Here's What This $39 Billion Hedge Fund Giant Has Been Buying

Every quarter, many money managers have to disclose what they've bought and sold, via 13F filings. Their latest moves can shine a bright light on smart stock picks.

Today let's look at D. E. Shaw & Co., founded by David E. Shaw. It has a reportable stock portfolio totaling more than $39 billion in value as of June 30, 2012.

Shaw is known as a math wizard and a quantitative investing pioneer. His firm is reportedly extremely selective, hiring less than 1% of applicants -- and Amazon.com CEO Jeff Bezos once made the cut.

The company's top three holdings (out of thousands), making up 4.7% of the portfolio's value, were Apple, IBM, and Berkshire Hathaway.

Interesting developments
So what does D. E. Shaw's latest quarterly 13F filing tell us? Here are a few interesting details:

New holdings include Phillips 66 (NYSE: PSX  ) and First Solar (Nasdaq: FSLR  ) . Phillips 66 is the recently spun off downstream business of ConocoPhillips. It's the nation's largest independent oil refiner by assets, and its stock recently hit a 52-week high, getting a boost from falling oil prices that swell its profit margins. It also initiated a dividend, recently yielding about 2%. Its stock is less of a bargain now, though, and investors may want to wait for stronger profit margins or a lower entry price.

First Solar has fallen close to 80% over the past year, facing tough competition, supply-and-demand issues, threatened government subsidies, and ever-changing technologies. On the bright side, it recently posted strong results after a string of ugly quarters -- but then it announced a slowdown at an Arizona solar power plant, and got investors worried that the company may have gotten ahead of itself and may even have recognized some revenue prematurely.

Among holdings in which D. E. Shaw increased its stake was Alpha Natural Resources (NYSE: ANR  ) . The coal company has fallen about 80% over the past year, due to low coal prices, and some analysts have downgraded it and some peers. The company has cut back on production, but its future isn't particularly promising in the near term, at least while natural gas prices are low. (Many utilities are switching to producing electricity with gas instead of coal these days.) Still, patient investors may like its long-term prospects

D. E. Shaw reduced its stake in lots of companies, including solid-state storage specialist Seagate Technology (Nasdaq: STX  ) . Seagate is poised to profit from increasing storage demand from both consumers with PCs and the servers of cloud-computing companies. Input prices can be volatile, though, and it does face competition. Rival Western Digital, for example, recently retook the top spot in the market from Seagate. Some worry about solid-state drives becoming commoditized and leading to shrinking profit margins for companies such as Seagate. Those less worried like the company's dividend yield near 4%, which it has aggressively increased.

Finally, D. E. Shaw unloaded many companies, such as VIVUS (Nasdaq: VVUS  ) , which recently received FDA approval for its weight-loss drug, Qsymia. Such drugs have blockbuster potential, given America's obesity problem, which explains the stock's nearly tripling over the past year. But the stock valuation is less compelling now, leading some to sell and look for greener pastures. Remember, too, that VIVUS has competition, such as from Arena Pharmaceuticals. Qsymia sports some possible heart risks, as well, and it remains to be seen whether patients and insurers will accept the drug's cost. Some even worry about the strength of its patent protection.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.

The growth of solar energy has been bumpy, but it maintains a lot of potential. For a more detailed look at First Solar and its enormous opportunity, check out our detailed research report on it. It comes with a year of free updates, too. Find out more.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Berkshire Hathaway, Amazon.com, and Apple, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Amazon.com, Apple, Berkshire Hathaway, and IBM. Motley Fool newsletter services have recommended buying shares of Amazon.com, Berkshire Hathaway, and Apple, as well as creating a bull call spread position in Apple and a synthetic long position in IBM. The Motley Fool has a disclosure policy.

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