Two Sigma Advisors’ Return, AUM, and Holdings
One of the largest hedge funds in the world, Two Sigma Advisors, was founded by the duo John Overdeck and David Siegel back in 2001, together with Mark Pickard, who retired in the meantime. John Overdeck and David Siegel have been running the firm since its inception and to say they have been doing it very successfully is an understatement. The fund’s regulatory assets under management on a discretionary basis of $48.66 billion speak the most about the duo’s excellent performance throughout the years.
Prior to co-founding Two Sigma Advisors, John Overdeck honed his investment acumen as Managing Director at D.E. Shaw & Co, and as Vice President and technical assistant at Amazon.com, Inc. (NASDAQ:AMZN). Naturally, as a math prodigy who went to the International Mathematical Olympiad when he was only 16 years old and won a silver medal, John Overdeck earned a B.S. in Mathematics (with distinction) and an M.S. in Statistics from Stanford University. He serves as Chair of the Board of Trustees of the National Museum of Mathematics. John Overdeck has been conducting his business very professionally, thanks to which he earned a place on Forbes’ list of 400 wealthiest Americans in 2018.
Before co-founding Two Sigma Advisors’s David Siegel was a Chief Information Officer at D.E. Shaw & Co, and he was also employed at Paul Tudor's Tudor Investment Corp. David Siegel has a Ph.D. in Computer Science from the Massachusetts Institute of Technology, where he ran a study at the Artificial Intelligence Laboratory. Two years ago, both John Overdeck and David Siegel were honored by the Academy of Achievement for being pioneers in technology and investment management.
What differentiates Two Sigma Advisors from many other hedge funds is its use of algorithms and reliance on technology such as artificial intelligence. John Overdeck and David Siegel have been working on creating a computer-guided model-based trading system for more than 40 years. It seems that the fund’s model of operation and investment strategy have been brilliant, as the fund grown to be one of the biggest hedge funds in the US, and in the world. Let’s take a more detailed look at their success, running through some of its return figures in recent years.
Its two funds from the same Two Sigma’s strategy, Compass Strategy, generated some pretty good returns in 2014. Two Sigma Enhanced Compass fund delivered impressive net returns of 57.55%, and Two Sigma Compass fund disclosed net returns of 25.56% in the same year. Even its funds that use different strategy had a positive performance in 2014 with Two Sigma Absolute Return fund delivering net returns of 10.06%, and Two Sigma Horizon fund returning 14.23%.
In 2016, its Compass fund, which trades futures across markets from commodities to currencies, gained 10.35%, while its flagship Spectrum fund delivered a return of 3%. Then, in the first seven months of 2017, its Compass fund lost 4.4%, only to make a comeback in 2018, being up by 2.96% since January until June. In the same period, its Absolute Return fund, which trades stocks, gained 2.4%.
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On the next page you can read about Two Sigma Advisors' Q3 2018 portfolio changes.
At the end of September 2018, Two Sigma Advisors’ equity portfolio was valued $40.98 billion. The fund had the biggest holding in an e-commerce giant, Amazon.com, Inc. (NASDAQ:AMZN), which was one of the top three of 30 Most Popular Stock Among Hedge Funds in Q3 of 2018. Its position in Amazon, after the fund had lowered it by 8%, counted 299,183 shares outstanding, with a value of $599.26 million. The company has a market cap of $809.95 billion, and over the past 12 months, its stock gained 32.23%, currently trading at $1,656.44. The fund’s equity portfolio is usually very diversified, and at the end of the third quarter of 2018, it had around 2200 positions.
The second biggest position the fund disclosed at the end of the third quarter of 2018 in Alphabet Inc Class A (NASDAQ:GOOGL). This position was worth around $520.06 million, on the account of 430,841 shares outstanding, after the fund had raised its stake by 47% during the third quarter. Alphabet Inc Class A is a very popular stock among the wealthy elite, being fourth among 30 Stocks Billionaires Are Crazy About: Insider Monkey Billionaire Stock Index. Furthermore, Alphabet Inc Class A has seen an increase in enthusiasm from smart money investors in our database, with 137 hedge funds long the stock at the end of the third quarter of 2018, up from 125 in the second quarter of 2018. Over the past six months, the company’s stock lost 7.32%, and at the moment of writing, it is trading at $1,081.65.
Two Sigma Advisors initiated the largest new position during Q3 2018 in Phillips 66 (NYSE:PSX), by obtaining 902,917 shares, which were valued $101.78 million. This is a diversified energy and logistics company, with a market cap of $42.42 billion. At the end of the third quarter of 2018, there were 43 investors in our database bullish on the stock, compared to 37 in Q2 2018. Over the past 12 months, the company’s stock price lost 9.88%, and it is now trading at $91.99. In its last earnings report for the third quarter of 2018, Phillips 66 disclosed a record adjusted earnings per share of $3.10 and earnings of $1.5 billion versus $1.3 billion in the second quarter of 2018. The company brought back $775 million to its shareholders via dividends and share repurchases. In the recent period, Phillips 66 has been beating EPS estimates - for the mentioned quarter, it was expected to post EPS of $2.50, but as already noted, it has delivered $3.10, while in the previous quarter, the consensus estimate was $2.16 per share, and the company delivered, even better $2.80 per share.
Among other big new additions to Two Sigma Advisors’ equity portfolio was Keurig Dr Pepper Inc (NYSE:KDP), whose 2.28 million shares with a value fo $52.74 million the fund obtained. Which was followed by two new stakes in Royal Caribbean Cruises Ltd (NYSE:RCL) and EOG Resources Inc (NYSE:EOG), with the fund acquiring 385,400 shares, valued $50.08 million, and 315,257 shares, worth $40.35 million, respectively. Whereas the biggest sold out stakes during the third quarter of 2018 were those Two Sigma Advisors held in Burlington Stores In (NYSE:BURL), Dollar Tree, Inc. (NASDAQ:DLTR), and U.S. Bancorp (NYSE:USB).
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This article was originally published at Insider Monkey.
