Louis Bacon's Moore Capital Management 13F Filing, Q4 2008 ~ market folly

Wednesday, March 18, 2009

Louis Bacon's Moore Capital Management 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 Louis Bacon's Moore Capital Management. Do note that global macro funds are typically not necessarily equity focused funds. While they do indeed have equity exposure, the majority of their holdings are in other markets. So, we mainly track them to check in on their sector exposure to see what types of global macro themes they may be investing in. 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.

Louis Bacon comes from the group of "offspring" of the legendary Commodities Corporation. Moore emerged as a successful offspring along with fellow great macro traders Bruce Kovner (Caxton Associates) and Paul Tudor Jones (Tudor Investment Corp). Moore, named after Bacon's middle name, is a $10 billion global macro set of hedge funds. Louis Bacon is a famed trader and risk manager. 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. For 2008, their Global Investments fund finished -4.3%, their Global Fixed Income fund finished +1.3%, and their Emerging Markets Fund finished -17.6%, as noted in our comprehensive list of hedge fund performance numbers.

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.

Many successful members of Moore have gone on to start their own funds. For instance, we track Bret Barakett's Tremblant Capital, who learned his trade at Moore. Also, its worth pointing out that Stanley Shopkorn, formerly of Moore Capital, has started his own fund. Additionally, we recently learned that Christopher Pia, another Moore alum will be starting his own fund. But, enough about those who have gone on to do their own thing. Let's check out what Moore was up to.

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):
Transocean (RIG)
Home Depot (HD)
Lowe (LOW)
State Street (STT)
Bristol Myers Squibb (BMY)
PS Wilderhill (PBW)
Continental Airlines (CAL)
Philip Morris International (PM)
Whirlpool (WHR)
Delta Air (DAL)
Exxon Mobil (XOM)
Lennar (LEN)
Toll Brothers (TOL)
Altria (MO)
Shaw Group (SGR)
Foster Wheeler (FWLT)
Stanley Works (SWK)
First Solar (FSLR)
Procter & Gamble (PG) Puts
Exxon Mobil (XOM) Puts
Mylan (MYL)
Hartford Financial (HIG)
Carnival (CCL)
Occidental Petroleum (OXY) Puts
IPC Holdings (IPCR)
Potash (POT)
Hess (HES) Calls
Suncor (SU) Puts
Flextronics (FLEX)

Some Increased Positions (A few positions they already owned but added shares to)
US Steel (X): Increased position by 725%
Electronic Arts (ERTS): Increased position by 683%
Navistar (NAV): Increased position by 521%
Vale (RIO): Increased position by 400%
Commercial Metals (CMC): Increased position by 386%
Walter Industries (WLT): Increased position by 313%
AK Steel (AKS): Increased position by 303%
Select Sector Energy (XLE): Increased position by 260%
Micron (MU): Increased position by 42%
Suncor (SU) Calls: Increased position by 18%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Sandisk (SNDK) Calls: Reduced by 95%
Cresud (CRESY): Reduced by 84%
Water Resources ETF (PHO): Reduced by 68%
Petroleo Brasileiro (PBR): Reduced by 67%
Hewlett Packard (HPQ): Reduced by 60%
Energy Solutions (ES): Reduced by 42%
Crown Holdings (CCK): Reduced by 41%
Ace (ACE: Reduced by 35%
Textron (TXT) Calls: Reduced by 20%
Homebuilders ETF (XHB): Reduced by 14%

Removed Positions (Positions they sold out of completely)
Foundry Networks (FDRY)
Companhia Siderurgica (SID)
Cemex (CX)
Formfactor (FORM)
Citigroup (C)
Hewlett Packard (HPQ) Puts
Wells Fargo (WFC)
Teradata (TDC) Calls
Chevron (CVX)
Cisco (CSOC) Puts
Informatica (INFA) Call
Genentech (DNA)
Rio Tinto (RTP)
Citrix (CTXS)
Lennar (LEN) Puts
Activision Blizzard (ATVI)
Informatica (INFA)
Qualcomm (QCOM)
Anheuser Busch (BUD)
Barr Pharma (BRL)
Cameco (CCJ)
Imclone (IMCL)
Applied Materials (AMAT) Calls
Data Domain (DDUP) Calls
Barclays (BCS-PD) Preferred D
Rohm & Haas (ROH)
KLA Tencor (KLAC) Calls
Goldman Sachs (GS)
Ishares Emerging Markets (EEM)
JPMorgan Chase (JPM)

Top 20 Holdings (by % of portfolio)

  1. Select Sector Energy (XLE): 13.67% of portfolio
  2. Select Sector Energy (XLE) Puts: 8.72% of portfolio
  3. Select Sector Energy (XLE) Calls: 8.72% of portfolio
  4. Max Capital (MXGL): 5% of portfolio
  5. Transocean (RIG): 4% of portfolio
  6. Ace (ACE): 3.9% of portfolio
  7. Home Depot (HD): 3.5% of portfolio
  8. Lowe (LOW): 3.34% of portfolio
  9. State Street (STT): 3.25% of portfolio
  10. Homebuilders ETF (XHB): 2.9% of portfolio
  11. Bristol Myers Squibb (BMY): 2.26% of portfolio
  12. Electronic Arts (ERTS): 1.75% of portfolio
  13. Water Resources ETF (PHO): 1.75% of portfolio
  14. AMR (AMR): 1.6% of portfolio
  15. PS Wilderhill (PBW): 1.6% of portfolio
  16. Continental Airlines (CAL): 1.5% of portfolio
  17. Philip Morris International (PM): 1.5% of portfolio
  18. Whirlpool (WHR): 1.5% of portfolio
  19. Delta Airlines (DAL): 1.5% of portfolio
  20. US Steel (X): 1.5% of portfolio

Moore was out adding massively for a few select names, increasing their position in many cases by > 300%. There seems to be a theme of a lot of economic recovery and 'early cycle' plays as if to position the portfolio to benefit from an increase in global activity. Assets from the collective long US equity, options, and note holdings were $1.3 billion last quarter and were $821 million this quarter. 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, John Griffin's Blue Ridge Capital, Bruce Kovner's Caxton Associates, and Paul Tudor Jones' Tudor Investment Corp. Look for our updates as we will be covering a new fund each day.

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