Eric Mindich's Eton Park Capital Buys More Gold: 13F Filing Q1 2009 ~ market folly

Tuesday, May 26, 2009

Eric Mindich's Eton Park Capital Buys More Gold: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up is Eric Mindich's Eton Park Capital, who was ranked 53rd in Alpha's 2008 hedge fund rankings. Mindich received an Economics degree from Harvard and then worked at Goldman Sachs' risk-arbitrage desk. After becoming the youngest partner in the history of Goldman Sachs at the age of 27, it was clear he had a bright future. In 2004, he started his hedge fund Eton Park Capital with a record $3 billion in assets and a $5 million minimum investment required of investors. Today, Mindich manages over $6 billion. Typically, Eton Park invests in long/short equity and convertible arbitrage strategies. Additionally, as much as 30% of the fund can be invested in private investments.

Their stellar performance and solid strategy are some of the main reasons we have included them in our Market Folly portfolio that we created with Alphaclone. Our custom portfolio takes the positions of Eton Park (and 2 other hedge funds) that are disclosed in the 13F filings. It then combines them into a unique hedge fund portfolio clone that is yielding 17% annualized returns since mid-2002. As you can see, the numbers speak for themselves. And, a large part of that solid performance can be attributed to Eton Park's stockpicking.

Lastly, we had also previously noted that Mindich was starting to see opportunity in the markets in an excerpt from an investor letter. The following were their long equity, note, and options holdings as of March 31st, 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):
Google (GOOG) Calls
Allergan (AGN) Calls
Energy ETF (XLE)
Wyeth (WYE)
Homebuilders ETF (XHB) Calls
Financials ETF (XLF) Calls
Amdocs (DOX)
Suncor (SU)
Caterpillar (CAT) Calls
Harmony Gold Mining (HMY)
Schering Plough (SGP)
Grupo Televisa (TV)
Neustar (NSR)
America Movil (AMX) Puts
Scripps Networks (SNI)
Petroleo Brasileiro (PBR) Puts
Alcoa (AA) Calls
Brazil ETF (EWZ) Puts
Viacom (VIA-B) Calls
Emerging Markets ETF (EEM) Puts
SPDR Gold Trust (GLD) Puts

Some Increased Positions (A few positions they already owned but added shares to)
Potash (POT) Puts: Increased by 1384%
SPDR Gold Trust (GLD) Calls: Increased by 266%
Comcast (CMCSK): Increased by 252%
Silver ETF (SLV): Increased by 129%
Potash (POT) Calls: Increased by 100%
Vimpelcom (VIP): Increased by 58.8%
Mobile Telesystems (MBT): Increased by 36%
SPDR Gold Trust (GLD): Increased by 31%
Ebay (EBAY): Increased by 27%
Goodyear Tire (GT): Increased by 21%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Beckman Coulter (BEC): Reduced by 34.3%
Qualcomm (QCOM): Reduced by 29.8%
Lorillard (LO): Reduced by 28%
Wells Fargo (WFC) Puts: Reduced by 27.5%
Gold Fields (GFI): Reduced by 18.9%
Comcast (CMCSA): Reduced by 16.6%
Walter Energy (WLT): Reduced by 11%
Hansen Natural (HANS): Reduced by 10%

Removed Positions (Positions they sold out of completely)
Citigroup (C)
Emerging Markets ETF (EEM) Calls
Akamai (AKAM)
Constellation Energy (CEG)
Qualcomm (QCOM) Calls
Covidien (COV)
Foundation Coal (FCL)
AK Steel (AKS)
Lorillard (LO) Calls
News Corp (NWS-A) Calls
Newmont Mining (NEM)
NRG Energy (NRG)

Top 15 Holdings (by % of portfolio)

  1. SPDR Gold Trust (GLD) Calls: 15.9% of portfolio
  2. SPDR Gold Trust (GLD) Puts: 7.2% of portfolio
  3. Potash (POT) Puts: 6.48% of portfolio
  4. Brazil ETF (EWZ) Puts: 6.05% of portfolio
  5. SPDR Gold Trust (GLD): 5.3% of portfolio
  6. Emerging Markets ETF (EEM) Puts: 4.97% of portfolio
  7. Hansen Natural (HANS): 3.69% of portfolio
  8. Verisign (VRSN): 3.63% of portfolio
  9. Viacom (VIA-B) Calls: 2.81% of portfolio
  10. Potash (POT) Calls: 2.59% of portfolio
  11. Hospira (HSP): 2.35% of portfolio
  12. Goodyear Tire (GT): 2.3% of portfolio
  13. Qualcomm (QCOM): 2.2% of portfolio
  14. Viacom (VIA-B): 2% of portfolio
  15. Petroleo Brasileiro (PBR) Puts: 1.95% of portfolio

Mindich continued to beef up his gold position by way of GLD and GLD calls. He increased his GLD calls position by 266% and his GLD common position by 31%. However, at the same time, he also added a new stake in GLD puts to offset things a little bit. He now holds 2 calls for every 1 put on the etf. You'll remember that last quarter he started a gold position in a large way. And, he obviously still likes that play going forwards, even though he has hedged it somewhat. Just last week we noted that Stephen Mandel's Lone Pine Capital also liked gold. David Einhorn of Greenlight Capital also favors the metal and we'll be updating his portfolio soon too. Since so many prominent managers have been piling into gold, we've thought it would be prudent to include a video that looks at the current technical analysis of gold.

In addition to his clear fondness for gold, Mindich also was loading up on Puts across various emerging markets names as he thinks they may be overextended near-term. He boosted put positions in the emerging markets exchange traded fund EEM, as well as in the Brazilian exchange traded fund EWZ, and in Petroleo Brasileiro (PBR). Although not specifically emerging market related, Mindich also brought on a large Put position in Potash (POT). We found this interesting as such an agricultural nutrient can tied to emerging markets growth. As these countries grow economically and in population, they obviously require more agriculture and food. There could be a connection here with his thinking, but that's pure speculation on our part.

In terms of sales, Mindich sold out of his large Wells Fargo (WFC) Put position, as that was his 2nd largest holding in his previous 13F filing. He also got rid of his 8th largest holding last time around, Citigroup (C). So, he seems to have strayed away from the financials for now, at least from what is disclosed in the 13F filing (they're not required to disclose their short positions).

Lastly, we also wanted to point out that Eton Park continues to hold their decent sized positions in Hansen Natural (HANS) and Verisign (VRSN). Those positions remain largely unchanged for the most part and are Eton Park's 7th and 8th largest holdings. Assets from the collective positions reported to the SEC via 13F filing were $6.2 billion this quarter compared to $3.39 billion last quarter. So, Eton Park has definitely put some more capital to work over the course of the first quarter of 2009. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, Paulson & Co (John Paulson), and Stephen Mandel's Lone Pine Capital.

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