Hedge Fund Tracking: Moore Capital Management (Louis Bacon) - 13F Filing Q3 2008 ~ market folly

Tuesday, December 9, 2008

Hedge Fund Tracking: Moore Capital Management (Louis Bacon) - 13F Filing Q3 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here. We've already covered:

Next up, we have Moore Capital Management, ran by Louis Bacon. Moore, named after Bacon's middle name, is a $10 billion global macro set of hedge funds. The next few funds we will be covering are global macro oriented funds, which is a switch from some of the more value oriented funds we've been covering, like the 'Tiger Cub' funds including Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, John Griffin's Blue Ridge Capital, and Andreas Halvorsen's Viking Global. Global macro funds seek to find investments in whatever market they can gain an edge, whether it be equities, bonds, currencies, debt, commodities, and more. So, keep in mind that these equity positions only represent a portion of the fund's overall holdings. They are not required to disclose holdings outside of equities, notes, and stock options.

Louis Bacon is a famed trader and risk manager. He comes from the group of "offspring" of the legendary Commodities Corp. Bacon emerged as one of the great macro traders alongside the likes of Paul Tudor Jones (Tudor Investment Corp), and Bruce Kovner (Caxton Associates). And, interestingly enough, Bacon helped get his firm off the ground when Paul Tudor Jones stopped accepting capital from investors and instead turned them to Bacon's firm. Returning 31% annually since inception in 1990, Bacon can be very proud of his flagship fund, Moore Global Investments. But, it doesn't stop there. His returns have shown little correlation to the stock market and low volatility. He is the definition of a risk manager.

Bacon credits his risk management skills to the futures markets, where he learned to be sensitive to market action. And, he learned such skills at an early age. While getting his MBA at Columbia, he used his student loan money to trade. And, he lost it all. Clearly, he learned a lesson he would never forget. Such a lesson stuck with him as he worked various jobs in the financial industry before eventually starting his own firm. And, in his first year managing Moore Capital Management, he returned 86%. Bacon strives to identify long running macro trends. While he has a longer-term macroeconomic view, he won't let that stop him from making money by trading around the position in the mean time. If you want to hear some insightful thoughts from Louis Bacon himself, head over to our post on Hedge Fund manager interviews. Also, its worth pointing out that Stanley Shopkorn, formerly of Moore Capital, has started his own fund.

Before beginning, you might be interested in checking out Moore's portfolio holdings from the second quarter of 2008. The following were Moore's long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC.

New Positions (Brand new positions that they initiated in the last quarter):
Energy ETF (XLE) Calls
Energy ETF (XLE) Puts
Energy ETF (XLE)
Ishares Emergin Markets (EEM)
Ace (ACE)
Goldman Sachs (GS)
Homebuilders ETF (XHB)
Sandisk (SNDK) Calls
KLA Tencor (KLAC) Calls
Rohm & Haas (ROH)
Data Domain (DDUP) Calls
Applied Materials (AMAT) Calls
Imclone (IMCL)
Cameco (CCJ)
Barr Pharma (BRL)
Activision Blizzard (ATVI)
Lennar (LEN) Puts
Citrix (CTXS)
Rio Tinto (RTP)
Informatica (INFA) Calls
Teradata (TDC) Calls
Wells Fargo (WFC)
Hewlett Packard (HPQ) Puts
Citigroup (C)
Cemex (CX)
Siderurgica (SID)
Foundry (FDRY)
Bucyrus (BUCY) Calls
Texas Instruments (TXN) Calls
International Rectifier (IRF)

Added to (Positions they already owned but added shares to)
Travelers (TRV): Increased by 1920%
SYMS (SYMS): Increased by 236%
EnergySolutions (ES): Increased by 100%
Chevron (CVX): Increased by 48%
Cisco (CSCO) Puts: Increased by 14%

Some Reduced Positions (Positions they sold some shares of - note not all sales listed)
Petroleo Brasileiro Cl A (PBR-A): Reduced by 79%
Electronic Arts (EA): Reduced by 95%
Tyson Foods (TSN): Reduced by 77%
Limelight networks (LLNW): Reduced by 55%
Walter Industries (WLT): Reduced by 84%
Crown Holdings (CCK): Reduced by 43%
Freeport McMoran (FCX): Reduced by 98%
Alpha Natural Resources (ANR): Reduced by 83%
Nvidia (NVDA): Reduced by 94%
Vale (RIO): Reduced by 94%
JP Morgan (JPM): Reduced by 38%
Powershares Water Resource (PHO): Reduced by 35%
Petroleo Brasileiro (PBR): Reduced by 9%
Barclays Bank Preferred Shares (BCS-PD): Reduced by 56%
Hewlett Packard (HPQ): Reduced by 57%
Qualcomm (QCOM): Reduced by 83%
Anheuser Busch (BUD): Reduced by 43%
Informatica (INFA): Reduced by 48%
Formfactor (FORM): Reduced by 50%

Removed Positions (Positions they sold out of completely)
Chesapeake (CHK) Calls
Chesapeake Energy (CHKDO) Convertible Bonds
Petrohawk (HK)
Powershares QQQ (QQQQ) Puts
Lehman Brothers (LEHMQ)
Philip Morris International (PM)
Merrill Lynch (MER) Puts
Sandridge Energy (SD)
Google (GOOG)
Petroleo Brasileiro (PBR) Puts
Marathon Oil (MRO)
Sotheby (BID)
Coca Cola (KO)
Potash (POT)
Comstock (CRK)
Ishares Transports (IYT) Puts
Goodrich Petroleum (GDP)
Terra Industries (TRA)
Arch Coal (ACI)
Agrium (AGU)
Teva Pharma Convertible Bonds (TEVA)
Target (TGT) Puts
Apple (AAPL)
Activision (converted into new shares of Activision Blizzard - ATVI)
Massey Energy (MEE)
Fomento Economico (FMX)
Goldman Sachs (GS) Puts
Mosaic (MOS)
Univanco (UBB)
Grupo Televisa (TV)

Top 20 Holdings (by % of portfolio)

  1. JPMorgan Chase (JPM): 9.1% of portfolio
  2. Energy ETF (XLE) Puts: 7% of portfolio
  3. Energy ETF (XLE) Calls: 7% of portfolio
  4. Ishares Emerging Markets (EEM): 6.8% of portfolio
  5. Powershares Water Resource (PHO): 4.2% of portfolio
  6. Max Capital (MXGL): 4% of portfolio
  7. Ace (ACE): 3.7% of portfolio
  8. Goldman Sachs (GS): 3.6% of portfolio
  9. Homebuilders ETF (XHB): 3.4% of portfolio
  10. Energy ETF (XLE): 3.4% of portfolio
  11. Sandisk (SNDK) Calls: 2.9% of portfolio
  12. Petroleo Brasileiro (PBR): 2.4% of portfolio
  13. KLA Tencor (KLAC): 2.3% of portfolio
  14. Rohm & Haas (ROH): 2% of portfolio
  15. Barclays (BCS-PD) Preferred Shares: 1.8% of portfolio
  16. Hewlett Packard (HPQ): 1.7% of portfolio
  17. Data Domain (DDUP) Calls: 1.5% of portfolio
  18. Applied Materials (AMAT) Calls: 1.5% of portfolio
  19. Imclone (IMCL): 1.4% of portfolio
  20. Cameco (CCJ): 1.4% of portfolio

Assets from the collective holdings were $4.45 billion last quarter and were only $1.36 billion this quarter. Much like Tudor, Moore was decreasing exposure to equities all across the board. Please note that we have not detailed every single change to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings and do not reflect the cash or short portions of their portfolio. This is just one of many funds in our hedge fund tracking series in which we're tracking 35+ prominent funds. We've already covered Whitney Tilson's T2 Partners, Peter Thiel's Clarium Capital, Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, Timothy Barakett's Atticus Capital, John Griffin's Blue Ridge Capital, Bret Barakett's Tremblant Capital, Andreas Halvorsen's Viking Global, John Paulson's Paulson & Co, David Einhorn's Greenlight Capital, and Dan Loeb's Third Point, and Paul Tudor Jones' Tudor Investment Corp. Overall, its been one of the worst years ever for hedge funds, as we noted in our recent October hedge fund performance update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Louis Bacon & Moore Capital Management:
- Stanley Shopkorn (ex-Moore Capital) starts new fund
- Moore's second quarter of 2008 portfolio
- October hedge fund performance update
- Hedge Fund Rankings

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