Jim Simons (Trades, Portfolio), founder of Renaissance Technologies LLC, has released his firm's portfolio for the fourth quarter. The top trades during the quarter included major reductions in Zoom Video Communications Inc. (ZM, Financial), Bristol-Myers Squibb Company (BMY, Financial), Chipotle Mexican Grill Inc. (CMG, Financial) and AbbVie Inc. (ABBV, Financial) as well as a new buy in Nvidia Corp. (NVDA, Financial).
Renaissance Technologies is a quantitative investment management company that trades in global financial markets. The company is dedicated to adhering to mathematical and statistical methods. Investments are made using a computer algorithm and trades are conducted for Simons by his firm.
Portfolio overview
At the end of the quarter, the portfolio contained 3,342 stocks, with 572 new holdings. It was valued at $92.09 billion and has seen a turnover rate of 13%. Top holdings at the end of the quarter were Novo Nordisk A/S (NVO, Financial), Baidu Inc. (BIDU, Financial), Pinduoduo Inc. (PDD, Financial), VeriSign Inc. (VRSN, Financial) and Bristol-Myers Squibb.
By weight, the top three sectors represented are health care (20.71%), technology (15.98%) and communication services (12.01%).
Zoom
A significant reduction in the firm's holding of Zoom (ZM, Financial) represented the most impactful trade of the quarter. The firm sold 2.85 million shares to slash the holding by 54.49%. The shares traded at an average price of $445.24 during the quarter. Overall, the trade had an impact of -1.34% on the portfolio and GuruFocus estimates the total gain of the holding at 168.29%.
Zoom provides a communications platform that connects people through video, voice, chat and content sharing. The company's cloud-native platform enables face-to-face video and connects users across various devices and locations in a single meeting. The company was founded in 2011 and is headquartered in San Jose, California, and serves companies of all sizes from all industries around the world.
On Feb. 22, the stock was trading at $401.63 per share with a market cap of $117.09 billion. There is not enough data to display a GF Value Line, but the company is trading above its intrinsic value according to the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rank of 2 out of 10. There is currently one severe warning sign issued for a Sloan ratio that indicates poor quality of earnings. Despite the low profitability rank, the company boasts operating and net margin percentages that outdo the majority of competitors.
Bristol-Myers Squibb
Another large reduction was seen in the firm's Bristol-Myers Squibb (BMY, Financial) holding. The firm cut the holding by 39.56% with the sale of 12.09 million shares. During the quarter, the shares traded at an average price of $61.52. GuruFocus estimates the firm has gained a total of 12.30% on the holding and the sale had a -0.73% impact on the portfolio.
Bristol-Myers Squibb discovers, develops and markets drugs for various therapeutic areas, such as cardiovascular, oncology and immune disorders. A key focus for Bristol is immuno-oncology, where it is leading in drug development. Unlike some of its more diversified peers, Bristol has exited several non-pharmaceutical businesses to focus on branded specialty drugs, which tend to support strong pricing power.
As of Feb. 22, the stock was trading at $60.68 per share with a market cap of $136.06 billion. According to the GF Value Line, the stock is trading at a modestly undervalued rating.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 9 out of 10. There are currently five severe warning signs, including new long-term debt, assets growing faster than revenue and an Altman Z-Score placing the company in the distress column. The company's cash-to-debt ratio of 0.32 ranks it lower than 70.28% of competitors and debt has reached record levels.
Chipotle
Chipotle (CMG, Financial) also saw a large reduction during the fourth quarter. Around 545,800 shares were cut to reduce the holding by 47.92%. The shares traded at an average price of $1,312.73 during the quarter. Overall, the sale had an impact of -0.68% on the portfolio and GuruFocus estimates the total gain of the holding at 75.84%.
With $5.6 billion in systemwide sales during 2019, Chipotle Mexican Grill is the largest player in the $16 billion domestic fast-casual Mexican restaurant category. Its menu includes burritos, bowls, tacos and salads, which are made from higher-quality ingredients than those typically found at quick-service restaurants. As of September, the firm operated more than 2,700 company-owned restaurants in the United States, Canada, the United Kingdom, France and Germany.
The stock traded at $1,446.59 per share with a market cap of $40.77 billion on Feb. 22. The shares are trading at a significantly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There are currently four severe warning signs issued, including declining operating and gross margin percentages and a Beneish M-Score indicating the company is a possible manipulator of their financials. The company's cash flows decreased in 2020 despite stronger 2019 results.
AbbVie
The firm's top reductions were rounded out with the 54.99% cut in its AbbVie (ABBV, Financial) holding. The firm sold 7.4 million shares that traded at an average price of $96.24 per share during the quarter. GuruFocus estimates the firm has gained a total of 15.20% and the sale had an impact of -0.65% on the portfolio.
AbbVie is a drug company with a strong exposure to immunology and oncology. The company's top drug, Humira, represents close to half of the company's current profits. The company was spun off from Abbott in early 2013. The recent acquisition of Allergan adds several new drugs in aesthetics and women's health.
On Feb. 22, the stock was trading at $107.49 per share with a market cap of $189.58 billion. According to the GF Value Line, the stock is trading at fair value.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 8 out of 10. There are currently three severe warning signs issued for assets growing faster than revenue, poor financial strength and an Altman Z-Score of 1.35 placing the company in the distress column. The company has consistently increased revenue over the last several years, but saw net income decrease in 2020.
Nvidia
The fourth quarter also saw numerous new buys in the portfolio, including a new holding established in Nvidia (NVDA, Financial) for the first time since it was sold in the third quarter of 2020. The firm purchased 1 million shares at an average price of $535.38 per share during the quarter. Overall, the purchase had a 0.57% impact on the portfolio and GuruFocus estimates the firm has a total gain of 55.23% on the holding.
Nvidia is the leading designer of graphics processing units that enhance the experience on computing platforms. The firm's chips are used in a variety of end markets, including high-end PCs for gaming, data centers and automotive infotainment systems. In recent years, the company has broadened its focus from traditional PC graphics applications such as gaming to more complex and favorable opportunities, including artificial intelligence and autonomous driving, which leverage the high-performance capabilities of the firm's graphics processing units.
As of Feb. 22, the stock was trading at $528.51 per share with a market cap of $363.76 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. There are currently three severe warning signs issued for assets growing faster than revenue, a Beneish M-Score indicating the company may manipulate its financials and a Sloan ratio indicating poor quality of earnings. The company's return on invested capital easily supports the weighted average cost of capital, allowing value to grow alongside the company.
Disclosure: Author owns no stocks mentioned.
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