John Griffin's Blue Ridge Capital Loves Apple (AAPL): 13F Filing ~ market folly

Wednesday, September 2, 2009

John Griffin's Blue Ridge Capital Loves Apple (AAPL): 13F Filing

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is John Griffin's hedge fund Blue Ridge Capital. Griffin is very similar to Stephen Mandel (whom we also just covered) in that they were both some of Julian Robertson's top men at legendary hedge fund Tiger Management. They both went on to form their own funds and as such are labeled 'Tiger Cubs.' Griffin is most well known for his status as Robertson's former right hand man and he clearly knows what he's doing. Prior to that, he received his bachelor's degree from the University of Virginia and his MBA from Stanford. For more on Griffin you can check out our post of Tiger Cub biographies. Blue Ridge invests in companies that dominate their industries and shorts companies with fundamental problems in order to seek absolute returns. Griffin likes to hedge with an effective amount of both long and short positions like a hedge fund in the true sense of the definition.

For more on how to think and analyze like Griffin and Blue Ridge, check out their recommended reading lists. They've laid out their top reads in four categories presented below:

- Behavioral Finance recommendations
- Analytical recommendations
- Economics recommendations
- Historical/Biographical recommendations

Definitely check those out as there are some great suggestions from Blue Ridge in there to help you analyze financial markets and think like a prominent hedge fund manager such as John Griffin.

The following were Blue Ridge's long equity, note, and options holdings as of June 30th, 2009 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 from largest to smallest):
Pfizer (PFE), CME Group (CME), Schering Plough (SGP), Vale (VALE), Western Union (WU), State Street (STT), iShares Silver Trust (SLV), Express Scripts (ESRX), Partnerre (PRE), VMWare (VMW), Palm (PALM), Interoil (IOC), Wells Fargo (WFC), Redwood (RWT), Direxion 3x bear financials (FAZ), & American Capital (ACAS)

Some Increased Positions (A few positions they already owned but added shares to)
Blackrock (BLK): Increased by 100%
Range Resources (RRC): Increased by 89.4%
Apple (AAPL): Increased by 75.65%
Axis Capital Holdings (AXS): Increased by 38.7%
ThermoFisher Scientific (TMO): Increased by 23.5%

Some Reduced Positions (Some positions they sold some shares of)
Microsoft (MSFT): Reduced by 64.4%
Monsanto (MON): Reduced by 61.8%
Mastercard (MA): Reduced by 61%
Yamana Gold (AUY): Reduced by 54.3%
Newmont Mining (NEM): Reduced by 42.4%
National Oilwell Varco (NOV): Reduced by 41.1%
RenaissanceRe (RNR): Reduced by 34.4%
Amazon (AMZN): Reduced by 34.2%
Goldcorp (GG): Reduced by 33.2%
Berkshire Hathaway (BRK-A): Reduced by 31%

Removed Positions (Positions they sold out of completely)
SPDR S&P 500 (SPY) Calls, Vale (RIO), Amgen (AMGN), Target (TGT), Vornado Realty (VNO), Petroleo Brasileiro (PBR), Google (GOOG), Dell (DELL), Anadarko Petroleum (APC), Devon (DVN), Packaging Corp (PKG), iShares Biotech (IBB), Fomento Economico (FMX), Goodrich Petroleum (GDP), Calpine (CPN), Vimpelcomm (VIP). It also shows them selling out of General Growth Properties (GGWPQ), but this is only because the SEC has deemed it not necessary to report holdings in those shares anymore. (We touched on this when we covered Bill Ackman's portfolio). We now have no way of knowing if Blue Ridge still hold common shares or not.

Top 15 Holdings by percentage of assets reported on the 13F filing *(see note below)

  1. Apple (AAPL): 7.3%
  2. Millipore (MIL): 5.4%
  3. Pfizer (PFE): 5.2%
  4. CME Group (CME): 5.2%
  5. ThermoFisher Scientific (TMO): 5.18%
  6. Schering Plough (SGP): 4.8%
  7. Visa (V): 4.7%
  8. Microsoft (MSFT): 4.5%
  9. Amazon (AMZN): 4.1%
  10. Covanta (CVA): 3.73%
  11. Vale (VALE): 3.7%
  12. National Oilwell Varco (NOV): 3.7%
  13. Blackrock (BLK): 3.43%
  14. Discovery Communications (DISCA): 3.04%
  15. Crown Castle (CCI): 2.63%

For all you Wall Street (the movie) fans out there, realize that we were very tempted to make the headline, 'Blue Horseshoe loves Apple,' but we refrained due to the fact that it would be a ridiculously bad joke. (Sidenote: the Wall Street sequel is coming for those of you unaware). At any rate, Blue Ridge Capital loaded up on shares of Apple (AAPL) in a big way, increasing their stake by over 75% and bringing it to their top holding. You can bet they're up big on this position as shares of AAPL have risen from $142 to $170 since June 30th when this portfolio snapshot was taken. Earlier this week, we also noted that David Stemerman's Conatus Capital held Apple as their top position. Shares of AAPL were certainly a theme over the past few quarters for many prominent hedge funds.

Blue Ridge also loaded up on shares of CME Group (CME), starting a brand new position and making it their 4th largest holding. Also worth noting is their brand new position of Western Union (WU), which they made their 17th largest holding. We mention this because John Griffin's hedge fund now owns Visa (V), Mastercard (MA), and Western Union (WU) all as top 20 holdings in their portfolio as they play the payment processing theme. While they brought on WU, they also cut their MA stake by 60%.

In terms of notable sales, they completely sold out of their SPDR S&P 500 (SPY) Calls position. That was previously a 5.8% stake for them and you have to believe they profited handsomely from it. From quarter-end to quarter-end (March 30th 'til June 30th), the S&P was up over 12.6%. We also wanted to highlight their 64% reduction in their Microsoft (MSFT) stake and their nearly 62% reduction in their Monsanto (MON) position.

It also appears if Blue Ridge has possibly been playing some risk arbitrage a bit with brand new positions in Pfizer (PFE) and Schering Plough (SGP), but there's no way for us to be sure. We only guess that solely because a ton of hedge funds have been buying shares of companies that are in the midst of some sort of merger or transaction. As the risk arbitrage space has dwindled due to fund redemptions and closures, newer funds have stepped onto the scene to pick up the pieces.

Lastly, we also wanted to highlight other recent activity from Blue Ridge where we see they established a new stake in PennyMac Mortgage (PMT).

*Note regarding portfolio percentages: Assets from the collective holdings reported to the SEC via 13F filing were $3.9 billion this quarter compared to $4.3 billion last quarter, so down slightly. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. In reality, the percentages are more watered down in their actual hedge fund portfolio. If you were to calculate percentage weightings in the actual hedge fund portfolio, they would obviously be different since you would divide position sizes by their total assets under management.

This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. So far, we've already covered the holdings of Bill Ackman's Pershing Square Capital Management, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Dan Loeb's Third Point LLC, and Stephen Mandel's Lone Pine Capital, George Soros (Soros Fund Management), Lee Ainslie's Maverick Capital, Philip Falcone's Harbinger Capital Partners, David Stemerman's Conatus Capital, and Eric Mindich's Eton Park Capital. Check back each day as we cover prominent hedge fund portfolios.

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