares have nearly tripled year-to-date, as the company continues reporting unprecedented growth because of the acceleration in demand for its data center chips. After reporting revenue of $7 billion in the first quarter and providing guidance of $11 billion for the second quarter, NVIDIA reported second quarter revenue of $13.5 billion and guided for another step up in the third quarter to $16 billion, with its CFO declaring “[d]emand for our Data Center platform for AI is tremendous and broad-based across industries and customers.” We are at the tipping point of a new era of computing with NVIDIA at its epicenter. This is how CEO and founder Jensen Huang put it (during the company’s August 23 earnings call):

“[T]he easiest way to think about the demand is the world is transitioning from general purpose computing to accelerated computing…[W]hat you’re seeing companies do now is recognizing this…tipping point…recognizing the beginning of this transition, and diverting their capital investment to accelerated computing and generative AI…This isn’t a singular application that is driving the demand, but this is a new computing platform…a new computing transitioning that’s happening…A new computing era has begun. The simultaneously going through two platform transitions, accelerated computing and generative AI.””

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1. Apple Inc. (NASDAQ:AAPL)

Two Sigma Advisors Equity Stake: $1.19 Billion

Year to Date Performance: +44%

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) YTD Performance: +15.59%

Number of Hedge Fund Holders: 135

Headquartered in Cupertino, California, Apple Inc. (NASDAQ:AAPL) designs, manufactures, and sells smartphones, personal computers, tablets, wearable’s, and accessories. The company is best known for the iPhone product line and the Mac line of personal computers and wearable’s, among other hardware devices. The company also generates billions of dollars from its service segment, driven by the sale of apps on the Apple Store, Apple Music, and the Apple Arcade game subscription service.

Amid the squabbles between Siegel and Overdeck, Apple Inc. (NASDAQ:AAPL) has continued to outperform in the Two Sigma Advisors portfolio, going by the 31% gain in Q1 compared to the 6% gain of the S&P 500 ETF (SPY).

Apple Inc. (NASDAQ:AAPL) was up by 17% in Q2 against 9.9% for the ETF and down 11% in Q3, compared to a 3.6% slide for the ETF. The quant hedge fund has been buying and selling shares in the company since 2010, currently accounting for 3.02% of the portfolio.

In its Q3 2023 investor letter, Baron Technology Fund shared its insights on Apple Inc. (NASDAQ:AAPL) as follows:

“After a strong start to the year, shares of Apple Inc. partially retraced their gains this quarter. Mixed second calendar quarter financial results, with iPhone, iPad, and Wearables revenue coming in just shy of consensus expectations, coupled with elevated investor concerns about the macro economy and potential weakness in consumer spending later this year, pressured shares. Despite these quarterly fluctuations in product sales, we are encouraged by several long-term trends, including: (1) revenue from higher-margin services like the App Store, iCloud, and Apple Pay, which are growing faster than the overall business, driving better revenue visibility and higher free-cash-flow (FCF) margins; (2) continued gains in global market share in smartphones, wearables, and other hardware categories; and (3) consistent returns of capital to shareholders via share repurchases and dividends. On top of these trends in the core business, Apple is thoughtfully investing in new categories like augmented reality, search, financial services, and streaming media content. We took advantage of weakness in the quarter to add to our position in Apple.”

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