Louis Bacon's Moore Capital Management Bets On Energy: 13F Filing Q1 2009 ~ market folly

Tuesday, June 30, 2009

Louis Bacon's Moore Capital Management Bets On Energy: 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.

This week is 'global macro week' here at Market Folly and we'll be covering some of the equity positions of the major global macro strategy hedge funds. We want to start off this week with a slight disclaimer. Since global macro funds trade all different types of asset classes, they're not an ideal bunch to track or to clone a portfolio from. However, they are some of the smartest minds out there in terms of secular themes, trading, and market timing. As such, we monitor their movements in equities to get a sense as to what sectors they like, when they're moving out of long equity positions, and to see if we can see any secular themes they might be playing. So, this week is not so much about tracking as much as it is about taking a step back and observing the 'bigger picture.'

The following were Moore's 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):
Wyeth (WYE), United Technologies (UTX), China Mobile (CHL), Metlife (MET), CMS Energy (CMS), Electronic Arts (ERTS) Calls, China Petroleum (SNP), Freeport McMoran (FCX), Emerson Electric (EMR), Monsanto (MON), Genentech (DNA) Puts, Caterpillar (CAT), EMC (EMC), Citrix (CTXS), Walmart (WMT), Activision Blizzard (ATVI), Northeast Utilities (NU), Netapp (NTAP), Riverbed (RVBD) Calls, Wyeth (WYE) Calls, Cummins (CMI), Owens Illinois (OI), Joy Global (JOYG), Schering Plough (SGP), & Hess (HES) Puts

Some Increased Positions (A few positions they already owned but added shares to)
Lorillard (LO): Increased by 606%
Petroleo Brasileiro (PBR-A): Increased by 196%
ACE (ACE): Increased by 178%
Select Sector Energy (XLE): Increased by 133%
Occidental Petroleum (OXY): Increased by 100%
Potash (POT): Increased by 92%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
PS Wilderhill (PBW): Reduced by 70%
Micron (MU): Reduced by 47% but their position is only 0.46% of their portfolio

Removed Positions (Positions they sold out of completely)
Transocean (RIG), Home Depot (HD), Lowes (LOW), State Street (STT), SPDR Homebuilders (XHB), Bristol Myers Squibb (BMY), Electronic Arts (ERTS), AMR (AMR), Continental Airliens (CAL), Philip Morris (PM), Whirlpool (WHR), Delta Airliens (DAL), US Steel (X), Exxon Mobil (XOM), Lennar (LEN), Toll Brothers (TOL), Altria (MO), Shaw Group (SGR), Hewlett Packard (HPQ), Foster Wheeler (FWLT), Stanley Works (SWK), First Solar (FSLR), & Procter & Gamble (PG) Puts.

Top 15 Holdings (by % of portfolio)
  1. Select Sector Energy (XLE) Calls: 18.9% of portfolio
  2. Select Sector Energy (XLE): 13.3% of portfolio
  3. Ace (ACE): 8.7% of portfolio
  4. Select Sector Energy (XLE) Puts: 8.1% of portfolio
  5. Max Capital (MXGL): 5.1% of portfolio
  6. Wyeth (WYE): 3.7% of portfolio
  7. Lorillard (LO): 2.77% of portfolio
  8. United Technologies (UTX): 2.5% of portfolio
  9. China Mobile (CHL): 1.8% of portfolio
  10. Metlife (MET): 1.7% of portfolio
  11. Powershares Water Resource (PHO): 1.5% of portfolio
  12. CMS Energy (CMS): 1.5% of portfolio
  13. Electronic Arts (ERTS) Calls: 1.5% of portfolio
  14. China Petroleum (SNP): 1.4% of portfolio
  15. Freeport McMoran (FCX): 1.3% of portfolio

Moore has placed a pretty hefty bet on the energy sector. While they have hedged some of the position with puts, they have a rather large long bias with 18.9% of the portfolio in XLE Calls and 13.3% of the portfolio in XLE shares for a long exposure of 32.2%. That is quite a large bet, even when taking the hedge into account. Then, when you further look at their portfolio, you also see numerous other energy and natural resource plays scattered throughout such as PBR-A, SNP, MON, POT, and more. It's also interesting to note that they too joined in on the WYE trade last quarter as they try to game the event-driven situation there.

As you can see from the massive amount of new positions they put on and the large amount of positions they completely sold out of, Moore (and most other global macro firms) move in and out of plays in bigger chunks than most other funds we follow. This is the perfect illustration as to why macro funds are not necessarily the best to track or clone portfolios from. At the same time, they can lend us hints as to certain macro themes they are seeing. And, in Moore's case, they have shown us a bias towards energy. This is intriguing because just yesterday Paul Tudor Jones was biased towards the financial sector, although they also had a decent sized position in energy via XLE as well.

Assets from the collective holdings reported to the SEC via 13F filing were $787 million this quarter compared to $821 million last quarter, so a slight decrease in long equity assets. Keep in mind also that Moore's equity exposure is just a sliver of their overall global macro portfolio. They are a multi-billion dollar firm and they do not even have $1 billion in long equities. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:

- Gurus such as: Soros Fund Management (George Soros), and Jim Rogers.

- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,

- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,

- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners, Philip Falcone's Harbinger Capital Partners, Ricky Sandler's Eminence Capital,

- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital

- Global macro firms such as: Paul Tudor Jones' Tudor Investment Corp,

- And, newer funds on the scene: David Stemerman's Conatus Capital. Check back each day as we cover new fund portfolios.

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