Among the myriad ways for individuals to come up with investment ideas is to review the stock holdings of a very successful hedge fund and then pick out the best of those stocks to invest in based on one's own homework and metrics.
One of the most viewed hedge fund portfolios at Stockpickr.com is that of
, a New York-based hedge fund founded 25 years ago by Jim Simons. The quantitative fund's many PhD mathematicians and statisticians use computer models to determine trends and to source investment ideas.
Its Medallion Fund is considered the most successful hedge fund in the industry, with returns reportedly 10% higher than those of George Soros. Because of its success, the firm is able to command 44% of the profits and a 5% management fee.
Stockpickr has reviewed the stocks held by Renaissance and extracted the stocks with the lowest price/earnings-to-growth, or PEG, ratios, into the
. The PEG ratio measures the
price-to-earnings (P/E) ratio in relation to the company's expected future earnings growth rate. Generally, the lower the PEG, the better the value, with a PEG below 2 considered very favorable.
The Renaissance stockholding with the lowest PEG ratio is
Royal Dutch Shell
, the Netherlands-based oil and gas company with a PEG of 0.7. The company last week announced that it bought back a significant number of its "A" shares. Royal Dutch has a P/E of 9.1 and a yield of 3.5%.
Royal Dutch Shell appears in the Stockpickr portfolio called
, due to the fact that it raised its
dividend by 14% earlier this year. Other stocks that showed up in this portfolio include
, which has a PEG of 2.5,
Bank of America
, with a PEG of 1.5, and
, at a 1.1 PEG.
Another Renaissance stock with a low PEG is
. This department store chain has a PEG of 0.8. In order to ramp up sales for the holiday season, Kohl's expanded its hours to attract more shoppers, opening at 4 a.m. instead of 5 a.m. on Black Friday. The stock has a P/E of 13.6.
Kohl's just appeared in
, a list that also includes
Abercrombie & Fitch
, with a PEG of 1,
, with a PEG of 1.2, and
, with a PEG of 1.
, with a PEG of 1.3, is another Renaissance holding. The Food and Drug Administration just accepted for review the new-drug application for asenapine, a tablet for the treatment of schizophrenia and acute mania or mixed episodes associated with bipolar disorder. Schering-Plough acquired asenapine through its recent acquisition of Organon BioSciences. Schering has a P/E of 22.7 and a yield of 0.9%.
Schering is owned by
(SWHFX), a four-star Morningstar rated fund that has generated an average annual return of 18.8% for the last five years. The fund also owns
, with a PEG of 1.6,
, with a PEG of 1.8, and
, which has a PEG of 1.4.
For the rest of Renaissance Technologies' low-PEG-ratio stocks, check out the
at Stockpickr.com. And for the fund's entire holdings, check out the
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for
The Financial Times
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
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