This $73 Billion Hedge Fund Is Buying Memory, Drugstores, and Telecom

Does an 8.6% dividend yield interest you, too?

Feb 27, 2014 at 4:45PM

The latest 13F season is commencing, when many money managers issue mandatory reports on their holdings. It can be worthwhile to pay attention, as you might get an investment idea or two by seeing what some major investors have been buying and selling.

For example, consider D. E. Shaw. Founded by David E. Shaw, it has a reportable stock portfolio totaling $73.3 billion in value as of Dec. 31, 2013. Shaw is known as a math wizard and a quantitative-investing pioneer. His firm is reportedly extremely selective when hiring, said to accept about one in 500 applicants -- CEO Jeff Bezos once made the cut.

D. E. Shaw's latest 13F report shows that it upped its holdings of Micron Technology (NASDAQ:MU), Rite Aid (NYSE:RAD), and Frontier Communications (NASDAQ:FTR).

Micron Technology's first quarter featured revenue up 120% and earnings rising 165% from year-ago levels. The purchase of the Japanese company Elpida has been a game-changing move, turning Micron into the world's second-largest DRAM maker with twice the company's previous memory capacity, more pricing power, and more production facilities. With demand growing for solid state drives, bulls like the company's investments in NAND memory technology. Many would like to see its dividend resurrected, too. At an analyst conference earlier this month, management said it was focused on "operational excellence and deployment of advanced technology," as well as decreasing debt, among other matters.

Rite Aid has been executing an impressive turnaround. The drugstore chain has struck or extended some savvy partnerships, such as with McKesson (which delivers most of its prescription drugs) and GNC Holdings (which houses some of its stores within Rite Aid locations). Rite Aid has been growing more slowly than its key rivals, but it still seems cheaper than those retailers. Its third-quarter report was mixed, featuring estimate-topping earnings and revenue up 2%, but management tempering near-term expectations. Bears would also remind us that Rite Aid still carries a lot of debt.

Frontier Communications had a great 2013, rising 21%. The telecom company offers a big 8.6% dividend yield -- but it also carries considerable debt, which could threaten that payout. Not helping the debt situation is Frontier's recent decision to buy AT&T's wireline business and statewide fiber network in Connecticut for $2 billion in cash. Frontier Communications expects the deal to boost free cash flow in the near term, though, and it has been shifting its focus from landline operations toward higher-margin operations such as broadband and serving business customers. Its recently reported fourth quarter featured roughly flat revenue, which was better than the loss that had been expected, while its earnings also delivered a surprise bit of growth.

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Selena Maranjian owns shares of The Motley Fool recommends and McKesson. The Motley Fool owns shares of Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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