In this article, we looked at Cliff Asness' investment philosophy and outlook on the US stock market. We also reviewed Asness’ AQR Capital Management’s assets under management, performance and stock picks. You can skip our detailed discussion of AQR Capital Management and go straight to AQR Capital Management's Top 5 Stock Picks.
Following record-breaking returns in 2022, AQR Capital Management's performance in 2023 has been exceptional, with several of its strategies outperforming the broader market indices. The investment philosophy of its founder, billionaire Cliff Asness, has been the driving force behind this success. Asness, who achieved great success for the Goldman Sachs Global Alpha Fund in the 90s, is famous for his great work on developing models and algorithms that can explore market patterns. His investment strategy combines traditional and unconventional techniques while diversifying investments in equity, alternative, and multi-asset funds. As of the end of the second quarter of 2023, AQR's AUM was around $120 billion.
Year to date, AQR Long-Short Equity Fund has generated a return of approximately 19%. Meanwhile, AQR Sustainable Long-Short Equity Carbon Aware Fund, AQR Style Premia Alternative Fund, AQR Equity Market Neutral Fund, and AQR Alternative Risk Premia Fund have posted year-to-date returns of 17%, 19%, 17.77%, and 15%, respectively. In addition, AQR Large Cap Multi-Style Fund and AQR Global Equity Fund from the equity segment have posted year-to-date returns of 14% and 13%, respectively. It's worth noting that none of the equity funds have generated negative returns so far in 2023. Furthermore, the Multi-Asset fund has posted a year-to-date return of over 6%.
According to AQR Capital Management’s LinkedIn account, Cliff Asness is also a managing principal and chief investment officer. He is an active researcher and has authored numerous financial articles for several publications, including The Journal of Portfolio Management and Financial Analysts Journal. Cliff Asness has also authored several books. Cliff Asness’ books that gained popularity include "The Allocator's Edge: A Modern Guide to Alternative Investments and the Future of Diversification," "Expected Returns: An Investor's Guide to Harvesting Market Rewards," and "Hedge Fund Management."
Cliff Asness is frequently featured in television and podcasts, where he shares his insights on financial issues. In a Bloomberg podcast with Barry Ritholtz, Cliff Asness discussed quant value investing, offering a comprehensive overview of how he manages risks and rewards. In another Cliff Asness podcast, he expressed concern about buoyant stocks, warned of trouble in the commercial real estate market and also predicted a potential financial crisis. Here is what the billionaire investor said:
"My biggest concern is stocks and bonds seem to be taking a very, very different view. Bonds are pricing in multiple, severe cuts over the next year to two years. That is a forecast for a recession, and not a mild one. Equities are whistling past the graveyard. If inflation stays sticky, or it comes down because we enter a non-trivial recession, it's equities that I think are a scary place. They're not priced very consistently with bonds, and we're going to find out who's right in the next year."
Cliff Asness' firm began with 10 employees in 1998 and has since grown to a team of over 700, with 65% of staff holding advanced degrees. AQR Capital Management's salaries for its employees are among the highest in the industry, and it has been named one of the Best Places to Work in Money Management from 2017 to 2022. AQR Capital Management's internship programs provide opportunities for rising talent to help reach global financial hubs. At present, the AQR Capital Management careers page shows over 21 job openings. The firm operates in seven locations across the globe. In the United States, AQR Capital Management's address is Greenwich, Connecticut.
AQR had $47 billion in the 13F portfolio at the end of the second quarter, up 1% from the previous quarter. Its top stocks picks include PulteGroup, Inc. (NYSE:PHM), Gilead Sciences, Inc. (NASDAQ:GILD), Adobe Inc. (NASDAQ:ADBE), Merck & Co., Inc. (NYSE:MRK), CVS Health Corporation (NYSE:CVS), The Cigna Group (NASDAQ:CI), Walmart Inc. (NASDAQ:WMT), Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA) and Meta Platforms, Inc. (NASDAQ:META).
AQR Capital Management’s Top Stock Picks
Cliff Asness of AQR Capital Management
Methodology
As Cliff Asness is one of the smartest investors and has extensive experience in the equity markets, paying attention to AQR Capital Management’s stock portfolio can help investors choose the right stocks. The following information is based on AQR Capital Management’s second-quarter 13F filings. We track hedge funds like AQR Capital Management because Insider Monkey's research has shown that their consensus stock picks can deliver exceptional returns.
AQR Capital Management: AUM, Performance, Stock Picks
Value of AQR Capital Management’s 13F Position: $319 million
Number of Hedge Fund Shareholders: 40
PulteGroup, Inc. (NYSE:PHM) contributed to AQR's performance in 2023 because its shares have surged 53% year to date. Given the positive financial outlook, Cliff Asness' investment firm increased its stake in PulteGroup, Inc. (NYSE:PHM) by 32% to $319 million in the second quarter. PulteGroup, Inc. (NYSE:PHM) reported second-quarter earnings per share of $3, beating the Wall Street consensus of $2.54 per share and increasing from $2.35 in the first quarter of the year. Its revenue of $4.19 billion also exceeded expectations of $4.02 billion.
Hedge fund confidence in PulteGroup, Inc. (NYSE:PHM) has also increased. According to data tracked by Insider Monkey, PulteGroup, Inc. (NYSE:PHM) was in 40 hedge fund portfolios as of the end of the second quarter, up from 37 the previous quarter.
Value of AQR Capital Management’s 13F Position: $324 million
Number of Hedge Fund Shareholders: 56
AQR Capital Management increased its stake in Gilead Sciences, Inc. (NASDAQ:GILD) during the second quarter. It appears that the firm was attempting to capitalize on the dip in the share price of Gilead Sciences, Inc. (NASDAQ:GILD). Gilead Sciences, Inc. (NASDAQ:GILD) shares are down about 12% so far in 2023.
Gilead Sciences, Inc. (NASDAQ:GILD) was in 56 hedge fund portfolios at the end of the second quarter, according to Insider Monkey data. With a $324 million stake, AQR Capital Management was the company's largest shareholder.
In the second quarter investor letter, Ariel Investments, an investment management company, highlighted reasons why Gilead Sciences, Inc. (NASDAQ:GILD) shares plunged and why it is bullish about the company. Here is what the firm stated about Gilead Sciences, Inc. (NASDAQ:GILD):
“Lastly, shares of biopharmaceutical company, Gilead Sciences, Inc. (NASDAQ:GILD), declined in the quarter on investor concerns over positioning of their drug, Trodelvy, amidst a crowded competitive landscape. Nevertheless, we maintain a positive outlook on the company, which is bolstered by the resilience of its core virology commercial business and the increasingly compelling oncology portfolio. We believe Gilead’s strategic transformation into a more diversified biopharmaceutical entity, expanding its focus from virology to oncology, provides a strong foundation for its future growth.”
Value of AQR Capital Management’s 13F Position: $331 million
Number of Hedge Fund Shareholders: 113
AQR Capital sold 21% of its stake in Adobe Inc. (NASDAQ:ADBE) during the second quarter to capitalize on recent gains, but the firm still owned a $331 million stake in the company. Adobe Inc. (NASDAQ:ADBE) has also contributed to AQR's performance in 2023 as its shares are up 57% year to date, thanks to AI and rising demand for its products. Adobe Inc. (NASDAQ:ADBE) has topped June quarter revenue and earnings estimates by $23 million and $0.12 per share. Its June quarter revenue of $4.89 billion increased by 10% year-over-year while EPS grew 20%.
Hedge fund interest in Adobe Inc. (NASDAQ:ADBE) has recently increased. The number of hedge fund positions increased to 113 at the end of the second quarter, up from 100 the previous quarter.
In the second quarter investor letter, Harding Loevner, an asset management company, expressed confidence in Adobe Inc. (NASDAQ:ADBE). Here is what the firm stated about Adobe Inc. (NASDAQ:ADBE):
“Although the market initially feared that Adobe Inc. (NASDAQ:ADBE) would lose out to Al image-generating programs Dall-E, Midjourney, and Stable Diffusion, the design-software giant has since released its own generative Al model called Firefly. One feature of Firefly is that it can help designers generate ideas and create and manipulate images more quickly in Photoshop or Illustrator that can then be processed by other Adobe products for further development, fostering a seamless workflow. There’s more work involved when trying to manipulate images created by outside tools. Also, because Firefly is trained on Adobe’s vast inventory of stock images and other licensed content, it can generate professional-quality, commercially viable results, further setting it apart from generic models that are often trained on copyrighted content that isn’t properly licensed. These are just two examples of how Al enhances the Adobe suite, which should allow the company to raise subscription prices and upsell users.”
Value of AQR Capital Management’s 13F Position: $332 million
Number of Hedge Fund Shareholders: 79
Cliff Asness’ investment firm increased its stake in Merck & Co., Inc. (NYSE:MRK) by 4% during the second quarter as it seeks to capitalize on the dip in the stock. Shares of Merck & Co., Inc. (NYSE:MRK) are down 6% so far in 2023. Like Adobe Inc. (NASDAQ:ADBE) and PulteGroup, Inc. (NYSE:PHM), hedge fund confidence increased in Merck & Co., Inc. (NYSE:MRK). The number of hedge fund positions in Merck & Co., Inc. (NYSE:MRK) increased to 79 at the end of the second quarter, up from 75 in the previous quarter.
In the second quarter investor letter, Carillon Tower Advisers, an investment management company, explained reasons for its bullishness on Merck & Co., Inc. (NYSE:MRK). Here is what the firm stated about Merck & Co., Inc. (NYSE:MRK):
Merck & Co., Inc. (NYSE:MRK) presented positive clinical data for a new drug in its oncology pipeline, announced an acquisition that was viewed favorably by investors, and reported strong first-quarter financial results while also increasing its earnings guidance for 2023.
Value of AQR Capital Management’s 13F Position: $341 million
Number of Hedge Fund Shareholders: 69
CVS Health Corporation (NYSE:CVS) is another top healthcare stock pick of AQR Capital Management. During the second quarter, the firm increased its stake in CVS Health Corporation (NYSE:CVS) by 6%. CVS Health Corporation (NYSE:CVS) shares are down 23% so far in 2023. CVS Health Corporation (NYSE:CVS), like Merck & Co., Inc. (NYSE:MRK), offers a high dividend yield, making it a good long-term investment.
In the third quarter investor letter, Oakmark Funds, advised by Harris Associates, highlighted reasons why CVS Health Corporation (NYSE:CVS) is a solid stock pick. Here is what the firm stated about CVS Health Corporation (NYSE:CVS):
“CVS Health Corporation (NYSE:CVS) is a diversified health care conglomerate with leading positions across multiple aspects of health services. The company owns the #1 pharmacy benefit manager, #1 retail pharmacy, #1 specialty pharmacy, #3 commercial health insurer and #3 Medicare Advantage organization in the U.S. Managed care and pharmacy benefits management have proven to be good businesses over time, characterized by healthy underlying growth and excellent free cash flow generation. CVS has underperformed the S&P 500 by more than 40 percentage points over the past 12 months, impacted by a cloud of company-specific and legislative concerns. While we are not dismissive of these potential risks and headwinds, we believe the market has become overly pessimistic. This created an attractive opportunity to invest in what we view as a durable, competitively advantaged and well-managed enterprise at a high-single-digit multiple of earnings.”
Value of AQR Capital Management’s 13F Position: $365 million
Number of Hedge Fund Shareholders: 76
Like Merck & Co., Inc. (NYSE:MRK) and CVS Health Corporation (NYSE:CVS), AQR Capital Management raised its stake in The Cigna Group (NASDAQ:CI) during the second quarter by 15%. The Cigna Group (NASDAQ:CI) shares are down around 10% so far in 2023. In the United States, Cigna Group (NASDAQ:CI) offers insurance and related products and services. Although The Cigna Group (NASDAQ:CI) shares are down year to date, Wall Street expects double-digit percentage financial growth in the coming quarters.
At the end of the second quarter, The Cigna Group (NASDAQ:CI) was in 76 hedge fund portfolios. Ken Griffen’s Citadel Investment Group and AQR Capital Management were the leading stakeholders in the company.
Value of AQR Capital Management’s 13F Position: $427 million
Number of Hedge Fund Shareholders: 84
Walmart Inc. (NASDAQ:WMT) shares are up 8% year to date, bringing twelve months gain to 20%. In addition to share price upside, Walmart Inc. (NASDAQ:WMT) also offers a dividend yield of around 1.50%. The company's strong returns are backed up by solid financial growth. After beating June quarter estimates, Walmart Inc. (NASDAQ:WMT) raised its full-year adjusted earnings per share forecast to $6.46, up from the $6.27 consensus and the prior guidance range of $6.20.
The number of hedge fund positions in Walmart Inc. (NASDAQ:WMT) as of the end of the second quarter was 84. D E Shaw was the leading stakeholder in the company, according to data tracked by Insider Monkey.
Value of AQR Capital Management’s 13F Position: $482 million
Number of Hedge Fund Shareholders: 283
With a $482 million stake, Amazon.com, Inc. (NASDAQ:AMZN) is one of AQR Capital Management's top stock picks. Amazon.com, Inc. (NASDAQ:AMZN) is also a major contributor to AQR’s performance in 2023. Amazon.com, Inc. (NASDAQ:AMZN) shares are up about 46% year to date. Furthermore, Wall Street forecasts Amazon.com, Inc. (NASDAQ:AMZN) to generate robust financial growth in the following quarter, providing support to the upside momentum.
In the second quarter investor letter, Mairs & Power, an investment advisor, outlined reasons why Amazon.com, Inc. (NASDAQ:AMZN) is outperforming. Here is what the firm stated about Amazon.com, Inc. (NASDAQ:AMZN):
“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.
Value of AQR Capital Management’s 13F Position: $483 million
Number of Hedge Fund Shareholders: 178
NVIDIA Corporation (NASDAQ:NVDA), like Amazon.com, Inc. (NASDAQ:AMZN), is a major contributor to AQR Capital Management's performance. NVIDIA Corporation (NASDAQ:NVDA) shares are up 215% year to date, thanks to strong demand for its AI-powered chips. NVIDIA Corporation (NASDAQ:NVDA) expects third-quarter sales in the range of $16 billion, well above the analysts' expectation of $12.5 billion.
Hedge funds are also bullish on the company. The number of hedge fund positions in NVIDIA Corporation (NASDAQ:NVDA) increased to 178 in the second quarter, up from 132 in the previous quarter.
In the second quarter investor letter, Harding Loevner, an asset management company, highlighted reasons why shares of NVIDIA Corporation (NASDAQ:NVDA) soared. Here is what the firm stated about NVIDIA Corporation (NASDAQ:NVDA):
NVIDIA Corporation (NASDAQ:NVDA) has been the biggest beneficiary this year in terms of its stock run and projected revenue gains. More companies- including, perhaps, some not yet in existence-will certainly join the ranks over time.
Value of AQR Capital Management’s 13F Position: $552 million
Number of Hedge Fund Shareholders: 231
Meta Platforms, Inc. (NASDAQ:META) has also produced exceptional returns in 2023. Its shares have soared 155% so far in 2023, owing to rising revenue and earnings growth trends. Meta Platforms, Inc. (NASDAQ:META) reported second-quarter revenue of $32 billion, exceeding analysts expectation by nearly $1 billion.
Meta Platforms, Inc. (NASDAQ:META) was in 231 hedge fund portfolios as of the end of the second quarter compared to 223 positions in the previous quarter.
In the second quarter investor letter, Artisan Partners, an investment management company, made comments about Meta Platforms, Inc. (NASDAQ:META). Here is what the firm stated about Meta Platforms, Inc. (NASDAQ:META):
“Our best performing stocks this quarter were Meta Platforms, Inc. (NASDAQ:META), Alphabet and Heidelberg Materials. Meta was the largest contributor to performance. Its shares have almost fully recovered from last year’s declines, rising 35% during the quarter and 138% YTD. During the quarter, the company reported earnings that showed a return to growth and healthy user engagement metrics. Most importantly, profitability appears to have stabilized and is poised to improve as significant cost reduction actions implemented over the past six months begin to have an impact. Separate from fundamental performance, there is excitement over AI’s potential to help the company’s business. While Meta’s technology prowess and massively scaled media platform certainly position the company to take advantage of AI, we believe it’s far too early to estimate any discrete tangible benefits. Overall, we view AI as one of several drivers that will contribute to Meta’s continued growth.”
Like Walmart Inc. (NASDAQ:WMT), Amazon.com, Inc. (NASDAQ:AMZN) and NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms, Inc. (NASDAQ:META) is one of AQR Capital Management’s top stock picks.
