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How to Invest for Long-Term Dividend Success Like Jim Simons

March 04, 2014 | About:

Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings filed by institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC). In this article, let's concentrate on one particular hedge fund and try to see the principal holdings in its portfolio. I will look into Renaissance Technologies LLC from Jim Simons (Trades, Portfolio), a private investment firm based in New York.

Recently the fund reported its equity portfolio, as at the end of last year. The total value of the portfolio amounted to $41.75 billion, up from $41.2 billion disclosed at the end of the previous quarter. Consequently, the fund's total return was 1.3% in the last quarter. The filing revealed that at the end of last year, the fund added 497 new positions to its equity portfolio, and sold out of 462 other companies. The top ten portfolio holdings as of the end of the quarter represented 11.47%. The largest changes from the previous 13-F fillings are in the health care sector (1.2%) followed by telecom stocks (0.9%).

In this article, we have selected three companies, in which the fund holds the largest stakes, in terms of market value.

The first on the list is McDonald's Corporation (MCD), in which Renaissance disclosed a $734.6 million stake with over 7.57 million shares. McDonald's is the largest fast-food restaurant company in the world, with nearly 35,000 restaurants in 119 countries. In the last quarter of 2013, the firm reported an improvement in earnings per share in the most recent quarter compared to the same quarter a year ago. McDonald´s increased its bottom line by 0.1% when compared to the same quarter one year prior, from $1,396.1 million to $1,397 million. It has a proven commitment to returning cash to investors, with a current dividend yield of 3.25% which is considered good to protect investor´s purchasing power.

Other hedge fund gurus have also been active in the company. Paul Tudor Jones (Trades, Portfolio) and First Pacific Advisor have bought in it in fourth quarter 2013.

Johnson & Johnson (JNJ) comes in next, the fund owning over 5.5 million shares, worth $503.6 million. The company reported earnings per share increased by 35.2% in the most recent quarter compared to the same quarter a year ago. As we can see in the next chart, the bank has demonstrated a pattern of positive EPS growth over the past two years.

1393517294701.png

The company returns cash to investors; the current dividend yield is 2.9%, which is considered enough to protect the purchasing power.

In Intel Corporation (INTC) Renaissance disclosed ownership of over 11.37 million shares, worth $295.1 million. The company reported earnings per share increased by 6.5% compared to the same quarter one year prior. This company also returns cash to investors; the current dividend yield is 3.6%, which is considered good enough to protect the purchasing power.

Final Comment

In the next chart we can appreciate the stock’s price movement. All of them have an upward trend for the 10-year period.

1393517365899.png

The three stocks are certainly attractive for fundamental investors and make it a worthy investment for Renaissance Technologies’ portfolio. In future articles we are going to calculate the intrinsic value of these stocks to determine if they are a good buy in terms of valuation.

Disclosure: Damian Illia holds no position in any stocks mentioned.

About the author:

Damian Illia
A fundamental analyst at Lonetreeanalytics.com constantly looking for value and income investments.

Visit Damian Illia's Website


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