Hedge fund manager and billionaire Cliff Asness now leads what once kick-started as a quantitative hedge fund, and now towers as AQR Capital Management: a firm with $185 billion in assets to boast, and a hedge fund that produced three billionaires, with all co-founders landing on Forbes’ billionaires list. After his first quarter moves, it is clear the billionaire is not impressed with stock giants Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA), and Lululemon Athletica inc. (NASDAQ:LULU).
Founder, Managing Principal and Chief Investment Officer, Asness has $3 billion to his name thanks to alternative strategies at Applied Quantitative Research (AQR) and a research-leaning mind that has won Asness five Bernstein Fabozzi and Jacobs Levy Awards from The Journal of Portfolio Management. The hedge fund manager’s brilliant mind is an expert in not just economics, with a Wharton School education to back it up, but also in engineering, and in honor of his lifetime dedication and passion for research, he has won the James R. Vertin Award from the CFA Institute.
With awards under his belt and billions to his title, Asness more importantly knows how to keep the investors flocking to his firm, with an eye on trading assets and proposing reasonable return fees for market returns, paying particular attention to stock value and company momentum. The goal: invest in stock players that bring strong returns in the long-term, taking the best of both passive and active management worlds.
Now let’s explore some of the fund’s recent moves in three key stocks:
Advanced Micro Devices, Inc.
AQR Capital Management is getting increasingly wary on stocks in the semi-conductor universe, pulling back 22% in its stake in AMD to 2,568,511 shares now worth $37,372k. AMD has faced some investor ire and fire with gamers not as pleased with the chip giant’s first Ryzen processors, but has had a year that generated a lot of buzz.
The company’s CPU core and single GPU are not necessarily the speediest in the chip maker race. However, AMD CEO Lisa Su made it clear at the Computex conference in Taipei that her company does not shy away in the face of competition, but rather chooses to embrace it, finding it ecosystem-friendly. Therefore, the giant is coming out fully swinging, announcing: a new Zen-based Epyc CPU server line set to emerge on the scene by the end of this month, taking Intel to bat for performance and efficiency; new Threadripper processors from the likes of ASRock, Asus, Gigabyte, and MSI coming out this summer, likely another shot at Intel once the pricing comes to light; a consumer Vega card to hit at industry event SIGGRAPH due this summer as well; and a better CPU and GPU-performing Ryzen Mobile, set for a release in the back half of the year.
For those hesitant on the giant’s short-term server ramp process, CEO Su eventually hopes to capture 10% of the data center market, but acknowledges patience is a virtue here. Production will take some quarters for AMD to resurge in the way it needs to for the Street, and hedge fund billionaires including Asness to be swayed to the side of the bulls.
For now, the Street seems to align with AQR’s cautious mindset, considering TipRanks analytics show AMD as a Hold. Out of 18 analysts polled by TipRanks in the last 3 months, 6 are bullish on AMD stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of 8%, the stock’s consensus target price stands at $11.70.
NVDA has stirred the enthusiasm pot for some shareholders on the heels of the Computex conference, where the company has indicated it has its eyes set on targeting gaming and datacenter gains. However, along with rival AMD, Asness has lost some confidence in this chip giant, reducing his position in NVDA by 43% to 1,061,083 shares worth $1115,584k- which indicates the hedge fund guru is in fact even more cautious than on competitor AMD.
Computex announcements ranged from a Pascal architecture-influenced Max-Q gaming laptop design, boasting an upwards to 70% gaming performance enhancement than in traditional OEM systems, coupled with an alliance with HGX Reference Architecture. The Max-Q gaming design is sleeker while maintaining powerhouse performance in the GPU and could be the company’s defensive move against AMD in the gaming market.
Still, a lot of the bullish case for NVDA hinges upon its attractive auto collaborations, with its self-driving technology giving the chip giant a huge foothold into datacenter growth prospects. Take Toyota for instance, a major sweep for the chip giant as one of the leading automakers of the world (and of market share on Wall Street) chose NVDA’s DRIVE PX AI car computing technology for its future autonomous car.
If artificial intelligence is driving the future, and NVDA continues to capture automaker interest left and right, maybe Asness will soon reconsider gaining more conviction in this giant’s prospects down the road. Even if gaming trends have been robust lately worldwide, the company’s datacenter piece of the puzzle glimmers with real AI possibility and sales growth potential.
Most on the Street are largely bullish on the stock, with TipRanks analytics demonstrating NVDA as a Buy. Based on 22 analysts polled by TipRanks in the last 3 months, 12 rate a Buy on NVDA stock, 8 maintain a Hold, while 2 issue a Sell on the stock. The 12-month average price target stands at $129.35, marking a 10% downside from where the stock is currently trading.
Lululemon Athletica inc.
Even if Lululemon did have a better first quarter showing than expected thanks to a solid gross margin, Asness is taking a step away from the athletic retailer giant. In the latest SEC filing, AQR Capital Management cut back 15% of its holding in the company to 294,847 shares worth $15,294k.
Lulu has a deceleration problem at its feet. True, the giant has made moves to try to better sales, which certainly came through in its quarterly performance, from Lulu’s product updates like the new Enlite bra along with evolving ivivia to an online presence instead and a This is Yoga campaign to strengthen consumer outreach. Even the CEO Laurent POtdevin acknowledged a sluggish beginning for the year, with consumers taking issue with too many neutral tones and not enough splashy colors.
However, the question remains: are the company’s efforts to address its merchandising missteps enough in a world where denim is suddenly taking centerstage and athleisure rivalry getting fiercer?
Especially if Under Armour can bring its female base appeal up to its stellar male consumer draw, Lulu could be in serious competitive danger. Bring Nike into the mix and higher expenses as Lulu attempts to bolster its international and digital efforts, the retailer skirts downside possibility. With more consumers wanting to shop online, it is smart for LULU to close ivviva stores, which hopefully will improve both challenging comps as well as ease margin difficulties. There were encouraging merchandise margin gains in the first quarter, and consumers could be engaged by new branding campaign endeavors. For now, AQR is choosing to retreat some on this retailer.
The rest of the Street is less hesitant on the giant than Asness, as TipRanks analytics exhibit LULU as a Buy. Out of 24 analysts polled by TipRanks in the last 3 months, 12 are bullish on Lululemon stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 13%, the stock’s consensus target price stands at $61.59.