Citadel Is The Most Successful Hedge Fund In History: Here Are Its Top Investment Picks
Citadel LLC is one of the largest hedge funds based in the U.S., with approximately $92.46 billion in total assets under management as of Sept. 30, 2023. Citadel has generated roughly $74 billion in total gains since its inception in 1990, making it the most successful hedge fund of all time.
Founded by Ken Griffin, Citadel was the second best-performing fund in 2023, raking in approximately $8.1 billion in profits last year. Griffin, who serves as the CEO and co-chief investment officer for Citadel, is currently the 37th richest man in the world, with a total net worth of nearly $37 billion. Let's look at some of Citadel's largest holdings.
Microsoft and Activision Blizzard
As of Sept. 30, 2024, Citadel owned approximately 5.04 million shares of Microsoft Corp. (NASDAQ:MSFT) and 15.02 million shares of Activision Blizzard, accounting for roughly 1.72% and 1.52% of the total portfolio, respectively. Citadel bought its stake in Activision Blizzard for a median price of $87.06 per share
Microsoft completed its acquisition of Activision Blizzard for $95 per share, or $69 billion later in October last year. Following the acquisition, Citadel is estimated to have made a profit of over $119 million.
Shares of MSFT surged over 56% in fiscal 2023, making it one of the best-performing stocks in Citadel's portfolio. With a market cap of approximately $3.12 trillion, Microsoft is currently the most valuable in the world.
The company's extensive investments in AI over the past few years have been paying off, as its minority stake in ChatGPT maker OpenAI is expected to generate billions.
In the fiscal 2024 second quarter, which ended Dec. 31, 2023, Microsoft's total revenues rose 18% year-over-year to $62 billion, while EPS increased 33% from the same period last year to $2.93.
“We've moved from talking about AI to applying AI at scale,” Satya Nadella, CEO and Chairman of Microsoft, said in the latest earnings release, “By infusing AI across every layer of our tech stack, we're winning new customers and helping drive new benefits and productivity gains across every sector."
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Boston Scientific Corporation
Citadel holds approximately 21.16 million shares of Boston Scientific Corp. (NYSE:BSX) as of Sept. 30, 2023, translating to 1.21% weightage in its total portfolio. The hedge fund bought shares of BSX at an average price of $47.63.
Shares of BSX have risen by over 13% so far this year, outperforming the benchmark S&P 500 index's 5.2% returns over this period.
The company announced its plans to acquire Axonics Inc. for $3.7 billion, or $71 per share, last month, which is expected to boost the former's urology business. Axonics was ranked #2 on the Financial Times list of fastest-growing companies in 2023. This acquisition is expected to boost Boston Scientific's growth rate significantly in the near term.
Analysts expect BSX's revenues to increase 9.4% year-over-year to $15.58 billion in fiscal 2024. The company's EPS is expected to increase at a compound annual growth rate (CAGR) of 12% over the next five years.
Mizuho upgraded its rating on BSX to Buy on Feb 1, with a price target of $80, indicating a potential upside of over 22%. Investment bank Raymond James has a Strong Buy rating on the medical device manufacturer, with a price target of $73, reflecting a potential upside of nearly 12%.
SPDR S&P 500 ETF
Roughly 1.12% of Citadel's total assets under management is invested in the SPDR S&P 500 ETF Trust (NYSE:SPY). Investment gurus have long preached the importance and benefits of investing in a low-cost, passively managed index ETF, which aims to replicate the performance of a benchmark index.
"Consistently buy an S&P 500 low-cost index fund," Warren Buffett said, "Keep buying it through thick and thin and especially through thin."
The S&P 500 index hit an all-time high, crossing the 5,000 mark on Feb 8. Year-to-date, the index has surged by over 5% despite stalled rate cuts and persistent macroeconomic headwinds.
UBS Global Research predicts the benchmark index to cross 5,150 in 2024. As the Federal Reserve gears up to slash the federal funds rate in the second half of the year, the equity rally is expected to continue through the upcoming months.
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