Paul Tudor Jones Is Betting on the SPY, Should You?

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Feb 20, 2015

Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings by filed institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC).

Hedge funds bought more than 15 million shares of the SPDR S&P 500 ETF Trust (SPY, Financial) worth $3.4 billion last quarter, according to data from 13-F filings compiled by Bloomberg. This ETF was the third-biggest aggregate increase in position by market value.

The SPDR S&P 500 ETF Trust (SPY, Financial)

An ETF is a special type of fund that invests in a portfolio of stocks or bonds. The aim is to mimic the performance of a specified index. As well as the shares, they are traded in the secondary market at any time (market hours) and investors can sell short. The advantages of this investment vehicle are that they provide an efficient method of diversification because investors gain exposure to an index or a particular sector. Second, investors know the composition of the fund at all times. Moreover, as they are a passive managed fund, they have good operating expense ratios.

The SPY ETF seeks to track the price performance of the underlying holdings in the S&P 500 Index. The S&P 500 Index measures the performance of the large capitalization sector of the US equity market. The Index is a capitalization-weighted index from a broad range of industries chosen for market size, liquidity and industry group representation. The S&P 500 is a popular proxy for the U.S. market and as an indicator of the economic health of the U.S. It is best suited for investors looking for diversification across sectors at a low cost.

Top Holding List:

Let's see the fund´s holding list:

  1. Apple Inc (AAPL, Financial) 4.046%
  2. Exxon Mobil Corp (XOM, Financial) 2.034%
  3. Microsoft Corp (MSFT, Financial) 1.926%
  4. Johnson & Johnson (JNJ, Financial) 1.514%
  5. Berkshire Hathaway Inc. (BRK.B, Financial) 1.444%
  6. Wells Fargo & Co (WFC, Financial) 1.384%
  7. General Electric Co (GE, Financial) 1.349%
  8. Procter & Gamble Co (PG, Financial) 1.237%
  9. JPMorgan Chase & Co (JPM, Financial) 1.19%
  1. Pfizer Inc. (PFE, Financial) 1.165%

Total Percentage of Top 10 Holdings: 17.28%

We can see from the list above that those large cap companies offer significant international exposure. Investors looking to complement this fund with smaller-cap stocks might look at Vanguard Extended Market Index ETF.

Hedge fund

Tudor Investment Corp. added 639,000 shares of the ETF, its biggest purchase in the period. Holding 645.900 shares and a market value of $135.6 million, it’s the firm’s biggest equity position.

Final comment

The fund has generated a total return of 15.89% in the last five years, 17.79% in the last three years, and 16.97% in the last year. So for those investors seeking to invest their money in an ETF with exposure to large cap U.S. equities, the SPY ETF is a good option because it offers diversification and has a total return that ranks very high in comparison with peers over the last three years.

Hedge fund gurus have also been active in the company. Donald Yacktman (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), John Buckingham (Trades, Portfolio), Eric Mindich (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Frank Sands (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), George Soros (Trades, Portfolio) and Bill Frels (Trades, Portfolio) have taken long positions in the last quarter of 2014, as well as Diamond Hill Capital (Trades, Portfolio).

Disclosure: Omar Venerio holds no position in any stocks mentioned.