Bret Barakett's Tremblant Capital Bullish on Research in Motion (RIMM), Bearish on Nokia (NOK): 13F Filing ~ market folly

Thursday, September 10, 2009

Bret Barakett's Tremblant Capital Bullish on Research in Motion (RIMM), Bearish on Nokia (NOK): 13F Filing

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up in our series is Bret Barakett's Tremblant Capital Group. Barakett, a former portfolio manager for Louis Bacon's Moore Capital, now runs his own hedge fund in New York and manages over $3 billion. Taken from their site, Tremblant Capital Group's objective is "to achieve superior risk adjust returns for our investors through our focused and disciplined investment process." Barakett's name will ring a bell for some as he is the brother of Timothy Barakett of Atticus Capital. We just got word recently that Atticus would be shutting down its main fund as Timothy steps away from the hedge fund game. Hopefully Bret doesn't get that same itch.

In terms of recent activity, we've noted that Tremblant has filed a 13G on IMAX. Additionally, we've called attention to their position in Eclipsys (ECLP). The following were Tremblant's long equity, note, and options holdings as of June 30th, 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.

New Positions (Brand new stakes that they initiated in the last quarter, listed from largest to smallest):
Nokia (NOK) Puts, Sina (SINA) Puts, Broadcom (BRCM) Puts, Integra (IART), Sohu (SOHU) Puts, Ford (F) Calls, Intel (INTC) Puts, Omnicare (OCR), Amazon (AMZN) Puts, Sony (SNE) Puts, Netflix (NFLX) Puts, AU Optronics (AUO) Puts, Hologic (HOLX) Puts, CBS (CBS) Puts, Imax (IMAX), Symantec (SYMC), & Weingarten Realty (WRI).

The rest of their new positions are less than 0.25% of their 13F each and aren't significant this time around, but we've listed them for those curious: Liberty Media Interactive (LINTA), Wynn (WYNN) Calls, CBS (CBS) Calls, AU Optronics (AUO) Calls, Caribou Coffee (CBOU), Lamar Advertising (LAMR) Calls, Benihana (BNHNA), Benihana (BNHN) - both shares, Sequenom (SQNM), and Commscope (CTV).

Some Increased Positions (A few positions they already owned but added shares to)
Visa (V) Calls: Increased by 405.7%
Equinix (EQIX): Increased by 303%
Research in Motion (RIMM) Calls: Increased by 120.4%
Redhat (RHT) Calls: Increased by 88.5%
Eclipsys (ECLP): Increased by 75.9%
Procter & Gamble (PG): Increased by 64.8%
Hologic (HOLX): Increased by 62.2%
Hologic (HOLX) Calls: Increased by 59.8%
Charles Schwab (SCHW): Increased by 54.2%
Mastercard (MA): Increased by 48.2%
Molson Coors (TAP): Increased by 42.6%

Some Reduced Positions (Some positions they sold some shares of)
Chipotle Mexican Grill (CMG-B): Reduced by 40.6%
Baidu (BIDU): Reduced by 39.4%
Green Mountain Coffee Roasters (GMCR): Reduced by 33.7%
Apple (AAPL): Reduced by 33.2%
Research in Motion (RIMM): Reduced by 32.1%
Inverness Medical (IMA): Reduced by 27.6%
Qualcomm (QCOM): Reduced by 25.9%
Redhat (RHT): Reduced by 24.2%

Removed Positions (Positions they sold out of completely, listed from their previously largest position to smallest)
Monsanto (MON), McKesson (MCK) Calls, J Crew (JCG), Thermo Fisher Scientific (TMO), Pharmaceutical Product Development (PPDI), Omnicare (OCR) Calls, Green Mountain Coffee Roasters (GMCR) Puts, Sohu (SOHU) Calls, Sina (SINA) Calls, Fred (FRED) Calls, Redhat (RHT) Puts, CSX (CSX), Covance (CVD), Bankrate (RATE) Puts, Factset (FDS) Calls, & Cheesecake Factory (CAKE) Calls.

The rest of the positions they dumped were previously less than 0.25% of the assets on the 13F each: Amazon (AMZN) Calls, Netflix (NFLX) Calls, Quality Systems (QSII) Calls, American Superconductor (AMSC) Calls, Pacific Sunwear (PSUN), and Ntelos (NTLS).

Top 15 Holdings by percentage of assets reported on 13F filing *(see note below regarding calculations)

  1. Research in Motion (RIMM) Calls: 8.78%
  2. Procter & Gamble (PG): 5.35%
  3. Nokia (NOK) Puts: 3.6%
  4. Visa (V): 3.46%
  5. Apple (AAPL) Calls: 3.42%
  6. Research in Motion (RIMM): 3.4%
  7. Hologic (HOLX): 3.1%
  8. Apple (AAPL): 2.76%
  9. Mastercard (MA): 2.68%
  10. Baidu (BIDU): 2.5%
  11. Red Hat (RHT) Calls: .25%
  12. Google (GOOG): 2.4%
  13. Qualcomm (QCOM): 2.36%
  14. Melco Crown (MPEL): 2.3%
  15. Walmart (WMT): 2.26%

Tremblant's portfolio is littered with a lot of typical 'hedge fund plays.' Apple, Visa, Qualcomm, Google, Mastercard, and Research in Motion are some of the most widely held stocks amongst hedge funds as noted in Goldman Sachs' hedge fund report. In that report, Goldman examined the top holdings across hedge fund land and Tremblant's portfolio is very emblematic of the industry.

In terms of portfolio shifts, we saw them buy a lot of new holdings via common stock and options positions, as listed in the rows above. In total, their assets invested on the long side as reported by 13F increased by over $900 million. Their most notable new position was that of Nokia (NOK) puts, which they brought all they way up to their third largest holding. While they already previously held shares of Visa (V), they boosted their current stake by over 400% and that should be duly noted. They also own the other half of true payment processing duopoly, Mastercard (MA), which they also boosted their existing position in by an additional 40%. These two positions are favorites of hedge funds far and wide as practically all the funds we track hold some amount of MA & V.

Tremblant also added to their position in Eclipsys (ECLP) which we covered on the blog before when they filed a 13G. This is the benefit of tracking all SEC filings rather than just the 13F as we already knew about their addition to ECLP back in April. Lastly, Tremblant also added to their existing position in Research in Motion (RIMM) common stock. They also own a ton of calls on RIMM and a few puts as well, most likely to hedge their long bias in the name.

In terms of notable sales, Bret Barakett's hedge fund sold 40% of one of their former prized holdings, Chipotle Mexican Grill (CMG-B). They had previously been adding to this position in February. This time around though, they were selling. Additionally, we saw Tremblant sell a third of their Green Mountain Coffee Roasters (GMCR) position. You can bet they've profited handsomely on this play as shares of GMCR are up 127% year-to-date, with a 3:2 stock split taking place back in June. On a quarter over quarter basis, GMCR was up 118%. There's definitely nothing wrong with locking in some solid profits. We've also noted very recently that Stephen Mandel's Lone Pine Capital has filed a 13G and disclosed a stake in GMCR as well. This is an interesting story because on one hand GMCR has some solid hedge fund ownership. Yet, on the other hand, it has historically had a large short interest and there was a short squeeze in the name earlier in the year.

Before ending, we wanted to bring up a slight caveat with Tremblant's portfolio. As always, 13F filings should be treated as a lagging indicator since they are essentially portfolio snapshots. However, you need to take them with even more grains of salt if the portfolios are laced with options positions. Since we cannot see strike prices or expiration dates, we can't truly gauge their position. Additionally, there's no way for us to see if they have sold options against their positions either. So, focusing on Tremblant's portfolio specifically, it's hard to see the true directional bet they've placed on some holdings. They own Apple (AAPL) common stock, but they also own puts, as well as calls on the name. So, this is just a warning to be cautious when evaluating their holdings that also have options attached to create their net position in a given name. We instead like to focus on the pure equity plays as they are much easier to accurately track. We addressed this issue previously with Eric Mindich's hedge fund Eton Park, who holds even more options positions than Tremblant.

*Note regarding portfolio percentages: Assets from the collective holdings reported to the SEC via 13F filing were $2.7 billion this quarter compared to $1.8 billion last quarter, so a substantial increase in long US equity exposure via common stock and options. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. In reality, the percentages are more watered down in their actual hedge fund portfolio. If you were to calculate percentage weightings in the actual hedge fund, they would obviously be lower since you would divide position sizes by their total assets under management (a larger number than the one reported on the 13F.

This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. So far, we've already covered the holdings of Bill Ackman's Pershing Square Capital Management, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Dan Loeb's Third Point LLC, and Stephen Mandel's Lone Pine Capital, George Soros (Soros Fund Management), Lee Ainslie's Maverick Capital, Philip Falcone's Harbinger Capital Partners, David Stemerman's Conatus Capital, Eric Mindich's Eton Park Capital, John Griffin's Blue Ridge Capital, Thomas Steyer's Farallon Capital, Boone Pickens' BP Capital Management, and Ken Griffin's Citadel Investment Group. Check back each day as we cover prominent hedge fund portfolios.

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