New York-based hedge fund Two Sigma, led by David Siegel, poured into Amazon.com (US:AMZN) and Paypal Holdings Inc (US:PYPL) in the quarter ending Dec. 31, according to the firm's most recent SEC form 13F filing.

The hedge fund reported 2,767 positions, up from from 2,434 positions reported at the end of the preceding quarter.

Two Sigma reported a fund value of $31.85 billion at the close of 2022, growing from $29.42 billion in the previous filing. Meanwhile, Bloomberg News reported on Feb. 17 that Siegel and co-chairman John Overdeck, were among Wall Street's highest paid fund managers, raking in $411 million each last year.

Meanwhile, the top five positions by size held by the fund at the end of the quarter were:

1. (US:QQQ) Invesco QQQ Trust ETF - 0.94% weight
2. (US:V) Visa Inc - 0.80% weight
3. (US:GILD) Gilead Sciences, Inc - 0.80% weight
4. (US:PCGU) PG&E Corp - 0.79% weight
5. (US:AMD) Advanced Micro Devices Inc - 0.78% weight

The heat map below illustrates the hedge fund's top 100 positions by size:

Two Sigma’s top portfolio increases during the quarter:

The largest allocation increase by the fund was in e-commerce conglomerate Amazon.com (US:AMZN) with a 0.717% allocation increase to 0.75% of the total portfolio, worth $238.54 million at the close of 2022. The fund holds a total of 2.84 million shares in Amazon.

Amazon shares have retreated around 50% from pandemic highs and have recently fallen from a relief rally since the beginning of 2023. The stock is still trading about 9% higher this year but has trended lower in February since reporting fourth quarter results at the beginning of the month. The results were below market forecasts and included guidance for Q1 for the market to expect $121 billion to $126 billion in sales. Amazon also recently completed its acquisition of 1life Healthcare (US:ONEM).

The second-most significant trade was in payment fintech company Paypal Holdings Inc (US:PYPL) with a 0.634% allocation increase to 0.75% of the fund, worth $239.17 million at the end of 2022.

Paypal’s shares have fallen significantly from  pandemic highs along with other tech names as the company was trading on an expensive valuation multiple. PYPL reported Q4 results in early February with 7% growth in sales to $7.38 billion, 18% growth in operating income to $1.2 billion and total payment volume growth of 5% to around $357 billion. The company told shareholders it expects to grow non-GAAP EPS by 18% in 2023 to around $4.87 per share.

The third-largest increase by the fund was in wholesale drug company AmerisourceBergen Corp (US:ABC) with a 0.549% growth in allocation to 0.58%, worth $185.73 million at the time of reporting.

ABC’s stock has outperformed US equity markets over the last year and has risen 11.7% on a one-year view. The company reported its first quarter results at the beginning of February with earnings meeting analyst expectations. The company also upgraded full-year profit guidance and is trading on a ~19x PE ratio which is undemanding relative to other growth peers.

The fourth-most significant trade was in semiconductor company Advanced Micro Devices Inc (US:AMD) with a 0.504% allocation increase to 0.78% of the fund, worth $246.92 million at the end of the quarter.

AMD’s share price has been under pressure over the last year after a significant run over the pandemic which saw chip shortages globally. When the company reported Q4 results at the end of January, management provided Q1 sales guidance which fell short of market forecasts and expected declines in client and gaming segments over the year.

American fast food corporation Yum! Brands Inc (US:YUM) was the fifth-most significant trade by the fund with a new 0.48% weight worth $152.04 million. The YUM share price is trading around all-time highs but continues to post strong results as seen in the most recent Q4 results. The company also boosted its quarterly dividend at the time of the last investor update, to 60.5 cents per share.

Other major portfolio increases by the fund were in Baxter International Inc (US:BAX), iShares 20+ Year Treasury Bond ETF (US:TLT), Carnival Corp (US:CCL) and Edwards Lifesciences Corp (US:EW).

Two Sigma’s top portfolio decreases during the quarter:

The most significant decrease by Two Sigma in the December quarter was a -0.928% reduction in the SPDR S&P 500 ETF (US:SPY) to 0.26% of the fund with the remaining exposure worth $84.11 million.

The second-largest sale was in JPMorgan Chase & Co (US:JPM) with the fund completely cutting its -0.77% stake in the bank.

The fund also reduced most of its stake in British pharmaceutical company GSK plc (US:GSK) with a -0.652% allocation decrease to a 0.06% weight, worth $19.61 million.

Two Sigma cut its stake in professional services company Accenture Plc (US:ACN) by 0.609% to a 0.05% weight, worth $14.39 million at the end of the quarter.

The fund completely sold out of Nike Inc (US:NKE) shares which previously held a 0.61% weight.

Other notable position reductions were in Procter & Gamble Co (US:PG), Meta Platforms Inc (US:META), Petroleo Brasileiro SA Petrobras ADR (US:PBR), along with selling all of its holdings of Broadcom Inc (US:AVGO) shares. 

The fund's reported market value remains well below pandemic highs although it has recovered from the recent 2022 sell-off with broader equity markets. The chart below illustrates the reported market value of the fund over the last 10 years.