We recently compiled a list of the 10 Best Stocks to Buy According to Billionaire D.E. Shaw. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against the other stocks.
Equity market pricing is never perfect due to supply and demand imbalances, emotional reactions, and errors. Billionaire investor David Elliot Shaw excels at detecting and exploiting these inefficiencies to generate shareholder value. Unlike most hedge fund managers who rely on intuition, Shaw uses sophisticated mathematical models and algorithms for investment decisions. Over the years, he has developed software and hardware to gain an edge in investment opportunities.
Born in 1951, David E. Shaw became a successful billionaire scientist and hedge fund manager. After earning a PhD from Stanford in 1980, he founded D.E. Shaw & Co. in 1988 with six employees and $28 million in capital. The hedge fund has averaged a 12.5% return since inception, with only one down year. Shaw’s firm uses powerful computers and advanced algorithms for quick market responses and risk management, returning over $51 billion to investors. Likewise, it generated a net return of 11.88% between 2001 and 2011. While Shaw’s firm was down by 9% at the height of the financial crisis in 2008, it bounced back to profitability with a 21% return in 2009.
READ ALSO: 10 Best Stocks to Buy According to Billionaire David Einhorn and Billionaire Paul Singer’s Top 12 Long-Term Stock Picks.
D.E. Shaw is expanding and launching new funds. In 2023, they raised money for D.E. Shaw Alkali Fund VI, the newest in their Alkali group. By November 2024, they had secured $1 billion for this fund, focusing on corporate debt, structured credit, and synthetic securitizations.
Last year, the firm also raised $1.1 billion for two new private investment vehicles: D.E. Shaw Voltaic Fund and D.E. Shaw Diopter Fund. In June 2024, D.E. Shaw announced it was raising its second fund in 16 months to target bank capital deals. They filed a private placement notice for D.E. Shaw Diopter Fund II, but the amount wasn’t disclosed.
Bloomberg reported that D.E. Shaw’s largest hedge fund, the D.E. Shaw Composite Fund, gained 9.6% in 2023, outperforming the HFR Global Hedge Fund Index, which was up about 2.5% through December 15. Reuters added that D.E. Shaw’s macro-oriented fund, the Oculus Fund, gained 7.8% in 2023, beating its macroeconomic peers. According to Bloomberg, the Oculus Fund has never had a negative year since it started.
Diversification is another vital arsenal that D.E. Shaw & Co. relies on to spread risk and reduce market volatility. The firm is highly diversified with a portfolio value of about $116.49 billion. While technology stocks account for the most significant share in the equity market at 24.6%, the hedge fund also has stakes in Services at 17.5% and the financial sector at 7.7%. In addition to diversifying holdings, Shaw relies on a multi-strategy approach to squeeze optimum value in the market.
Billionaire D.E. Shaw suggests investing in resilient companies, even as the US Federal Reserve signals fewer interest rate cuts in 2025. Despite three cuts reducing the benchmark rate to 4.25%-4.5%, economic slowdown concerns persist, especially in the labor market. Job growth is mainly in government and health care, while growth in manufacturing, business, and professional services has stagnated.
Our Methodology
To make the list of best stocks to buy according to billionaire D.E. Shaw, we scanned D.E. Shaw & Co investment portfolio. We then settled on the hedge fund’s largest holdings analyzing why they stand out and the number of hedge funds that hold stakes in them. Finally, we ranked the stocks in ascending order based on D.E. Shaw & Co stake value.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
D.E. Shaw & Co’s Stake Value: $2 Billion
Number of Hedge Fund Holders: 158
Apple Inc. (NASDAQ:AAPL) is a technology company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories. It is one of the best-performing stocks in the D. E. Shaw portfolio, going by the 37% year-to-date gain. The strong performance comes from investors rallying behind the company’s innovative product lineup and strong financial performance that affirms underlying growth.
Similarly, it is one of the best stocks to buy, according to billionaire D.E. Shaw, given the investments it is making in AI. Apple Inc. (NASDAQ:AAPL) is investing in Apple Intelligence, an AI-driven initiative that is expected to bolster the iPhone product line. While iPhone sales have appeared subdued in recent years, the integration of AI features is one factor expected to give people a reason to upgrade, strengthening Apple’s revenue base.
Consequently, iPhone shipments are projected to grow 12% year-over-year to 258 million units in fiscal 2026. The growth would be propelled by features like upgraded Siri, AI image tools, and ChatGPT integration. While the hardware business has been a key growth driver over the years, the service segment also affirms Apple Inc.’s (NASDAQ:AAPL) long-term prospects. The segment is projected to achieve a double-digit growth rate driven by strong pricing power, expanding adoption and new offerings
The introduction of AI services is projected to contribute between $7 and $14 billion in incremental services revenue. Likewise, the expectation is high that Apple Inc.’s (NASDAQ:AAPL) gross margin will improve next year owing to cost efficiencies and faster-growing service revenue, allowing the company to generate more shareholder value.
Overall AAPL ranks 2nd on our list of the best stocks to buy according to Billionaire D. E. Shaw. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.