In this article we will take a look at the 10 best stock picks of billionaire David Shaw for 2021. You can skip our detailed analysis of David Shaw’s history and outlook for 2021 and go directly to 5 Best Stocks to Buy According to Billionaire D.E. Shaw.
David E. Shaw is a hedge fund manager and computer scientist who founded DE Shaw and Co., a multinational investment management firm, in 1968. Shaw is worth more than $7 billion and his investment firm is famous for having developed mathematical models and using computer algorithms to take advantage of anomalies in the stock market. Shaw, a former associate professor at Columbia University, has turned away from the investment world and now focuses solely on computational biochemical research.
Last year, business publication Bloomberg reported that DE Shaw and Co had managed double digits returns in seven of the past eight years, outperforming other hedge funds by more than 8% that year with a gain of 10.5% and also improving its position on the S&P 500 Index. The hedge fund manages more than $80 billion in assets. The top 20 holdings of the hedge fund only comprise about 21% of its portfolio, with the other 79% in smaller holdings across the industry, underlining a strategy of the fund to diversify investments.
The largest holdings of the company include Amazon Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB), Mastercard Inc (NYSE: MA), Advanced Micro Devices Inc (NASDAQ: AMD), and Mcdonald’s Corporation (NYSE: MCD). It owns more than 1% of the total shares of four big technology firms and also has stakes in the entertainment, financial services, and the retail industry. Earlier this month, the fund announced that it had raised $1 billion for a fund designed to target stressed assets, financing, and special situations.
In 2020, the hedge fund returned positive returns of 19.4% to investors. The investment philosophy of the company revolves around innovation, risk assessment, and quality of staff in capital markets around the world. Shaw, the founder of the fund, is considered one of the top earners in the hedge fund industry. He has been appointed as government advisor by two US Presidents over the course of his professional life. Shaw, now 70-years-old, is also a member of the National Academy of Sciences in the US.
His hedge fund deploys unique methods to manage investments, including use of quantitative methods and computational technology to support fundamental research. The firm also uses qualitative analysis to make private investments in technology, wind power, real estate, financial services firms, and distressed company financing. The diversity of its portfolio often shields it against market volatility, cementing its rank as one of the top-performing funds year-on-year.
David Shaw’s returns stand out in the hedge fund industry which is otherwise struggling. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start our list of billionaire David Shaw’s top 10 stock picks for 2021. We used Shaw’s 13F portfolio for this analysis.
10. NIO Inc. (NYSE: NIO)
NIO Inc. (NYSE: NIO) is a Shanghai-based electric vehicle manufacturer that develops smart and high performance vehicles run on batteries. The firm also has stakes in the electric battery making business, setting up its own facility for battery manufacturing in 2020 that has helped reduce the price of the car by almost 25%. The firm was founded by William Li in 2014. Earlier this month, the company reported that it had delivered more than 7,000 EVs to consumers in March, beating sales estimates by a wide margin.
The company has a market cap of more than $62 billion and posted a revenue of more than $2.4 billion in December 2020. Last month, the stock for electric vehicle manufacturers rallied after US President Biden announced a new plan to increase government spending on clean energy vehicles. Stocks of NIO were up more than 1% after the announcement and have been on a growth trajectory since. The electric vehicle maker ranks tenth on our list of top 10 best stock picks of billionaire David E Shaw.
At the end of the fourth quarter of 2020, 34 hedge funds out of 887 in the Insider Monkey database held stakes in NIO, down from 35 out of 817 in Q3 2020. The total value of the shares held by these hedge funds in Q4 2020 was over $2.6 billion, up from $1.4 billion in the preceding quarter. As of February 2021, DE Shaw Capital Holdings held 15,415, 735 shares of NIO, with a total value of over $750 million. The hedge fund holds more than 0.66% of the total shares in the EV firm.
9. Merck & Co., Inc. (NYSE: MRK)
Merck & Co., Inc. (NYSE: MRK) is an American national pharma firm that produces medicines, vaccines, biologic therapies and animal healthcare products. The firm is most famous for selling Keytruda, the top immunology drug that is used to treat cancer patients. The market value of the firm is well in excess of $200 billion and the firm has an annual revenue of close to $50 billion. The cancer drug that the company manufactures was alone responsible for at least $11 billion in sales last year.
Last month, the firm invested close to $30 million in equipping a single-use production facility at its Science Centre in France. Earlier this month, it also completed the $1.8 billion takeover of Pandion Therapeutics. The firm has also joined the World Health Organization in recommending against the use of generic anti-parasite drugs to treat coronavirus patients. Merck ranks ninth in our list of top 10 best stock to buy in 2021 according to billionaire D.E. Shaw.
At the end of the fourth quarter of 2020, 82 hedge funds out of 887 in the Insider Monkey database held stakes in Merck, up from 80 out of 817 in Q3 2020. The total value of the shares held by these hedge funds in Q4 2020 was over $71 billion, up from $63 billion in the preceding quarter. As of February 2021, DE Shaw Capital Holdings held 9,916, 261 shares of Merck, with a total value of over $811 million. The hedge fund holds more than 0.72% of the total shares in the pharma firm.
8. Wells Fargo & Company (NYSE: WFC)
Wells Fargo & Company (NYSE: WFC) is a California-based financial services company. It is one of the largest banks in the world in terms of market capitalization. It was founded by Henry Wells and William Fargo in 1929. Wells Fargo has more than 8,000 branches across the US, and more than 13,000 ATMs in the country. The banking firm also operates globally, serving tens of millions of customers in over 35 countries. In recent years, the company has started to retreat from retail banking to step into other financial services.
The firm has a market cap of over $167 billion and posted more than $58 billion in revenue in December 2020. Last month, the company said that it had not suffered losses in a recent firesale of stocks related to Archegos Capital. Global investment firm JP Morgan had earlier voiced risks about Wells Fargo and the future of the firm under increased regulatory scrutiny. However, Wells Fargo said it had well collateralized over the firesale and was not under exposure. It ranks eighth in our list of top 10 best stocks to buy in 2021 according to billionaire D.E. Shaw
At the end of the fourth quarter of 2020, 99 hedge funds out of 887 in the Insider Monkey database held stakes in Wells Fargo, up from 90 out of 817 in Q3 2020. The total value of the shares held by these hedge funds in Q4 2020 was over $8.7 billion, up from $8.4 billion in the preceding quarter. As of February 2021, DE Shaw Capital Holdings held 28,339, 693 shares of Wells Fargo, with a total value of over $850 million. The hedge fund holds more than 0.75% of the total shares in the firm.
7. Berkshire Hathaway Inc. (NYSE: BRK-B)
Berkshire Hathaway Inc. (NYSE: BRK-B) is a Nebraska-based holdings company that owns several large businesses in the United States and also has minority stakes in many of the biggest corporations of the world. It was founded by Oliver Chace in 1839. The firm is the eighth largest publicly traded company globally. The firm is also popular because it is controlled by American business tycoon Warren Buffet. The investor is famous for making long-term investments that return handsome profits.
The holdings company has a market cap of more than $611 billion and posted more than $245 billion in revenue in December 2020. The share price of the company has increased more than 12% over the six months. Earlier this month, the firm announced that it would be offering yen-denominated bonds in multiple tranches and use the earnings for general company purposes. The bonds issued would not be listed on any securities exchange, the firm added. It ranks seventh on our list of top 10 best stocks to buy in 2021 according to billionaire D.E. Shaw.
At the end of the fourth quarter of 2020, 110 hedge funds out of 887 in the Insider Monkey database held stakes in Berkshire, up from 109 out of 817 in Q3 2020. The total value of the shares held by these hedge funds in Q4 2020 was over $20.7 billion, up from $19.5 billion in the preceding quarter. As of February 2021, DE Shaw Capital Holdings held 3,867, 971 shares of Berkshire, with a total value of over $890 million. The hedge fund holds almost 0.8% of the total shares in the firm.
6. Square, Inc. (NYSE: SQ)
Square, Inc. (NYSE: SQ) is a San Francisco-based digital payments and financial services company that was founded by Jack Dorsey and Jim McKelvey in 2009. The firm has marketed many products over the years, including the Square Reader, a device that accepted credit card payments by connecting to a smartphone through the audio jack, the Square Stand, a device that turned the Apple iPad into a point of sale system for retail transactions, and the Square Register, an actual point of sale system for small businesses that accepted card payments.
The company has a market cap of over $104 billion and reported a revenue of more than $9.5 billion in December 2020. The shares of the financial service firm have been on the rise since Keefe, Bruyette & Woods, an investment banking firm, upgraded the stock of the company in late March to Outperform from Market Perform. Sanjay Sakhrani, a KBW analyst, said that the company offered a huge opportunity to drive incremental growth and increase engagement. The investment firm set a price target of $250 for Square.
At the end of the fourth quarter of 2020, 89 hedge funds out of 887 in the Insider Monkey database held stakes in Square, up from 73 out of 817 in Q3 2020. The total value of the shares held by these hedge funds in Q4 2020 was over $8.8 billion, up from $6.5 billion in the preceding quarter. As of February 2021, DE Shaw Capital Holdings held 4,307,300 shares of Square, with a total value of over $900 million. The hedge fund holds more than 0.8% of the total shares in the entertainment firm.
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Disclosure: None.10 Best Stocks to Buy According to Billionaire D.E. Shaw for 2021is originally published on Insider Monkey.
