D.E. Shaw’s multi-strategy hedge fund, known for pioneering quantitative investing, continues to generate robust returns for investors even in a volatile environment, thanks to its systematic and hybrid investment strategies. So far in 2023, the hedge fund has returned nearly 18% to investors, and its largest composite fund has returned 24.7% and 18.8% in 2022 and 2021, respectively. Founded in 1988, D. E. Shaw & Co. uses mathematical models and computer programs to support fundamental research and benefit from anomalies in the financial market. The hedge fund managed $109 billion in assets as of the end of the third quarter, and the value of its 13F portfolio was close to $96 billion.
The firm’s investments are spread across several sectors, with technology accounting for 28% of the total portfolio, consumer discretionary for 18%, healthcare accounting for 13%, and finance accounting for 10%. Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) are among its largest stock holdings.
D.E. Shaw, who received a doctorate in computer science and was a Columbia University faculty member researching supercomputers, entered Wall Street by joining Morgan Stanley’s automated proprietary trading group. He founded D.E. Shaw & Co. in 1988 with a seed capital of $28 million. He successfully began implementing mathematical and quantitative techniques in investment, resulting in solid returns in the early years and a net return of 26% in 1996. However, his keen interest in research and development led him to establish D.E. Shaw Research in 2002, where he has been leading a large team of scientists.
Risk management has always been very important to D.E. Shaw and his firm. Portfolio managers analyse investments first, followed by an executive committee and a chief risk officer. The fact that the firm has returned an incredible $51 billion to investors since its inception suggests that its emphasis on risk management and multiple strategies has been effective. The quantitative hedge fund produced a net return of 11.88% from 2001 to 2011. Additionally, it was able to reduce losses during the 2008 financial crisis, losing just 9% and making a 21% return the following year.
David E. Shaw of D.E. Shaw
Methodology
Considering that D.E. Shaw is among the most astute investors and has a wealth of knowledge regarding the equity markets, following his top stock recommendations can assist investors in selecting the appropriate stocks. The third-quarter 13F filings from D.E. Shaw & Co. are the source of the following data. Insider Monkey’s research indicates that hedge funds such as D.E. Shaw & Co. can produce exceptional returns on their consensus stock picks, which is why we follow them. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
15 Best Stocks to Buy in 2024 According to Billionaire D.|E. Shaw
15. The Home Depot, Inc. (NYSE:HD)
Value of D.E. Shaw’s 13F Position: $407 million
Number of Hedge Fund Shareholders: 78
The Home Depot, Inc. (NYSE:HD) is one of the best stocks to buy in 2023 due to its potential to generate solid returns for shareholders. Billionaire D.E. Shaw has also expressed confidence in The Home Depot, Inc. (NYSE:HD), increasing his stake in the home improvement retailer by 35% during the third quarter. The Home Depot, Inc. (NYSE:HD) shares are up 10% year to date, and the company pays a dividend yield of 2.40%. The Home Depot, Inc. (NYSE:HD) expects revenue in the range of $151.1 billion to $152.7 billion and earnings of $15.09 per share in 2024.
In the third quarter investor letter, Madison Investments, an investment advisor, expressed its confidence in The Home Depot, Inc. (NYSE:HD). The following is what the firm said about The Home Depot, Inc. (NYSE:HD):
“We updated the sustainable scorecard for The Home Depot, Inc. (NYSE:HD) and maintained our Above Average Rating. Home Depot’s corporate responsibilities focus on three pillars: focusing on its people, operating sustainably, and strengthening its communities. Home Depot continues to focus on its people by investing billions of dollars in wages, training, and benefit enhancement. The company’s environmental targets include the reduction of direct (Scope 1) and indirect (Scope 2) emissions by 42% by 2030, as well as a 25% decrease in emissions related to the “use of products sold” (Scope 3 emissions). Both targets are from a 2020 base year.
Separately, The Home Depot Foundation announced that it will invest $6 million in skilled trades training to address the 400,000 job openings across the construction industry. This grant launches a new program that will provide free, skilled trades training and scholarships for veterans and military families.”
14. Pfizer Inc. (NYSE:PFE)
Value of D.E. Shaw’s 13F Position: $436 million
Number of Hedge Fund Shareholders: 75
Billionaire D.E. Shaw took advantage of Pfizer Inc.’s (NYSE:PFE) steep drop in share price during the third quarter by increasing its stake in the healthcare company by 104% to $436 million. Pfizer Inc. (NYSE:PFE) appears to be facing short-term challenges as demand for COVID-related drugs declines. Pfizer Inc. (NYSE:PFE) is now forecasting lower revenue and earnings in 2024. Its revenue and earnings forecasts for 2024 fell short of Wall Street consensus estimates by nearly $3.2 billion and $1.02 per share, respectively. Despite this, Pfizer Inc. (NYSE:PFE) increased its dividend by 2.4% to $0.42 per share.
In a third-quarter investor letter, Smead Capital Management, an investment management company, explained the reasons why shares of Pfizer Inc. (NYSE:PFE) plunged. Here is what the firm stated about Pfizer Inc. (NYSE:PFE):
“Through the first nine months of the year, we had a gain of 2.10%. The S&P 500 had a gain of 13.07% and the Russell 1000 Value had a gain of 1.79%. The stock market realized markedly higher riskless US Treasury interest rates had their effect on the stock market as it began to reassert what Warren Buffett calls the “gravitational pull” on price-to-earnings ratios (P/E).
On the downside, Target (TGT), Bank of America (BAC) and Pfizer Inc. (NYSE:PFE) detracted the most in the first nine months of the year. Pfizer (PFE) is suffering from a fall-off in Covid-19 vaccinations and we are trying to figure out what to do with it as a small holding.”
13. The Estée Lauder Companies Inc. (NYSE:EL)
Value of D.E. Shaw’s 13F Position: $441 million
Number of Hedge Fund Shareholders: 46
Billionaire D.E. Shaw’s hedge fund increased its stake in The Estée Lauder Companies Inc. (NYSE:EL) by more than 2100% to capitalize on the stock’s steep decline. The Estée Lauder Companies Inc. (NYSE:EL) stock has dropped roughly 40% year to date. The Estée Lauder Companies Inc. (NYSE:EL) is a consumer goods company that sells skincare, makeup, and hair care products all over the world. The company has been struggling due to declining margins. However, management appears to be optimistic about its recovery strategy, with expectations for 2024 earnings in the range of $2.17.
Other hedge funds, like D.E. Shaw, took advantage of the buying opportunity in The Estée Lauder Companies Inc. (NYSE:EL). The Estée Lauder Companies Inc. (NYSE:EL) was in 46 hedge fund portfolios at the end of the third quarter, up from 45 the previous quarter.
In the third quarter investor letter, Madison Investments, an investment advisor, mentioned The Estée Lauder Companies Inc. (NYSE:EL). Here is what the firm said:
“NextEra, The Estée Lauder Companies Inc. (NYSE:EL), Target, Oracle, and TE Connectivity were the largest detractors. Estee Lauder has seen a steep decline in its travel retail business in both China and Korea. We expect the travel retail business to begin to recover as we move into 2024.”
12. Royal Caribbean Cruises Ltd. (NASDAQ:RCL)
Value of D.E. Shaw’s 13F Position: $443 million
Number of Hedge Fund Shareholders: 42
Royal Caribbean Cruises Ltd. (NASDAQ:RCL), like Estée Lauder Companies Inc. (NYSE:EL), Pfizer Inc. (NYSE:PFE), and The Home Depot, Inc. (NYSE:HD), is one of the 15 best stocks to buy in 2024 according to billionaire D.E. Shaw. During the third quarter, his firm increased its stake in Royal Caribbean Cruises Ltd. (NASDAQ:RCL) by 27% to $443 million. The firm appears to have benefited from its stake because shares of Royal Caribbean Cruises Ltd. (NASDAQ:RCL) have increased nearly 160% in the last twelve months. Royal Caribbean Cruises Ltd. (NASDAQ:RCL) exceeded its revenue and earnings estimates for the third quarter and raised its full-year adjusted earnings per share guidance to $6.58–$6.63 from $6.00–$6.20 previously.
As of the end of the third quarter, Royal Caribbean Cruises Ltd. (NASDAQ:RCL) was in 42 hedge fund portfolios. Ken Griffin’s Citadel Investment Group was among the largest hedge fund shareholders in the company, according to data tracked by Insider Monkey.
11. Visa Inc. (NYSE:V)
Value of D.E. Shaw’s 13F Position: $446 million
Number of Hedge Fund Shareholders: 169
During the third quarter, billionaire D.E. Shaw’s firm increased its stake in payment technology company Visa Inc. (NYSE:V). Visa Inc. (NYSE:V) appears to be one of the best stocks to buy in 2024 due to its strong financial outlook and stellar share price returns. Visa Inc. (NYSE:V) shares have risen 26% year to date, owing to strong revenue and earnings growth. The company also increased its dividend by 16% and announced a $25 billion share buyback programme. Visa Inc. (NYSE:V) anticipates that its adjusted EPS will grow in the low teens next year, following 17% growth in 2023.
Ensemble Capital Management, an investment management company, mentioned a few companies, including Visa Inc. (NYSE:V) in its third-quarter investor letter. Here is what the firm stated about Visa Inc. (NYSE:V):
“Mastercard is a company that pretty much everyone has heard of. In fact, when we meet with Ensemble’s clients, we occasionally tell them that we’re nearly certain that they are carrying a Mastercard in their wallet or purse as we speak, and if not, they are carrying a Visa Inc. (NYSE:V). Most people carry both.
People carry Mastercard and Visa because they are accepted nearly everywhere in developed markets. And they are accepted in most emerging economies, at least at locations where higher income people spend money. As a shopper you can show up at a bodega in Peru, a high end hotel in Tokyo, a truck stop in Alabama, or an ice cream cart in Milan, show them a piece of plastic and they’ll let you walk away with goods and services without any worry that they aren’t going to get paid…” (Click here to read the full text)
10. Alphabet Inc. (NASDAQ:GOOG)
Value of D.E. Shaw’s 13F Position: $472 million
Number of Hedge Fund Shareholders: 392
Like Visa Inc. (NYSE:V), Royal Caribbean Cruises Ltd. (NASDAQ:RCL), and The Estée Lauder Companies Inc. (NYSE:EL), billionaire D.E. Shaw increased his stake in Alphabet Inc. (NASDAQ:GOOG) during the third quarter, and it also ranked among the 15 best stocks to buy. As of the end of the third quarter, the firm owned $472 million worth of shares of Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc.’s (NASDAQ:GOOG) shares have risen 61% in the last year, thanks to the improving online advertising trend and the company’s penetration in the AI market.
In the third-quarter investor letter, Diamond Hill Capital, an investment management company, stated that Alphabet Inc. (NASDAQ:GOOG) was among the top contributors to its performance. Here is what the firm stated about Alphabet Inc. (NASDAQ:GOOG):
“On an individual holdings’ basis, top contributors to return in Q3 included long positions in KKR, Ciena Corporation and Alphabet. Shares of media and technology company Alphabet Inc. (NASDAQ:GOOG) rose in the quarter as its advertising and cloud businesses remain robust and the company delivered results ahead of market expectations. From a sector perspective, communication services also managed a positive Q3 (2%), riding the ongoing wave of positive mega-cap stocks’ performance, like Alphabet.”
9. UnitedHealth Group Incorporated (NYSE:UNH)
Value of D.E. Shaw’s 13F Position: $481 million
Number of Hedge Fund Shareholders: 107
Healthcare companies struggled throughout 2023 due to declining sales trends, but future fundamentals began to improve. UnitedHealth Group Incorporated (NYSE:UNH) also exceeded its third-quarter revenue and earnings estimates, and the company raised its full-year earnings forecast to $24.85 from $24.70 previously. Wall Street analysts expect UnitedHealth Group Incorporated (NYSE:UNH) to earn nearly $28 per share in 2024. UnitedHealth Group Incorporated (NYSE:UNH) has returned $11.5 billion in dividends and share buybacks so far this year. However, shares of UnitedHealth Group Incorporated (NYSE:UNH) are still struggling to recover. Billionaire D.E. Shaw appears to be optimistic about the fundamentals, as his firm increased its stake in UnitedHealth Group Incorporated (NYSE:UNH) by 9% during the third quarter.
UnitedHealth Group Incorporated (NYSE:UNH) was in 107 hedge fund portfolios at the end of the third quarter, according to Insider Monkey data.
8. Uber Technologies, Inc. (NYSE:UBER)
Value of D.E. Shaw’s 13F Position: $510 million
Number of Hedge Fund Shareholders: 147
Uber Technologies, Inc. (NYSE:UBER) is one of billionaire D.E. Shaw’s top 15 stocks to buy. His company owned a $510 million stake in the ride-hailing behemoth. Uber Technologies, Inc.’s (NYSE:UBER) stock has risen in recent months following its inclusion in the S&P 500 index. Uber Technologies, Inc. (NYSE:UBER) shares are up nearly 150% in 2023. Uber Technologies, Inc. (NYSE:UBER) reported gross bookings of $35.28 billion in the third quarter, with trips increasing 25% year over year to 2.4 billion.
In the third quarter investor letter, RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, highlighted the performance of Uber Technologies, Inc. (NYSE:UBER). Here is what the firm stated about Uber Technologies, Inc. (NYSE:UBER):
“Uber Technologies, Inc. (NYSE:UBER): UBER was the top contributor in the quarter following a better-than-expected 2Q23 earnings report and 3Q23 guidance. Gross bookings of $33.6 billion were up 16% year over year. Mobility gross bookings of $17 billion grew 25% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $16 billion were up 12% from last year. 2Q Adjusted EBITDA of $916 million, up $552 million year over year, significantly beat Street estimates of $845 million and the company generated $1.1 billion of free cash flow. Management guided to continuing growth in 3Q Gross Bookings (17%-20% growth) and Adjusted EBITDA (of $975-1,025 million).
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its 130 million users (by comparison, Amazon Prime has 200 million members) and penetrate new markets of on-demand services, such as package and grocery delivery, travel, and worker staffing for shift work. Given its $4.3 billion of unrestricted cash and $4.4 billion of investments, the company’s enterprise value of $95 billion equates to just over 20x next year’s estimated free cash flow.”
7. Tesla, Inc. (NASDAQ:TSLA)
Value of D.E. Shaw’s 13F Position: $709 million
Number of Hedge Fund Shareholders: 83
Tesla, Inc. (NASDAQ:TSLA) is among the best stocks to buy in 2024 due to its growth potential. Tesla, Inc. (NASDAQ:TSLA) was one of the top performers in 2023, with a share price increase of more than 100%. Although Tesla, Inc. (NASDAQ:TSLA) slightly missed its third-quarter deliveries target, the company expects to meet it in the coming quarters. Tesla, Inc. (NASDAQ:TSLA) has been constantly building and upgrading its factories around the world to meet its goals.
White Brook Capital Partners, an investment management firm, mentioned Tesla, Inc. (NASDAQ:TSLA) in its third-quarter investor letter. Here is what the firm stated about Tesla, Inc. (NASDAQ:TSLA):
“The magnificent seven, that underpin the S&P 500 performance, which includes Tesla, Inc. (NASDAQ:TSLA), now comprise almost 30% of the market capitalization of the S&P500. At least three of the seven stocks have heightened downside risk and suffer from already high penetration, weakening end markets, competitive risk, and lofty valuation. They have been remarkably resilient to increased interest rates and the potential for slowing growth. Small and midcap stocks, on the other hand, have been systemically penalized by fears of recession and continue to price that eventuality even as significantly better outcomes have become more probable. Today, it’s relatively easy to find attractive investments in this segment.”
6. Meta Platforms, Inc. (NASDAQ:META)
Value of D.E. Shaw’s 13F Position: $881 million
Number of Hedge Fund Shareholders: 240
The share price of Meta Platforms, Inc. (NASDAQ:META) increased by 200% in 2023, thanks to a rebound in online advertising and user growth. In the third quarter, Meta Platforms, Inc. (NASDAQ:META) revenue increased 23% to $34.15 billion, while operating income increased 143% to $13.75 billion. Its operating margin more than doubled year over year, and net income increased 164% to $11.58 billion. Wall Street anticipates that Meta Platforms, Inc. (NASDAQ:META) will continue to grow its revenue and earnings. In 2024, Meta Platforms, Inc. (NASDAQ:META) is expected to generate $150 billion in revenue and $1.37 per share in earnings. Therefore, like Tesla, Inc. (NASDAQ:TSLA), The Home Depot, Inc. (NYSE:HD), Uber Technologies, Inc. (NYSE:UBER), UnitedHealth Group Incorporated (NYSE:UNH), Visa Inc. (NYSE:V), Royal Caribbean Cruises Ltd. (NASDAQ:RCL), The Estée Lauder Companies Inc. (NYSE:EL), Alphabet Inc. (NASDAQ:GOOG) and Pfizer Inc. (NYSE:PFE), Meta Platforms, Inc. (NASDAQ:META) is one of the best stocks to buy in 2024 according to billionaire D.E. Shaw.
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Disclosure: None. 15 Best Stocks to Buy in 2024 According to Billionaire D.E. Shaw is originally published on Insider Monkey.