Stocks to invest in – Billionaire Asness’ Secret Formula Points To Apple, Microsoft, and Pfizer



Stocks to invest in –

AQR Capital Management is predominantly a quantitative equity hedge fund firm co-founded by the former Goldman Sachs portfolio manager, Clifford S. Asness, in 1997. Nevertheless, this investment management firm focuses on other traditional investing approaches as well. Clifford Asness is well-known for founding one of the earliest “quant vehicles” within Goldman Sachs called the Global Alpha fund, which was later headed by Mark Carhart. Global Alpha had grown from $100 million under management to $7billion in its first 3 years while the record return reached a figure of more than 100% after fees.

AQR -stands for “applied quantitative research”- Capital Management, which is one of the top hedge fund in the world when considering the total assets under management (AUM), has applied mathematics to market data and has made evidence-based investments across different asset classes quite successfully. Clifford Asness’ flagship Absolute Return Fund, which is the successor of Global Alpha, has generated an annualized return of 10.8% net-of-fees despite suffering destructive losses during the financial crisis of 2008 (Note: the annualized return includes the three-year returns of Global Alpha). In this article we will cover three top picks of this hedge fund, identified by Asness’ and his team’s quant strategies, that include the following companies: Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Pfizer Inc. (NYSE:PFE). It’s also worth mentioning that Apple and Pfizer have been consistently among AQR’s top picks, while Microsoft managed to make the top 3 list only recently.

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Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 144% over the ensuing 32 months, outperforming the S&P 500 Index by 84 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody. There are only a few hedge fund managers -quant hedge funds are disproportionally represented in this group- who can outperform the market by picking large-cap picks.

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Cliff Asness


AQR Capital Management, $43,756,669,000

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AQR Capital increased its equity stake in Apple Inc. (NASDAQ:AAPL) by 529,740 shares during the most recent quarter. This move augmented the hedge fund’s overall position in the largest publicly traded company in the world by market capitalization to 6.89 million shares, which are valued at $857.71 million as of March 31, 2015. One of the most captivating rumors that has been circulating around Apple is that the company intends to launch self-healing screens for the new phones in the upcoming years. This will undoubtedly boost the revenue generated from iPhones and assist the company grow bigger, since the cracked phone screens happen way too often and even Apple haters will start buying the new self-healing iPhones. Supposedly, Apple has already developed a chemical process that allows glass phone screens heal themselves. In the meantime, the stock has risen by over 14% year-to-date. The activist investor Carl Icahn, who manages the Icahn Capital hedge fund firm, is by far the largest shareholder within our database in Apple Inc. (NASDAQ:AAPL) with 52.76 million shares.

– Stocks to invest in

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