Stockpickr: Top Picks From a Top Hedge Fund

In prior columns, I've mentioned how United Online(UNTD Quote) and CMGI(CMGI Quote) are also owned by Renaissance. United Online is known for being in the declining dial-up Internet access business, and CMGI is a failed Internet incubator.

Wall Street has basically abandoned them, although both companies have cleaned up their act lately. United Online has $156 million in cash in the bank, no debt, a forward P/E of 12, and is quickly redefining itself as a social network through its popular Classmates.com Web site.

CMGI has just about $200 million in net cash and a $647 million market cap, and has become a growing -- and highly profitable -- IT services firm.

The key thing for Renaissance in these positions is that it's almost impossible for either of these companies to go out of business. If you have $200 million in cash, you have no debt, you're still generating $100 million in cash every year and you have an enterprise value of $400 million, you would have to make a lot of mistakes to go under. And before that happened, activists probably would step in and clamor for changes to be made. Renaissance likely anticipates this scenario by taking positions in these types of names first.

Renaissance also owns a chunk of security software firm Symantec(SYMC Quote). The company has taken a hit over the past year because it had the right idea (buying storage firm Veritas), but the wrong execution (the integration has gone poorly). Yet the $16 billion market-cap company has almost $1.6 billion in cash flow, 25% year-over-year earnings growth, and a forward P/E of just 16, according to analysts.