In this piece, we will take a look at Medallion's Fund's strategy, returns, and holdings. If you want to skip out on the details about the fund's manager, its history, and performance, then head on over to Medallion Fund Strategy, Returns, and Holdings: Top 5 Stock Picks.
Out of the different investment strategies that hedge funds and institutional managers use to invest in the stock market, one approach is quantitative investment. This strategy, as the name suggests, relies heavily on mathematics to make investment decisions. Simply put, the strategy involves determining the probabilities of stock performance and balancing the portfolio accordingly. This includes calculating variables such as the standard deviation of a stock's returns and then comparing this data with a broader set to make decisions.
The 'guru' of quantitative investing in the hedge fund industry is none other than Jim Simons of Renaissance Technologies. His journey on the stock market has made him one of the richest people in the world. According to Forbes Magazine, Jim Simons was worth a stunning $28 billion as of July 2023, which comfortably places him as the 49th richest person in the world.
The source of Jim Simons' unimaginable wealth is his hedge fund Renaissance Technologies. The hedge fund offers its customers a pick of several different funds to invest in. These include its flagship Medallion Fund, the Institutional Diversified Alpha Fund, the Institutional Diversified Global Equity Fund, and the Institutional Equities Fund. Out of these, the Medallion Fund is Renaissance's flagship product and also one of its most successful to date.
We've been covering Mr. Simons and his different funds for quite some time now. For instance, the Equities Fund gained a whopping 25.6% in the first eight months of 2011 and 5.4% in August alone. Our detailed analysis of Renaissance Technologies' performance in August 2011 revealed that the biggest stocks in his portfolio actually performed better than the full portfolio when compared to the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). While the S&P ETF had lost 5.1% during the month, the complete portfolio of Renaissance Technologies made of more than 1,500 stocks actually lost 4.9%. This performance improved when the focus was narrowed down to the top 50 stocks, which ended up losing less than half of the S&P 500 ETF with -1.6% returns. This analysis also showed what a magician Mr. Simons is when it comes to quantitative trading, as he beat the market when it was going up, and then beat it again when it was going down since the RIEF itself had returned 5.4% in August 2011. To find out more on that you can read our detailed analysis here: The Mystery Behind Jim Simons’ Amazing August Returns.
This wizardry has been the focus of a lot of attention, whether it's from investors, journalists, or even academics. Estimates suggest that the Medallion Fund has made tens of billions of dollars since being set up. For instance, until March 2020, the fund had generated annualized average returns of a whopping 66%, with Renaissance Technologies itself having generated more than $100 billion in profits between 1988 and 2020. However, the performance divergence between different funds managed by Renaissance has also created a bit of controversy for Mr. Simons and his hedge fund in the past. These became pronounced in 2009 in the aftermath of the financial crisis as the investing environment became fraught in general. In a conference call with fund managers, investors asked them why the Equities Fund had lost 17% between January and April 2009 while an internal fund exclusive to the billionaire and other Renaissance managers had actually diverged and returned 12%. The equities fund was flush with capital from new investors as it was the first to accept money in over a decade after the Medallion Fund was closed to outside investors.
So, what's going on in the Renaissance world right now? Well, Mr. Simons retired from managing the daily affairs of the fund in 2010 and stepped down as an executive chairman in 2021. And the fund seems to be doing quite well even without its legendary investor. Insider Monkey's research shows that as of March 2023, the cumulative value of all investments made by the fund in its portfolio to the Securities and Exchange Commission stood at a cool $75.3 billion. However, the tech heavy side of the portfolio did see some shakeup since Q1 2022, as the portfolio had stood at $85 billion back then.
During the first quarter of 2023, Renaissance Technologies had actually added positions in more than 400 companies. The biggest new position was in the industrial conglomerate Honeywell International Inc. (NASDAQ:HON), with Renaissance Technologies, adding a $349 million stake in the company. Crucially though, it seems like the quantitative hedge fund has had enough of investing in the world's biggest technology firm Apple Inc. (NASDAQ:AAPL). Renaissance Technologies had held a massive $922 million stake in Apple by the end of December 2022, and Q1 saw the fund cut this stake down to just $1.5 million. Does this mean that the world's premier quantitative trader believes that Apple's shares have no magic left in them? You be the judge.
With these details in mind, let's take a look at some top stock picks of Renaissance Technologies, out of which the notable names are Amazon.com, Inc. (NASDAQ:AMZN), Novo Nordisk A/S (NYSE:NVO), and Gilead Sciences, Inc. (NASDAQ:GILD).
Medallion Fund Strategy, Returns, and Holdings
Jim Simons of Renaissance Technologies
Our Methodology
To compile our list of the Medallion Funds' top stock picks, we used data from Renaissance Technologies' top stock picks for the first quarter of this year. This is because Medallion is a private fund whose investments are not categorically listed on a public platform. However, the Q1 2023 data does show where the $75 billion portfolio is headed.
Renaissance Technologies Investment In Q1 2023: $526 million
Chevron Corporation (NYSE:CVX) is one of the largest oil companies in the world. Renaissance Technologies increased its stake in the company by 156% in Q1 2023, and it owned 3.2 million shares that were worth $526 million during the time period. The firm's shares are rated Buy on average, and its EPS and analyst EPS estimates have been dropping over the past few quarters as the energy boom subsides.
As of March 2023, 64 of the 943 hedge funds part of Insider Monkey's database had bought and owned Chevron Corporation (NYSE:CVX)'s shares. While Renaissance Technologies owned a $526 million stake in the company, its largest investor was Warren Buffett's Berkshire Hathaway with a $21 million investment.
Just like Novo Nordisk A/S (NYSE:NVO), Amazon.com, Inc. (NASDAQ:AMZN), and Gilead Sciences, Inc. (NASDAQ:GILD), Chevron Corporation (NYSE:CVX) is a top Renaissance Technology stock pick.
Renaissance Technologies Investment In Q1 2023: $550 million
The Boeing Company (NYSE:BA) is one of the biggest aerospace companies in the world. Jim Simons' investment firm grew its stake in the firm by a massive 1,076% in Q1 2023. Perhaps this was the right time, as The Boeing Company (NYSE:BA) has started to reap the dividends from a recovery in global travel, with its commercial shipments growing by 12.4% in April.
By the end of this year's first quarter, 52 of the 943 hedge funds polled by Insider Monkey had bought and invested in The Boeing Company (NYSE:BA). Among these, the largest shareholder is Ken Fisher's Fisher Asset Management through a stake worth $926 million.
Renaissance Technologies Investment In Q1 2023: $586 million
The Hershey Company (NYSE:HSY) is a household name known for its confectionery products. Despite an inflationary environment, the company had held its ground well and beaten analyst EPS estimates for all of its previous four quarters.
Jim Simons' Renaissance Technologies owned 2.3 million The Hershey Company (NYSE:HSY)'s shares as of March 2023, allowing it to own a $586 million stake. Along with him, 44 of the 943 hedge funds surveyed by Insider Monkey had also invested in the firm, out of which Renaissance was the largest investor.
Renaissance Technologies Investment In Q1 2023: $672 million
VeriSign, Inc. (NASDAQ:VRSN) is a technology company that provides backend internet services to websites. It's seen mixed reactions from analysts recently, with two downgrades to Neutral, two upgrades to Outperform, and two Buy ratings.
Out of the 943 hedge funds part of Insider Monkey's database, 37 had owned VeriSign, Inc. (NASDAQ:VRSN)'s shares during this year's first quarter. During the same time period, Jim Simons' Renaissance Technologies had invested $672 million in the firm, which is dwarfed by Warren Buffet's Berkshire Hathaway's $2.7 billion investment.
Renaissance Technologies Investment In Q1 2023: $685 million
UnitedHealth Group Incorporated (NYSE:UNH) is one of the largest healthcare plans and associated services providers in America. It is a rare stock on our list whose shares are rated a Strong Buy on average; perhaps influenced by the fact that the firm has been beating analyst EPS estimates heftily as of late.
Jim Simons' investment firm owned a $685 million stake in UnitedHealth Group Incorporated (NYSE:UNH) during 2023's March quarter. During the same time period, 116 of the 943 hedge funds surveyed by Insider Monkey had also invested in the company with the largest investor being Rajiv Jain's GQG Partners through its $2.2 billion investment.
Amazon.com, Inc. (NASDAQ:AMZN), UnitedHealth Group Incorporated (NYSE:UNH), Novo Nordisk A/S (NYSE:NVO), and Gilead Sciences, Inc. (NASDAQ:GILD) are some top Renaissance Technologies stock picks.