Jim Simons (Trades, Portfolio), founder of Renaissance Technologies LLC, has released his firm's portfolio for the first quarter of 2021. The top trades were reductions in Baidu Inc. (BIDU, Financial), Pinduoduo Inc. (PDD, Financial), Bristol-Myers Squibb Company (BMY, Financial), AbbVie Inc. (ABBV, Financial) and Chipotle Mexican Grill Inc. (CMG, 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 3,257 stocks, with 596 new holdings. It was valued at $80.38 billion and has seen a turnover rate of 20%. Top holdings at the end of the quarter were Novo Nordisk A/S (NVO, Financial), VeriSign Inc. (VRSN, Financial), Zoom Video Communications Inc. (ZM, Financial), Monster Beverage Corp. (MNST, Financial) and Atlassian Corp. PLC (TEAM, Financial).
The top three represented sectors are health care (19.39%), technology (16.21%) and communication services (12.94%).
Baidu
The largest trade of the quarter came from the firm's Baidu (BIDU, Financial) holding. The position was slashed by 62.69% with the sale of 5.38 million shares that traded at an average price of $261.90 during the quarter. Overall, the sale had a -1.27% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 57.93%.
Baidu is the largest internet search engine in China with mid-70s mobile traffic share in the search market. The firm generates 86% of revenue from online marketing services and the rest from other segments. Baidu is a technology-driven company and has been investing in artificail intelligence technology, such as autonomously driven cars.
On May 21, the stock was trading at $190.07 with a market cap of $66.04 billion. According to the GF Value Line, the shares are trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 8 out of 10. There are currently three severe warning signs issued for a declining operating margin, assets growing faster than revenue and a declining operating margin. Despite the warning sign, the company's operating margin ranks the company better than 66.73% of competitors in the interactive media industry.
Pinduoduo
The firm also cut back its Pinduoduo (PDD, Financial) holding by 62.59% during the quarter. The 4.47 million shares that were sold traded at an average price of $169.27 throughout the quarter. GuruFocus estimates the firm has gained 265.44% on the holding and the sale had a -0.86% impact on the portfolio overall.
Pinduoduo provides a platform for buyers with value-for-money merchandise and fun and interactive shopping experiences. The company's mobile platform offers a comprehensive selection of priced merchandise, featuring a social shopping experience that leverages social networks as an effective and efficient tool for buyer acquisition and engagement. The company's whole revenue is derived from within the People's Republic of China.
As of May 21, the stock was trading at $129.96 per share with a market cap of $162.34 billion. There is not enough data for the GF Value Line to be calculated, but the share price has started to trail off after peaking over $200 per share.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 1 out of 10. There are currently no severe warning signs issued for the company. Since 2016, the company's weighted average cost of capital has consistently overshadowed the return on invested capital, indicating struggles with profitability alongside a negative operating margin.
Bristol-Myers Squibb
Bristol-Myers Squibb (BMY, Financial) also saw a large reduction in the portfolio during the quarter. The holding was cut by 62.27% with the sale of 11.50 million shares. During the quarter, the shares traded at an average price of $62.18. Overall, the equity portfolio saw a -0.77% impact and GuruFocus estimates the total gain of the holding at 13.53%.
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 the company 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.
The stock was trading at $67.12 per share with a market cap of $149.87 billion. The shares are fairly valued according to the GF Value Line.
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 8 out of 10. There are currently four severe warning signs issued for the company, including new long-term debt and assets growing faster than revenue.
The company's cash-to-debt ratio of 0.28 ranks it worse than 73.83% of the industry as debt has spiked in the last few years.
AbbVie
The firm slashed its AbbVie (ABBV, Financial) holding during the quarter by 86.03% with the sale of 5.21 million shares. The shares traded at an average price of $106.92 during the quarter. The sale had an overall impact of -0.61% and the firm has gained an estimated total of 15.46% on the holding.
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 May 21, the stock was trading at $116.32 per share with a market cap of $205.45 billion. According to the GF Value Line, the shares are trading at a fair value rating.
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 five severe warning signs issued for the company, including poor financial strength and an Altman Z-Score of 1.37 indicating a higher likelihood of bankruptcy. 2020 saw the company's revenue make a large jump, but net income fell off after a consistent five-year run.
Chipotle
Rounding out the firm's top five trades was yet another reduction in its Chipotle (CMG, Financial) holding. The 339,600 shares that were sold traded at an average price of $1,447.50 during the quarter and cut the holding by 57.24%. GuruFocus estimates the total gain of the holding at 74.15% and the sale had a -0.51% impact on the portfolio.
With roughly $6 billion in systemwide sales during 2020, 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 December 2020, the firm operated more than 2,700 company-owned restaurants in the United States, Canada, the United Kingdom, France and Germany.
As of May 21, the stock was trading at $1,333.08 per share with a market cap of $37.55 billion. The shares are trading at a significantly overvalued rating as seen on 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 2 out of 10. There are currently three severe warning signs issued for assets growing faster than revenue and declining gross and operating margins. The company's free cash flow grew between 2016 and 2019, but slipped backwards in 2020.
Disclosure: Author owns no stocks mentioned.
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