Friday, March 26, 2010

Last Chance for the Certified Hedge Fund Professional (CHP) $50 Discount

The Certified Hedge Fund Professional (CHP) Designation is almost full so now is your last chance to take advantage of the discount we've secured for Market Folly readers. There are only 14 spots left and it is first come, first served. To receive the discount, enter your email address in the form at the bottom of this page. Once you get an email, just mention Market Folly and you'll receive the exclusive discount.

If you're unfamiliar with the CHP, it is like the CFA, CAIA and other certification programs but has an exclusive focus on hedge funds. Through the CHP you'll gain a better knowledge of the industry and will garner the designation for your professional credentials. Additionally, you will have exclusive access to their hedge fund jobs guide, directory of employers, and vast networking opportunities.

There are only 14 spots left. Enter your information below to receive the $50 discount

(Email and RSS readers come to the site to receive it)

Carl Icahn Buys Take Two Interactive (TTWO) Yet Again

Today seems to be repeat transaction day here at Market Folly. First, we saw Warren Buffett's Berkshire Hathaway selling Moody's (MCO) shares for the second time this week. And now we see that Carl Icahn, through his various investment vehicles, has again purchased shares of Take Two Interactive (TTWO) for the second time this week. We just covered his previous transaction and now see that Icahn purchased more shares on March 22nd. Icahn added 36,653 more shares at a price of $9.96. This brings his total ownership to 11,620,526 shares in the video game maker as he seeks to institute change to generate shareholder value.

Taken from Google Finance, Take Two Interactive is "a global publisher, developer and distributor of interactive entertainment software, hardware and accessories. The Company’s publishing business consists of Rockstar Games, 2K Games, 2K Sports and 2K Play publishing labels. The Company develops, markets and publishes software titles for gaming and entertainment hardware platforms."

For more from everyone's favorite corporate raider, head to Icahn's investor letter as well as the rest of his portfolio.

Berkshire Hathaway Sells Moody's For 2nd Time This Week

We have yet another recent transaction out of Warren Buffett's Berkshire Hathaway. And, you guessed it, they're selling more Moody's (MCO) shares. Just a few days ago we noted how Buffett was selling MCO and their latest Form 4 filed with the SEC shows recent activity on March 23rd & 24th. On the 23rd they sold 148,054 shares at a weighted price of $30.2195. The next day they sold 57,574 more shares at $30.3661. After these sales, they still owned 30,786,876 shares. Please note that these shares are owned by NICO and GEICO, subsidiaries of Berkshire Hathaway. As we pointed out before, it's very clear that Berkshire finds anything above $25 as a fair price to sell MCO shares at and they tend to sell shares in the high-20's. To learn how to invest like the legend himself, head to Warren Buffett's recommended reading list.

The rationale behind these sales is still somewhat up in the air. Before the Burlington Northern acquisition, Buffett was selling MCO shares to help finance that transaction. However, they still continue to sell some Moody's so they could also be looking to reduce their overall position size. Or, they possibly could just view the current share price as fair value because there's a pattern as to what price they sell at. Others have speculated that Berkshire is less comfortable with their MCO exposure based off of Buffett's previous comments about Moody's. In the end, it's most likely some combination of multiple reasons though. We just wanted to update you on the latest round of transactions and it most likely will not be the last.

Taken from Google Finance, Moody's "a provider of credit ratings; credit and economic related research, data and analytical tools; risk management software, and quantitative credit risk measures, credit portfolio management solutions and training services."

For more from the legendary investor, head to Berkshire Hathaway's annual letter and Warren Buffett's portfolio.

What We're Reading ~ 3/26/10

Learning from hedge fund Scion Capital's Michael Burry [Street Capitalist]

Also, an in-depth look at Michael Burry in Michael Lewis' new book [The Big Short]

The rise of return envy [Abnormal Returns]

The death cross in China [Pragmatic Capitalist]

Bill Ackman's greatest short detailed in the new book Confidence Game [Bloomberg]

It's okay to borrow investment leads/ideas from others [Reformed Broker]

Assessing the latest movements out of Yale's Endowment [peHUB]

Hedge fund resume writing tips [HedgeFundBlogMan]

Taking a look at the Lions Gate Entertainment/Carl Icahn situation [MergerArbitrageInvesting]

Many hedge funds are short Palm (PALM). Here's why the company's only hope might be an acquisition [Business Insider]

Interview with Jim Chanos [NY Observer]

Short sellers & financial misconduct (direct .pdf link) [AmericanFinanceAssociation]

Screen of stocks looking at the dogs of the Dow & net payout yield [SmartMoney]

My life in finance [Eugene Fama]

SEC probing 2 other big name hedgies [NYTimes]

Good profile of Carl Icahn [NYTimes]

Brief profile of Moore Capital's Louis Bacon [Wall Street Journal ~ subscription required to view it, but you can get a discount here]

Financial websites & blogs most influential with individual investors, study finds [IR Web Report]

Thursday, March 25, 2010

Hedge Fund Harbinger Boosts Sable Mining Stake

Back in December 2009, we reported that Philip Falcone's hedge fund firm Harbinger Capital Partners had built a large stake in Sable Mining Africa (AIM: SBLM). Since then, Harbinger have continued to boost their position. Due to trading on March 23rd, they now own 23.35% of the company. This is quite a large increase since the last time we saw their stake and you can see the gradual rise in ownership broken down below:

December 17th, 2009: 15.1% ownership stake
February 11th, 2010: 15.05%
February 17th, 2010: 17.11%
February 22nd, 2010: 18.03%
March 3rd, 2010: 19.08%
March 23rd, 2010: 23.35%

If you're unfamiliar with our series of tracking hedge fund positions in UK markets, we posted a preface here. Additionally, we've covered Harbinger's UK positions in detail before for those interested.

Boosting their stake in Sable Mining isn't the only activity we've seen out of Falcone's hedge fund as of late. We also saw them adjust their Calpine position and in the past noted their bet on Spring Nextel (S). After having a dismal 2008, Harbinger had a solid showing last year as they finished up 46.5% as we noted in our 2009 hedge fund performance numbers post. Falcone runs his $6 billion hedge fund with a focus on distressed plays and often takes concentrated positions in companies.

Sable Mining Africa Ltd is small company listed on the AIM market in London. It was re-named in November 2009 and used to be called BioEnergy Africa. Sable changed in 2009 with a move away from bio-ethanol related assets into mining related energy assets. Sable Mining is now focused on the acquisition or investment in early stage coal and uranium with a particular emphasis on Namibia, Botswana, Zimbabwe and Zambia. The company intends to be an active investor in an attempt to add value both operationally and strategically to the businesses it acquires or invests in. The company’s objective is to own entire or majority interests in suitable businesses or assets rather than holding minority investments. To facilitate the new strategy, the company undertook a fundraising via a placing of new ordinary shares in December 2009. It is likely that Harbinger bought shares in the placement at a price below the quoted market share price. Sable’s Chairman is ex-England cricketer and slow left arm bowler, Phil Edmonds.

For more of our coverage of hedge fund Harbinger Capital, head to our portfolio updates.

Gold as an Insurance Policy (and When to Sell It)

Societe Generale is out with some well thought out research on everyone's favorite precious metal: gold. The global strategy research piece is called "Popular Delusions: When to sell gold." In it, the argument is made that gold is not really an investment, but rather a speculative tool.

The most intriguing thing about this precious metal is perhaps the vast array of reasons that investors are purchasing it. Some use it to hedge, some are making a speculative wager, while others use it to bet against fiat currency or protection from inflation. In SocGen's research, they examine gold primarily as an insurance policy. And they interestingly point out that, "Indeed, during the '6000 year gold bubble' no one has defaulted on gold. It is the one insurance policy which will pay out when you really need it to."

The author is using gold as an insurance policy against developed market governments failing. They note that the crises we've seen in Dubai and now Greece are just the first few drops in the bucket. In the end, they conclude that it will be time to sell gold when "political winds change direction and become blustering gales forcing us onto the course of fiscal sustainability." So, there you have their argument for gold as an insurance policy.

In another corner, you have hedge fund rockstar John Paulson who is using his new gold fund to bet against fiat currency, and in particular, the US dollar. We also just recently examined the dynamic between gold, the dollar & gold equities.

Global macro hedge fund Woodbine Capital, on the other hand, sees gold as the anti-goldilocks. They've owned gold as well as out of the money puts on the metal. They're not using it as a hedge for inflation or deflation. Instead, they're wagering on it as part of their theme of increased emerging market demand.

Additionally, we've also see John Burbank's Passport Capital's rationale for owning physical gold. They own it because of its supply/demand dynamic as well as central bank action, among other reasons. David Einhorn's hedge fund Greenlight Capital was one of the first to store physical gold. We've also seen others use it as a diversification tool in their portfolio. Lastly, we saw Dan Loeb's Third Point at one time use gold as a fat tail risk and doomsday trade. Obviously, the reasons to own gold vary. The research below now presents gold as an insurance policy.

Embedded below is Societe Generale's look at the precious metal and when to sell it. It's a great objective take on the metal and worth the read:

You can directly download a .pdf here.

As you can see, there are a myriad of reasons to own the metal. It's hard to say though whether or not everyone would be selling for the same reason in the end. SocGen argues that the time to sell gold will be when fiscal sustainability is achieved, but this is because they view the metal as an insurance policy. When or why others might sell the metal is yet to be determined and something we haven't seen discussed at length. That's the crazy thing about gold, everyone seems to own it for different reasons. In markets, when to buy is one thing. But many great investors will tell you that it's when you sell that matters most.

For more on gold, we've posted copious amounts of hedge fund research and highly recommend reading the following:

- John Paulson's gold fund: an in-depth look
- Global macro hedge fund Woodbine's research, Gold: The Anti-Goldilocks
- Passport Capital's rationale for owning physical gold
- A look at the dynamics between gold, the dollar & gold equities

Hedge Fund D.E. Shaw Updates a Position

Hedge fund firm D.E. Shaw & Co recently filed a 13G with the SEC in regards to shares of Lear Corporation (LEA) due to activity on March 11th, 2010. In the filing, we see that they now have a 5.1% ownership stake in LEA with 2,202,816 aggregate shares owned. This share total includes warrants that are exercisable into 421,409 shares and preferred stock convertible into 70,238 shares.

This is an increase in their position because back on December 31st, 2009 they owned 1,310,101 shares. Over the past three months they've gained exposure to 892,715 more shares and as such have increased their position by 68.1%. D.E. Shaw was recently listed as one of the world's largest hedge funds and its founder David Shaw recently appeared on Forbes' billionaire list.

Taken from Google Finance, Lear is "a supplier of automotive seat systems and electrical power management systems with a global foot printing, including 35 countries."

For more research from this multifaceted firm, head to D.E. Shaw's insight on leverage. For more of the latest portfolio maneuvers from prominent investment managers, head to our hedge fund tracking series.

Hugh Hendry's Eclectica Likes Annaly Capital Management (NLY)

Today we're covering the latest updates out of Hugh Hendry's Eclectica Absolute Macro Fund and their CF Eclectica Europe Fund as well. They recently posted up their February 2010 letter and we get some insight as to what they're investing in and how their portfolio is allocated. They've definitely made some position adjustments since the last time we looked at their portfolio.

Their commentary highlights their new addition of Annaly Capital Management (NLY) to the portfolio. They like this position because it has a dividend of 17% but point out that it does come with risks, including the possibility that the Fed aggressively raises interest rates (which would negatively effect NLY's business). This play sticks with Eclectica's overall theme that inflation is not a worry here and they see the Fed keeping interest rates low longer than many anticipate. Hendry is more worried about deflation than anything and he thinks Annaly is a safe play in the mean time because he does not anticipate an aggressive rise in interest rates. For more thoughts from Hendry, check out his insight from a recent investment panel.

We see that Eclectica's Absolute Macro Fund top 10 holdings are as follows:

1. Long EUR/short EEK: 21.8%

2. Long EUR/short LVL: 14.5%

3. German 30 year government bond: 10.3%

4. Annaly Capital Management (NLY): 5.1%

5. Long USD/short KRW: 2.7%

6. long USD/short ZAR: 2.4%

7. long USD/short AUD: 2.1%

8. long USD/short GBP: 2.1%

9. MetroPCS Wireless 9.25% 2014: 2.1%

10. British American Tobacco: 1.6%

As you can see, their top 3 holdings are highly concentrated and their brand new NLY stake is pretty sizable. Embedded below is Eclectica's Macro Fund February update and you can directly download the .pdf here:

Additionally, we wanted to post up an update from their CF Eclectica Europe Fund as well. That is embedded below and you can see their brief commentary and top 10 holdings as well, with a downloadable .pdf here:

Always intriguing to see what Hugh Hendry is up to with his various investment vehicles. For more on Hendry's funds, we've posted up some past Eclectica commentaries. Be sure to also check out his take on how he would invest $100 million as well as BBC's recent video of a day in the life of Hugh Hendry, which many of you no doubt will find amusing.

Wednesday, March 24, 2010

Carl Icahn Buys More Take Two Interactive (TTWO)

Our favorite rabblerouser and 'corporate raider' Carl Icahn keeps adding to his position in his latest target. According to an SEC Form 4 filing, Icahn acquired 50,840 shares at a price of $10.01 on March 18th. A day later, he acquired an additional 660,000 shares at $9.93. This brings his total to 11,583,873 shares, a 13.7% ownership stake in the company.

In his amended 13D filing, Icahn notes that the aggregate purchase price of their position was $97,593,700. As we've detailed in the past, Icahn has been adding to this stake repeatedly. In December, Icahn owned a little over 11% of the company. By January, he owned slightly over 12%. And now, in March, he owns almost a 14% stake. Other recent notable activity out of Icahn includes trying to acquire Lions Gate Entertainment (LGF). However, the company just rejected his latest offer. Additionally, Icahn exercised warrants on Tropicana Entertainment and looks as if he's going to try to push for the sale of another company he owns a large stake in, Biogen Idec (BIIB).

For more on Icahn's investments, check out his investor letter as well as the rest of his portfolio.

Taken from Google Finance, Take Two Interactive is "a global publisher, developer and distributor of interactive entertainment software, hardware and accessories. The Company’s publishing business consists of Rockstar Games, 2K Games, 2K Sports and 2K Play publishing labels. The Company develops, markets and publishes software titles for gaming and entertainment hardware platforms."

Hedge Funds Covering Euro Shorts, Buying Crude Oil: Trend Report

Bank of America Merrill Lynch is out with their latest hedge fund trend report and in it, we see the latest market positioning of various hedge fund strategies. Two weeks ago, we saw that hedgies favored high quality stocks. This past week, hedge funds sold gold and silver while buying copper and adding to their net long stake in platinum. They also added to their crowded long positions in crude oil. Additionally, we see that in forex markets hedgies continued to cover their deep shorts in the euro. Just yesterday we noted that legendary investor Jim Rogers was long the euro. In interest rates, hedge funds were covering some of their 10 year note shorts while adding to their shorts in the longer duration 30 year treasuries.

Given our site's focus on equity hedge funds, let's turn now to exposure levels there. It's no surprise to see many large specs add to their short positions in SPX futures given the large overbought condition of the markets. Additionally, we see that market neutral funds are net short equities here and have below average market exposure. Global macro funds were decreasing their net long US equities exposure while buying emerging markets. Long/short equity funds favor small cap names here, but not as much as they previously did. These hedgies still like high quality stocks and their overall market exposure sits around the historical average at 37.5% net long. However, their high quality tilt has declined recently since peaking back in February at the highest levels in over a year.

Embedded below is Bank of America Merill Lynch's latest hedge fund trend report:

You can directly download a .pdf copy here.

As always, a great overview of the positioning of various hedge fund strategies. Make sure to examine the report all the way through as they examine each fund strategy in-depth separately. If you found this report resourceful, check out past hedge fund exposure levels to compare it to. For more research from BofA, we highly recommend checking out their hedge fund generals list of the most popular concentrated positions amongst hedgies.

Jeff Saut: Cautious Short-Term, Bullish Long-Term

It's been a while since we last checked in on Jeff Saut, Chief Market Strategist for Raymond James. So today we're looking at the latest market commentary from him entitled, "Catching Pigs?!". (An aside: Saut almost always has odd titles for his investment strategy publications, have you noticed that?) At any rate, he notes that,

"Currently, however, the U.S. equity markets don't 'see' the potential for a lower structural growth rate, and lower P/E ratio, as the Dow Theory 'buy signal' of last year was reconfirmed last Wednesday."

What's fascinating here is that the Dow has now regained over 50% of the points that were lost back in the market's decline from late 2007 to early 2009. Saut makes special note that yes, the market is overbought. This is something we touched on yesterday with Jim Rogers' commentary as well. However, this overbought status has been overridden by momentum to the upside. No one can guess when this momentum will secede and therein lies the problem. Looking longer-term, Saut still believes this is the typical economic cycle (corporate profits surge and then inventory rebuild occurs).

He is cautious in the short-term but still likes accumulating strong stocks (preferably with dividends). He tosses out ideas such as Century Tel (CTL), Leggett & Platt (LEG), and Brinker (EAT). This meshes with what we've seen out of prominent hedge funds that also currently like high quality stocks.

Embedded below is the latest investment strategy from Jeff Saut:

You can directly download the .pdf here.

Interesting as always to hear the latest thoughts from their Chief Market Strategist. Be sure to check out Jeff Saut's 2010 market outlook as well. And for more research out of Raymond James, we've compiled their list of analysts' best stock picks for 2010.

Oaktree Capital's Howard Marks Frustrated With the Government

Howard Marks of Oaktree Capital is out with his latest commentary and we thought we'd post it up for those interested. Just last week we posted up Marks' in-depth review of 2009, a great read from the Oaktree Chairman. His commentary this time around is actually a follow-up to his last piece, "Tell Me I'm Wrong," where he outlined things in the investment world that concerned him.

His latest piece entitled, "I'd Rather Be Wrong" focuses on the government's inability to tackle financial problems. He's vehemently frustrated with the political situation and writes, "That brings me to the subject of one of today's greatest stumbling blocks, the absence of that elusive ideal: bipartisanship." Obviously, this missive is much more political and not investment related. However, the ramifications of various political actions will ultimately impact the financial industry, so we can understand Marks' concern.

Embedded below is Oaktree Capital and Howard Marks' latest commentary:

You can directly download the .pdf here.

For investment insight from Oaktree Capital, we highly recommend reading Howard Marks' 2009 review and his list of ways to play inflation.

Tuesday, March 23, 2010

Moore Capital Raided By FSA in the UK

One of the biggest stories today has been the fact that Louis Bacon's hedge fund firm Moore Capital was raided earlier by the Financial Services Authority (FSA) in the United Kingdom. An employee at Moore Capital has been arrested, but no one has been charged. Robert Peston over at BBC has noted that, "Moore Capital's understanding is that the FSA is probing private dealings by the trader, rather than trades for the firm." According to Bloomberg, Moore's equity execution trader Julian Rifat was the individual searched. Apparently, an individual at Deutsche Bank and an individual at the London office of BNP Paribas are also under investigation.

According to the FSA press release, "It is believed that the city professionals passed inside information to traders (either directly or via middlemen) who traded based on this information and have made significant profits as a result." Apparently the joint investigation began back in late 2007. Their release calls this the first operation where 16 addresses were searched today.

So for now, it appears as though the individuals are under investigation for their own private transactions and that the firms themselves are not under investigation. It will certainly be interesting to watch as it unfolds. Moore Capital's name has now been tossed into the negative spotlight with all of these headlines though. Remember that last year another high profile hedgie, Raj Rajaratnam's Galleon Group was also accused of insider trading last year.

Moore Capital's founder Louis Bacon is of course one of the most prominent global macro managers out there and was recently featured on Forbes' billionaire list. For more on Bacon's hedge fund, we've posted up some recent portfolio activity out of Moore, as well as some of their UK positions. We'll continue to follow developments in this new insider trading case.

Hedge Fund Balyasny Asset Management Discloses New Position

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has filed a 13G with the SEC in regards to shares of Baltic Trading (BALT). In the filing, they disclose a 5.52% ownership stake in the company with 925,000 shares. This is a brand new position for them and it appears as though they received shares in the initial public offering (IPO) on March 11th, 2010.

Balyasny Asset Management, nicknamed BAM, was founded by Dmitry Balyasny in 2001. It has over 100 employees with the main office in Chicago and other offices in Greenwich, Hong Kong, London, Mumbai, and New York. Their investment process involves fundamental research by sector as well as dynamic capital allocation. They place a heavy weighting on experience and organize their teams so that they can concentrate on any given idea.

Balyasny likes to "focus on misunderstood situations and companies/sectors undergoing turbulent change from different perspectives." Through their research process they seek to identify unique ideas with attractive risk return. For 2009, Balyasny's Atlas Global Fund was up 8.64% as noted in our hedge fund performances post. In terms of other recent activity out of Balyasny, we wrote about their 13G filing on shares of Maguire Properties (MPG).

Taken from their recent press release, Baltic Trading is "a Marshall Islands company recently formed by Genco Shipping & Trading Limited, plans to conduct a shipping business focused on the drybulk industry spot market. Baltic Trading plans to use the proceeds of the offering, together with a $75 million capital contribution received from Genco, to acquire its initial fleet of two Capesize newbuildings and four 2009-built Supramaxes and for working capital and general corporate purposes, which may include future vessel purchases."

For more of the latest hedge fund portfolio movements, head to our coverage of the latest SEC filings.

Jim Rogers Starts Some Short Positions

Legendary investor Jim Rogers recently appeared on television and voiced some of his latest opinions and investment maneuvers. We haven't talked about the former Quantum Fund manager for a while because, let's face it, he's on television all the damn time. But, some of his comments from this recent interview made us take notice.

Potentially the most notable bit of his conversation was when he said, "I had no shorts for about 15 months so I started putting out some shorts recently. But the fact that I've been putting out shorts means the stock market won't pull back." So, it's interesting to see Rogers fight the current trend. In his mind, it's the right play, but he knows he's going to potentially feel some pain first. Many investors out there will agree that the market is overdue for a near-term pullback. MarketClub voiced these concerns in their recent technical analysis video of the S&P 500. Additionally, Bespoke outlined that many stocks are overbought.

We've also noticed some other signs that the market might be getting overheated for now. If you hadn't realized yet, there's been an insane amount of secondary offerings hitting the market. As we tweeted earlier, these secondaries typically come in droves when there is complacency and it could be a contrarian signal. (You can follow us on Twitter here). It's been noted many times in the past that investors often buy the most at the top. Where were all these secondaries when the market was tanking and stocks were cheap? There was no demand; investors were too scared. Now that everyone feels 'safe' again, the secondaries are rolled out, the buybacks crank up, and the insiders start purchasing. So, you can't really blame Rogers for taking a stab here even though he's going against the current trend.

In his interview, Jim Rogers also talked about some other hot topics. He touched on the euro given the fact that European sovereign defaults have taken centerstage. Rogers notes that, "The euro will probably break up in the next 15 to 20 years. Don't get me wrong, I own the euro. We've had currency unions in history. They didn't survive. This one won't survive either." So, he's short-term bullish and long-term bearish on the euro.

He then shifted his focus to how potential sovereign defaults could have ramifications for the currency. Rogers said that, "If the euro zone helps the Greeks, that weakens the fundamentals of the euro. As the next government comes to demand concessions, they weaken the currency from within. I would let Greece go bankrupt because then everybody will say the euro is a serious currency." This stance of his is by no means new. He's a staunch supporter of the notion that markets should work things out on their own, even if it means something will fail. So, it's always intriguing to hear what Rogers has to say.

In the end, everyone knows market timing is a bitch. While Jim Rogers obviously isn't suggesting you go net short, it makes perfect sense to us to put on some hedges, take some profits on longs, and to identify companies that are now looking too frothy. And, it sounds as if that's just what Rogers is doing. Whitney Tilson of hedge fund T2 Partners has been doing the same. Lee Ainslie of hedge fund Maverick Capital said in his investor letter that he thinks 2010 will be a return to a stockpicker's market. He makes a great point that the decline in the price of risk equals opportunity for shorts.

Here's the video of one of Rogers' recent television interviews:

In financial markets, you can never be too cautious. After all, it usually hurts more to be reactive rather than proactive. We just wanted to highlight Rogers' new application of short positions since he's previously been long for many months. It's been a while since we last covered the legendary investor in detail, but those looking for more of his wisdom can head to our ancient post on Rogers' portfolio and an interview with his thoughts on commodities.

Berkshire Hathaway Sells Moody's Shares Again

Yet again, we see that Warren Buffett's Berkshire Hathaway (BRK.A) has sold more shares of Moody's (MCO). According to a Form 4 filed with the SEC, on March 18th, 2010 they sold 678,962 MCO shares at a price of $29.98. On the next day, Buffett sold an additional 136,943 shares at a weighted average price of $29.8125. Keep in mind though that Berkshire Hathaway still owns over 30.9 million shares of MCO. So while they've reduced their stake in the company numerous times, they still hold a sizable position. Buffett of course was recently named to Forbes' billionaire list.

As we've said all along, we've been expecting Berkshire Hathaway to further reduce their Moody's position based on Buffett's comments about the company not being in as dominant of a position as it once was. Not to mention, each time shares of MCO have traded in the mid to high $20's, they've sold some. So, we'll have to see if this trend continues. For more resources from the legendary investor himself, check out Warren Buffett's recommended reading list as well his recent interview where he discussed succession planning and other topics.

Of Berkshire's remaining share ownership, 15.2 million shares are owned by Berkshire subsidiary National Indemnity Company "NICO" and 15.7 million are owned by Government Employees Insurance Company "GEICO." Taken from Google Finance, Moody's is "a provider of credit ratings; credit and economic related research, data and analytical tools; risk management software, and quantitative credit risk measures, credit portfolio management solutions and training services."

To see what other investments the Oracle of Omaha has made, check out Warren Buffett's portfolio and make sure to read Berkshire Hathaway's annual letter.

Tom Brown's Hedge Fund Second Curve Capital Updates Positions

In a recent 13G filed with the SEC, Tom Brown's hedge fund firm Second Curve Capital has updated their stake in CompuCredit Holdings (CCRT). Due to activity on March 18th, 2010, Second Curve now shows a 5.3% ownership stake in the company with 2,512,730 shares.

This means they've increased their position by 41.85% by adding 741,341 more shares over the past three months. Back on December 31st, 2009, Brown's hedge fund owned 1,771,389 shares as we noted when we covered Second Curve's portfolio.

Additionally, Second Curve has filed a pair of Form 4's with the SEC in regards to shares of Taylor Capital Group (TAYC). Keep in mind that these two transactions represent indirect ownership for Second Curve. As noted on the filings, the nature of this indirect ownership is "By advisory clients of Second Curve Capital, LLC." On February 26th, 2010, it shows they acquired 10,000 shares of TAYC at a price of $11.03. Additionally, on March 12th, 2010, they acquired an additional 15,000 shares at a price of $11.35.

This brings their total ownership up to 1,320,191 shares of Taylor Capital Group. It represents an increase in the size of their position by 22.96% as they've added 246,580 shares over the course of the past three months. You can view the rest of Second Curve's investments here.

Taken from Google Finance, CompuCredit Holdings is "a provider of various credit and related financial services and products to or associated with the financially underserved consumer credit market."

Taylor Capital Group "serves as the holding company for Cole Taylor Bank, primarily engaged in commercial banking. The Bank provides a range of products and services primarily to closely-held commercial customers and their owner operators in the Chicago metropolitan area."

For the latest movements from some of the most prominent hedge funds out there, make sure to check in on our portfolio tracking series daily.

Steven Cohen's SAC Capital Boosts Psychiatric Solutions (PSYS) Stake

In a 13G filed with the SEC, Steven Cohen's hedge fund firm SAC Capital has disclosed an 8.7% ownership stake in Psychiatric Solutions (PSYS) with 4,873,406 shares. The disclosure was made due to activity on March 12th, 2010 and this is a massive increase over their previous position of only 45,498 shares from December 31st, 2009. In the past three months, they've increased their stake by over 10,611%, adding 4,827,908 more shares. PSYS of course has been a takeover target as of late and it's clear that SAC thinks that a transaction will eventually occur.

SAC Capital finished 2009 up over 28% as noted in our post on hedge fund 2009 performance numbers. Famed manager Stevie Cohen of course was recently featured in Forbes' billionaire list as well.

Taken from Google Finance, Psychiatric Solutions (PSYS) is "a provider of inpatient behavioral healthcare services in the United States. The Company’s other behavioral healthcare business primarily consists of its contract management and a managed care plan in Puerto Rico. Its contract management business involves the development, organization and management of behavioral healthcare and rehabilitation programs within medical/surgical hospitals."

In terms of other recent activity out of the famous hedge fund, we've previously detailed some of SAC's other portfolio moves for those interested.

Monday, March 22, 2010

Hedge Fund Passport Capital Sells Some Imperial Sugar (IPSU)

John Burbank's hedge fund Passport Capital has filed a Form 4 with the SEC in regards to shares of Imperial Sugar (IPSU). On March 17th, 2010, Burbank's hedge fund sold 20,394 shares of IPSU at a price of $15.11 and 6,136 shares at $15.05. After these transactions, Passport still owned 1,202,985 shares.

Within the filing, we also see a breakdown of Passport's option position in Imperial Sugar. 24,000 shares are represented by calls with an exercise price of $20, an exercise date of 2/4/2010, and an expiration date of 4/17/2010. 4,400 shares are via $22.50 calls and 15,100 shares via $25 calls, all with the same dates as well. We've previously seen them touch on their IPSU position in their Agriculture Fund investor letter as well. Additionally, for those interested in the sector, you can read Passport's research on the case for agriculture.

Taken from Google Finance, Imperial Sugar is "engaged in processing and marketing of refined sugar in the United States. The Company refine, package and distribute sugar at facilities located in Georgia and Louisiana. In addition, through joint venture operations the Company markets sugar and other sweeteners in Mexico and Canada."

For the rest of Passport Capital's equity positions, check out our coverage of their portfolio.

The Asset Management Industry In 2010: A Look Back At McKinsey's Predictions

Seeing how many of our readers are actively involved in the asset management industry, we figured many of you would find this past research intriguing. This is a prior McKinsey & Co publication from a few years ago where they crafted predictions for the asset management industry for the future (and in particular 2010). So, it's interesting to look back on their predictions & research and compare it to the modern day asset management industry. In the report, they outlined eight key trends that at the time they thought would be key going forward:

1. The move from accumulation to income and risk management. "As the biggest demographic wave in our country's history transitions out of the workforce over the next two decades, the retirement opportunity will represent the single largest driver of growth and profitability for the financial services industry."
2. Shift to outcome orientation from relative performance
3. Separation of alpha and beta
4. Pension restructuring
5. Institutionalization of retail sales
6. Increasing role of marketing and client service
7. Convergence and evolution of alternatives
8. Changing sources of growth in retail and international

McKinsey also came to some interesting conclusions back then. The first wasn't a stretch and was highly likely given the industry's tendencies. They believed that traditional products in the asset management arena would see price declines of 10-20%. Additionally, they forecast that up to 30% of a firm's earnings would come from new products that weren't even offered yet. This was also very much the case as new products constantly hit the markets. The question going forward becomes, what will those new products be and who will gain the leg up by innovating them? This just goes to show the ever-changing dynamic in the industry. Think about what products were offered five years ago and then compare those to today's offerings.

Lastly, they've outlined five key areas where they thought asset managers should focus on in order to take advantage of these trends: "seizing the retirement opportunity, retooling the investment management process, reinventing retail distribution and product management capabilities, reorienting new business development toward future growth opportunities, and driving scale to generate operating leverage."

Embedded below is McKinsey's past predictions for what the asset management industry would be like in 2010:

*Update: The embedded document has been removed per the request of representatives from McKinsey.

So, they've taken a broad look at the industry and it's fun to look back at their predictions and compare them to what's actually transpired. We'll have to see if they now compile a new set of predictions for 2015. You can attempt to download the .pdf here.


For our coverage of what the smart money out there is investing in, be sure to check in on our hedge fund portfolio tracking series. And for insight from some of the most respected asset managers out there, head to our coverage of guru commentaries.

Hedge Fund Ebullio Capital: Down 86.25% In One Month

By now, many of you may have already heard the startling tale of Lars Steffensen's hedge fund Ebullio Capital Management. For the month of February 2010, they were down a whopping 86.25%. That brought their year to date total return to -95.83%. Immediately, questions swirl in one's head such as 'How did this happen? What kind of risk management did they have in place? How will they recover?' Remarkably, their investor letter had quite a calm tone to it. And even more surprisingly, the rationale for how such a travesty happened was quite vague.

If we were investors in a fund that lost that much money that quickly, we'd certainly want to know *exactly* what happened. While it's still not totally clear as to what happened, maybe they ought to take a look at fellow hedge fund D.E. Shaw & Co's insight on leverage. We have heard through the grapevine though that they were massively long tin and then flipped it to a short (with leverage). Once other hedge funds smelled blood, they pounced on the opportunity to bet against his massive position. Needless to say, this is what you would call anti-risk management.

At any rate, embedded below is Ebullio Capital Management's investor letter for February 2010:

You can directly download a .pdf here.

Amazing stuff, right? And people wonder why hedge funds are often looked at in a negative light. For more commentary from managers who don't lose all their money in two months time, head to our coverage of hedge fund investor letters.

Carl Icahn Gets Aggressive With Lions Gate Entertainment (LGF) Offer

Late last week, corporate raider and everyone's favorite rabblerouser Carl Icahn said he was seeking to acquire all of Lions Gate Entertainment (LGF). This is a much more aggressive move for Icahn as he previously was seeking to acquire only 29.9% of the company.

Icahn currently owns almost 19% of the company and he is offering $6 a share, contingent upon his acquiring 50.1% of the company at least. Additionally, the company would have to remove its poison pill. If he is successful, it seems very clear that Icahn will start his campaign of change by replacing management. Shares are already trading around his $6 offer price, so it will be interesting to see if he is successful with yet another acquisition.

In terms of other recent action out of Icahn's camp, we recently noted he exercised warrants on Tropicana Entertainment and we've posted up Icahn's investor letter as well. Taken from Google Finance, Lions Gate Entertainment is "the studio with a presence in production and distributions of motion pictures, television programming, home entertainment, family entertainment, video-on-demand and digitally delivered content. The Company released approximately 18 to 20 motion pictures theatrically per year, which include films it develops and produces in-house, as well as films that it acquires from third parties."

To see the rest of his investments, head to our coverage of Carl Icahn's portfolio.

Elliott Associates Discloses General Growth Properties (GGP) Stake

Paul Singer's hedge fund Elliott Associates has filed a 13G with the SEC in regards to shares of General Growth Properties (GGP). The disclosure was made due to activity on March 9th and they now show a 5.3% ownership stake in the company with 16,738,695 shares. This aggregate beneficial ownership includes various investment entities and subsidiaries of Elliott. The overwhelming majority of their position is via common stock while 103,695 shares are via convertible notes.

Elliott Management was founded by Paul Singer back in 1977 and managers over $12 billion today, typically focusing on distressed assets. Our additional coverage of Elliott Management's Paul Singer includes his recent insight at a hedge fund panel and his previous thoughts at the Ira Sohn conference.

Elliott's entrance into GGP means that yet another prominent investor is bullish on the company's prospects as it emerges from bankruptcy. Other notable investors that have sizable stakes in General Growth Properties (GGP) include Bill Ackman's hedge fund Pershing Square, Whitney Tilson's T2 Partners, and Bruce Berkowitz's Fairholme Fund.

Taken from Google Finance, General Growth Properties is "a self-managed real estate investment trust (REIT). The Company has ownership interest in, or management responsibility for, over 200 regional shopping malls in 43 states, as well as ownership in master planned communities and commercial office buildings. GGP’s business is focused in two main areas: Retail and Other."

To see what other stocks hedge funds are taking large positions in, head to Goldman Sachs' VIP list and the hedge fund generals list.