Hedge Fund Pequot Capital Update: Unwinding Portfolio ~ market folly

Tuesday, August 25, 2009

Hedge Fund Pequot Capital Update: Unwinding Portfolio

Even though Art Samberg's hedge fund Pequot Capital is shutting down, we are still covering their last slew of SEC filings. In his goodbye letter, Art Samberg revealed that their Matawin and Special Opportunities funds will become separate entities. So, we are just covering the last slowly dwindling days of Pequot as they wind everything down. Their most recent SEC filings include their 13F and an amended 13G.

Firstly, we start with the 13G they amended on Impax Laboratories (IPXL). Due to activity on July 31st, 2009, Pequot has completely sold out of this name and now shows ownership of 0 shares. Secondly, we turn to their 13F filing where their hedge fund still shows a number of US equity long positions. However, keep in mind that this filing shows their holdings as of June 30th, 2009. But, if you wish to discern which positions they are most likely to liquidate (if they haven't already), you can check out their full 13F filing with the SEC here. Notable large positions include Chipotle Mexican Grill (CMG-B), IMAX (IMAX), Impax Laboratories (IPXL), Jack in the Box (JACK), and McDonald's (MCD).

We've also detailed numerous other changes to Pequot's portfolio recently. We noted all the changes to various 13G filings they made in this post. Additionally, we noted their sales of Akorn (AKRX). On the blog we often tracked the commentary of Pequot's Chief Investment Strategist, Byron Wien. (Read his July letter here). Since Pequot is shutting down, Wien has moved to The Blackstone Group as Vice Chairman of Advisory Services. Prior to Pequot, Wien was Chief Investment Strategist at Morgan Stanley.

Other recent news out of Pequot indicates that they have been cited in 44 reports since 2005 from securities exchange 'watchdogs' who alert possible insider trading misconduct. The trades connected to wrongdoing by Pequot include Google (GOOG), Cox Communications, International Securities Holdings, and Premcor amongst many others. Many of the reported infractions come from companies that were subject to takeover bids. For instance, shares of Premcor were up 18% after it was announced they were being bought out by Valero (VLO). We'll continue to monitor the developments in this regard, but their source of downfall is pretty evident. Art Samberg himself has cited the negative cloud hanging over Pequot as a main reason for shutting down. They had a large image problem and that's tough to overcome on a Wall Street that is now more focused on regulation than ever.

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