Jim Simons (Trades, Portfolio), a former military code-breaker, is 80 years old and stepped away from running the most lucrative, highest performing, hedge fund in the world back in 2009. Yet his algorithms continue to generate market-beating results. While many of the notable hedge fund managers started young, Simons was in his mid-40s when he founded RenTec, and has since built a $20 billion fortune.
More importantly, the fund takes positions in thousands of stocks, which should statistically make generating 30% annualized returns virtually impossible - but that’s what Renaissance has done. Even after high fees it has generated $55 billion in profit over the last 28 years.
That’s why investors should be keen on the current holdings by this guru, many of which have positive net current assets, and some of which have small capitalizations of less than $200 million. Here are the top four.
Transworld Entertainment (TWMC, Financial)
The fact that Transworld is still in business is impressive. The company used to be a leader in entertainment retail through FYE stores. While it still has over 200 stores, the company has adapted to the internet with its etailz business to sell across all the major online platforms. This has been on the list of NCAV plays for years.
Financials
$153.3 million in current assets
$89.7 million in total liabilities
$63.6 million net current asset value
$45.2 million market capitalization
Renaissance owns 637,400, good for a 1.76% stake.
AutoWeb Inc. (AUTO, Financial)
AutoWeb operates automotive website directories (including Autobytel) that help car dealers move inventory. It’s been around since the early 1990s when the internet started becoming mainstream, and has steadily grown into solid business generating over $137 million in annual revenue.
Financials
$42 million in current assets
$16 million in total liabilities
$26 million net current asset value
$47 million market capitalization
Renaissance owns 548,800, good for a 4.25% stake.
Bridgepoint Education Inc. (BPI, Financial)
Yes, for-profit education is still around and now that it’s not such a hot topic, those that survived can do things better this time around. Bridgepoint is one company that has survived and regained profitability. It operates Ashford (which includes the Forbes School of Business) and The University of the Rockies, because why not have two colleges? The majority of the company's revenue comes from federal financial aid programs used by its students. Again, as long as the colleges are meeting standards and not pushing financial aid like a Trump University sales rep, the company should be alright.
Financials
$246 million in current assets
$147 million in total liabilities
$99 million net current asset value
$179 million market capitalization
Renaissance owns 858,158, good for a 3.14% stake.
China New Borun Corp. ADR (BORN, Financial)
For everyone who is gluten intolerant, China New Borun Corp. makes corn-based alcoholic beverages through its two facilities in China. It’s also widely successful, generating over $27 million in net income on $340 million in sales during the last 12 months, boosting its book value to almost $2 per share. The close price yesterday was $1.29. The stock has an incredibly low price multiple, 1.2x, and announced a “going private” offer back in February for $1.67 a share.
Financials
$368.6 million in current assets
$184.3 million in total liabilities
$184.3 million net current asset value
$33 million market capitalization
Renaissance owns 615,808, good for a 2.39% stake.
The current exchange rate for yuan is 0.16 USD.
In closing
By adding Graham’s margin of safety layer on top of these trades, the two stocks that make the most sense are China New Borun Corp and Transworld. If you’re going to follow the guru investors, Jim Simons (Trades, Portfolio) is an obvious choice, but while each of these stakes represents a majority position in the respective companies, they are paltry sums to the fund itself.
Disclosure: I am not long/short any of the stocks mentioned in this article.
