Bruce Kovner's Caxton Associates 13F Filing: Q4 2008 ~ market folly

Monday, March 16, 2009

Bruce Kovner's Caxton Associates 13F Filing: Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

This week, turning the focus to global macro funds, we'll be checking in on Bruce Kovner's Caxton Associates. Do note that global macro funds are typically not equity focused funds. While they do indeed have equity exposure, the majority of their holdings are in other markets. So, we mainly check in on their sector exposure to see what types of global macro themes they may be investing in. This $9 billion firm is one of many global macro oriented funds which we cover. This 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. But, they are only required to disclose equity holdings.

Kovner comes from the group of "offspring" of the legendary Commodities Corp. Kovner emerged as a successful offspring along with fellow great macro traders Paul Tudor Jones (Tudor Investment Corp), and Louis Bacon (Moore Capital Management). If you want to hear some insightful thoughts from Bruce Kovner himself, head over to our post on Hedge Fund manager interviews. Taken from Wikipedia, Kovner's bio is as follows: "Kovner's first trade was for $3,000, borrowed against his MasterCard, in soybean futures contracts. Realizing growth to $40,000, he then watched the contract drop to $23,000 before selling. He later claimed that this first, nerve-racking trade taught him the importance of risk management. In his eventual role as a trader under the legendary Michael Marcus at Commodities Corporation (now part of Goldman Sachs), he purportedly made millions and gained widespread respect as an objective and sober trader. This ultimately led to the establishment of his current company, Caxton Associates, in 1983, which today manages over $10 billion in capital and has been closed to new investors since 1992." Kovner is also featured in Jack Schwager's book, Market Wizards. Caxton's Global Investments fund saw Caxton's net returns of 13% (after performance fees), as noted in our year-end performance numbers post. Kovner last year told Alpha magazine that, "One of the most important skills you need is to consistently reinvent where you put resources. You must seek out undiscovered information." His hedge fund is named after the first printer of books in English from the fifteenth century.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
WR Berkley (WRB)
Ecolab (ECL)
Western Union (WU)
McDonalds (MCD)
Kraft (KFT)
Northern Trust (NTRS)
Urban Outfitters (URBN)
Oil Service ETF (OIH)
Liberty Media (LMDIA)
Bed Bath & Beyond (BBBY)
SPDR Gold Trust (GLD)
Devon Energy (DVN)
Anadarko Petroleum (APC)
Potash (POT)
American Express (AXP)
Ambev (ABV)
Teva Pharma (TEVA)
United States Steel (X)
Morgan Stanley (MS)
Petroleo Brasileiro (PBR)
Noble (NE)
Ishares Brazil ETF (EWZ)
CF Industries (CF)
Unibanco (UBB)
Ishares Mexico ETF (EWW)
Weyerhaeuser (WY)
Fluor (FLR)
Canadian Natural Resources (CNQ)

Some Increased Positions (A few positions they already owned but added shares to)
Amgen (AMGN): Increased position by 285%
Occidental Petroleum (OXY): Increased position by 71%
General Mills (GIS): Increased position by 17.8%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
JPMorgan Chase (JPM): Reduced position by 92%
Crown Holdings (CCK): Reduced position by 69%
Gilead (GILD): Reduced position by 67%
Berkshire Hathaway (BRK-A): Reduced position by 67%
DirecTV (DTV): Reduced position by 65%
Lorillard (LO): Reduced position by 63%
Total (TOT): Reduced position by 56%
Wells Fargo (WFC): Reduced position by 53.7%
Ferro (FOE): Reduced position by 51%
Raytheon (RTN): Reduced position by 50.5%
Medco Health (MHS): Reduced position by 49%
Apollo Group (APOL): Reduced position by 47%
Google (GOOG): Reduced position by 47%
Netease (NTES): Reduced position by 47%
Waste Management (WMI): Reduced position by 46.4%
XTO Energy (XTO): Reduced position by 42%
Colgate Palmolive (CL): Reduced position by 38.9%
Walmart (WMT): Reduced position by 37%
Hewlett Packard (HPQ): Reduced position by 36%
Priceline (PCLN): Reduced position by 34.5%
Lazard (LAX): Reduced position by 30%
WR Grace (GRA): Reduced position by 27.6%
Qualcomm (QCOM): Reduced position by 26%
Visa (V): Reduced position by 22.8%
Philip Morris Intl (PM): Reduced position by 12%

Removed Positions (Positions they sold out of completely)
Great Atlantic (GAP)
Petroleo Brasileiro (PBR-A)
Barr Pharma (BRL)
Home Depot (HD)
Trinity Industries (TRN)
Reinsurance Group (RGA-B)
Precision Castparts (PCP)
Greenfield Online (inactive)
Kohls (KSS)
Mohawk Industries (MHK)
Rockwood (ROC)
Goldman Sachs (GS)
Lennar (LEN)
Fastenal (FAST)
Bucyrus (BUCY)
Titanium Metals (TIE)
Schlumberger (SLB)
Tercica (TRCA)
Ariba (ARBA)
Symantec (SYMC)
Estee Lauder (EL)
Scripps Networks (SNI)
Altria (MO)
Campbell Soup (CPB)
Ikon Office (IKN)
Grey Wolf (GW)

Top 20 Holdings (by % of portfolio)

  1. Service Corp (SCI): 4.37% of portfolio
  2. General Mills (GIS): 4.14% of portfolio
  3. Philip Morris (PM): 3.66% of portfolio
  4. Walmart (WMT): 3% of portfolio
  5. Occidental Petroleum (OXY): 2.6% of portfolio
  6. Raytheon (RTN): 2.25% of portfolio
  7. XTO Energy (XTO): 2.1% of portfolio
  8. WR Berkley (WRB): 1.9% of portfolio
  9. Priceline (PCLN): 1.85% of portfolio
  10. Hewlett Packard (HPQ): 1.84% of portfolio
  11. Wells Fargo (WFC): 1.84% of portfolio
  12. Vivus (VVUS): 1.78% of portfolio
  13. Colgate Palmolive (CL): 1.73% of portfolio
  14. Medco Health (MHS): 1.64% of portfolio
  15. Ecolab (ECL): 1.63% of portfolio
  16. Waste Management (WMI): 1.57% of portfolio
  17. Apollo Group (APOL): 1.53% of portfolio
  18. Western Union (WU): 1.49% of portfolio
  19. McDonalds (MCD): 1.49% of portfolio
  20. Amgen (AMGN): 1.46% of portfolio

Caxton was moving out of equities in a big way this past quarter. Assets from the collective long US equity, options, and note holdings were $2.2 billion last quarter and were $770 million this quarter. That's really the only major move worth noting... the fact that they were selling out of so many things. Overall, they have a pretty blue-chip littered portfolio. They're playing it 'safe' considering their holdings and the fact that they have so little equity exposure now. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, Andreas Halvorsen's Viking Global, Timothy Barakett's Atticus Capital, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Peter Thiel's Clarium Capital, Bret Barakett's Tremblant Capital, David Stemerman's Conatus Capital, James Pallotta's Raptor Capital Management, Lee Ainslie's Maverick Capital, and John Griffin's Blue Ridge Capital. Look for our updates as we will be covering a new fund each day.

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