Paul Tudor Jones' Hedge Fund Tudor Investment Corp: 13F Filing Q1 2009 ~ market folly

Monday, June 29, 2009

Paul Tudor Jones' Hedge Fund Tudor Investment Corp: 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.'

First up, we have legendary global macro trader Paul Tudor Jones. He comes from the group of "offspring" of the legendary Commodities Corporation. Tudor Jones emerged as a successful offspring along with fellow great macro traders Bruce Kovner (Caxton Associates) and Louis Bacon (Moore Capital Management). Taken from Wikipedia, the bio of PTJ is as follows: "In 1980 he founded Tudor Investment Corporation which is today a leading asset management firm headquartered in Greenwich, Connecticut. The Tudor Group, which consists of Tudor Investment Corporation and its affiliates, is involved in active trading, investing and research in the global equity, venture capital, debt, currency and commodity markets. One of Jones' earliest and major successes was predicting Black Monday in 1987, tripling his money during the event due to large short positions. Jones uses a global macro strategy when trading in some of his funds. This strategy can be seen in the 1987 PBS film "TRADER: The Documentary". The film shows Mr. Jones as a young man predicting the 1987 crash. Jones' firm currently manages$17.7 billion (as of June 1, 2007). Their investment capabilities are broad and diverse, including global macro trading, fundamental equity investing in the U.S. and Europe, emerging markets, venture capital, commodities, event driven strategies and technical trading systems." So, as you can see, PTJ is quite an accomplished gentleman, earning him the title of THE macro trader.

If you want to hear some insightful thoughts from Tudor Jones himself, head over to our post on Hedge Fund manager interviews or our post on quotes from PTJ. In terms of other activity we've covered, Tudor has been busy in the past. Previously, they filed numerous 13G's with the SEC, amending a bunch of their holdings. Additionally, we learned that they will be starting a new Momentum Fund. They still of course have their main flagship BVI Global fund that finished 2008 -4.5% as noted in our 2008 hedge fund performance numbers. Keep in mind that as of right now, Tudor has only a minuscule amount of their overall portfolio allocated to equities. They are a multi-billion dollar firm and only have equity exposure of a few hundred million, as detailed below.

The following were Tudor'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):
Select Sector Financial (XLF) Calls, iShares China (FXI), Select Sector Consumer Discretionary (XLY), Philip Morris International (PM)

The rest of their brand new positions are much smaller, as each are less than 0.5% of Tudor's portfolio: American Electric Power (AEP), Altria Group (MO), Health Care REIT (HCN), Waste Management (WMI), Omnicom (OMC), EOG Resources (EOG), Nasdaq (NDAQ), General Electric (GE), Sunoco (SUN), Alcoa (AA), Aflac (AFL), Analog Devices (ADI), NYSE Euronext (NYX), Reynolds American (RAI), Select Sector Consumer Staples (XLP), Ventas (VTR), Arch Coal (ACI), Aes (AES), Goldman Sachs (GS), Peabody Energy (BTU), International Game Technology (IGT), Consol Energy (CNX), Bunge (BG), Pfizer (PFE), Stericycle (SRCL), Supervalu (SVU)

Some Increased Positions (A few positions they already owned but added shares to)
Select Sector Financials (XLF): Increased by 643%
Select Sector Healthcare (XLV): Increased by 331%
Semiconductor Holdrs (SMH): Increased by 138%
Select Sector Energy (XLE): Increased by 20%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Kraft Foods (KFT): Reduced by 95%
Prudential (PRU): Reduced by 94%
Harris Corp (HRS): Reduced by 93%
Metlife (MET): Reduced by 92%
SLM Corp (SLM): Reduced by 82%
Devon Energy (DVN): Reduced by 62%
US Steel (X): Reduced by 60%

Removed Positions (Positions they sold out of completely)
Genentech (DNA), Wyeth (WYE), Monsanto (MON), Mako Surgical (MAKO), Berkshire Hathaway (BRK-A), Select Sector Technology (XLK), CIT Group (CIT), Mastercard (MA), Blackrock (BLK), Teva Pharma (TEVA), Wendys Arbys (WEN), Cigna (CI), Citigroup (C), Corning (GLW), Select Sector Industrial (XLI), Market Agribusiness ETF (MOO), Sandisk (SNDK), Agilent (A), Potash (POT). They also sold out of numerous other positions that were each less than 0.5% of their overall portfolio.

Top 15 Holdings (by % of portfolio)

  1. Select Sector Financials (XLF) Calls: 13.63% of portfolio
  2. Select Sector Financials (XLF): 11.25% of portfolio
  3. Semiconductor Holdrs (SMH): 10.3% of portfolio
  4. Progenics Pharmaceuticals (PGNX): 5% of portfolio
  5. Select Sector Healthcare (XLV): 4.6% of portfolio
  6. iShares China (FXI): 3.2% of portfolio
  7. Taleo Corp (TLEO): 2.76% of portfolio
  8. Select Sector Energy (XLE): 2.1% of portfolio
  9. Switch & Data (SDXC): 1.4% of portfolio
  10. Select Sector Consumer Discretionary (XLY): 0.87% of portfolio

Upon looking at Tudor's portfolio, many will obviously point to the fact that they have large long exposure to financials via XLF and XLF calls. And, this is worth highlighting as it is clear they've made a sector bet in that regard having increased their position there. However, we will point to the bigger picture and note that Tudor's long equity exposure is very minimal, at best. As such, we could interpret this as them seeing further downside risk in equities. Or, they could simply be pursuing opportunities in other markets. Assets from the collective holdings reported to the SEC via 13F filing were $290 million this quarter compared to $334 million last quarter, so we see a slight dip in long equity exposure on their part from quarter to quarter. However, the main thing to take away is that Tudor is a multi-billion dollar firm. They only have a couple hundred million in long equity exposure, which is not much in the bigger scheme of things. That is the main thing we've taken away from examining their portfolio.

At the same time though, there are some interesting holdings in their portfolio. Besides their interesting financials position, Tudor also has a larger stake in semiconductors and health care, as both are within their top 5 positions. While they added heavily to their financial exposure, they added quite heavily to their semiconductor position too (via SMH) and some people may overlook that. Overall, it's easy to see which sectors Tudor might like more than others on the long equity side of things due to the creations known as sector exchange traded funds (ETFs). Tudor seems to like them to gain exposure to a certain sector and that makes sense given their global trading nature. 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

- 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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