John Griffin's Hedge Fund Blue Ridge Capital Fancies JPMorgan Chase (JPM) ~ market folly

Wednesday, December 23, 2009

John Griffin's Hedge Fund Blue Ridge Capital Fancies JPMorgan Chase (JPM)

This is the third quarter 2009 edition of our hedge fund portfolio tracking series. If you're unfamiliar with tracking hedge fund movements or SEC filings, check out our series preface on hedge fund 13F filings.

Next up in our series is John Griffin's hedge fund firm Blue Ridge Capital. Blue Ridge seeks absolute returns by investing in companies who dominate their industries and shorting the companies who have fundamental problems. Both Griffin at Blue Ridge and Lee Ainslie over at Maverick Capital like to effectively hedge with a solid balance of both long and short positions (like a true hedge fund... not like some of the crazy funds these days that aren't truly hedged).

Griffin graduated from the University of Virginia and received his MBA from Stanford. And, like many other hedge funds we cover on the site, Griffin is a 'Tiger Cub' as he previously plied his trade under Julian Robertson as his former right hand man at Tiger Management. For more on how to think and analyze like Griffin and Blue Ridge, check out their recommended reading lists. They've laid out their top reads in four categories presented below:

- Behavioral Finance reading
- Analytical recommended reads
- Economics recommendations
- Historical/Biographical recommendations

Keep in mind that the positions listed below were Blue Ridge's long equity, note, and options holdings as of September 30th, 2009 as filed with the SEC. We don't cover every single portfolio maneuver, as we instead focus on all the big moves. All holdings are common stock unless otherwise denoted.

Some New Positions
Brand new positions that they initiated last quarter:

JPMorgan Chase (JPM)
Market Vectors Gold Miners (GDX)
Dollar Tree (DLTR)
Equinix (EQIX)
Pennymac Mortgage (PMT) ~ we detailed this position previously when they first revealed it

Some Increased Positions
Positions they already owned but added shares to:
Range Resources (RRC): Increased by 174.7%
Express Scripts (ESRX): Increased by 147.4%
Western Union (WU): Increased by 105.4%
Monsanto (MON): Increased by 97.3%
iShares Silver Trust (SLV): Increased by 95.9%
Palm (PALM): Increased by 74%
Crown Castle (CCI): Increased by 61.3%
American Capital (ACAS): Increased by 27.5%
Amazon (AMZN): Increased by 31.7%

Some Reduced Positions
Stakes they sold shares in but still own:
RenaissanceRe (RNR): Reduced position by 75.3%
Broadridge Financial (BR): Reduced by 70.4%
Apple (AAPL): Reduced by 31.2%
Berkshire Hathaway (BRK.A): Reduced by 18.5%

Removed Positions
Positions they sold out of completely:
Schering Plough (SGP)
Vale (VALE)
National Oilwell Varco (NOV)
State Street (STT)
Charles Schwab (SCHW)
Partnerre (PRE)
Agnico Eagle Mines (AEM)
VMWare (VMW)
Axis Cap (AXS)
Goldcorp (GG)
Newmont Mining (NEM)
Yamana Gold (AUY)
Harley Davidson (HOG)
Wells Fargo (WFC)
Novagold (NG)
Direxion Financial Bear 3x (FAZ)

Top 15 Holdings by percentage of assets reported on 13F filing

  1. Apple (AAPL): 5.83%
  2. JPMorgan Chase (JPM): 5.75%
  3. Pfizer (PFE): 5.68%
  4. Amazon (AMZN): 5.36%
  5. Western Union (WU): 5.26%
  6. Crown Castle (CCI): 4.92%
  7. Millipore (MIL): 4.81%
  8. CME Group (CME): 4.58%
  9. Microsoft (MSFT): 4.29%
  10. Thermo Fisher Scientific (TMO): 4.25%
  11. Blackrock (BLK): 4.17%
  12. Visa (V): 4.04%
  13. Discovery Communications (DISCA): 3.47%
  14. Express Scripts (ESRX): 3.36%
  15. Covanta (CVA): 3.33%

The main portfolio change to make note of was their brand new stake in JPMorgan Chase (JPM) which they brought all the way up to their second largest holding at 5.75% of their reported longs. The trade in hedge fund land has been long moneycenter banks and short regional banks for some time and this position sticks to that theme. Additionally, Blue Ridge's stake in Apple (AAPL) is quite sizable. Even though they sold off a third of their position, it still remains their top holding at 5.83% of their holdings.

John Griffin's hedge fund also boosted their holdings in Express Scripts which is notable since many other Tiger Cub portfolios own this name including Andreas Halvorsen's Viking Global. And while their brand new stake in Equinix (EQIX) only landed at their 26th largest holding, we highlight this because we've seen numerous hedge funds accumulating shares over the past few quarters and will have to see if they added more in the fourth quarter.

One other change we want to highlight Blue Ridge's fifth largest holding of Western Union (WU). While we've seen many hedge funds prefer payment processors that bear no credit risk such as Visa and Mastercard. Blue Ridge has taken a slightly different path here by playing a global money transfer company, a position they doubled down on in the third quarter. Blue Ridge also owns Visa at their 12th largest holding.

Lastly, we see they sold completely out of various gold miners and replaced those stakes with a single position in the Market Vectors Gold Miners exchange traded fund (GDX). So it seems they favored a pre-made basket via ETF instead of creating their own assembly of holdings. That pretty much wraps up the major changes in their portfolio this time around. To learn to invest like John Griffin, check out hedge fund Blue Ridge's recommended reading list.

Below you'll find graphical representations of the recent shifts in Blue Ridge Capital's portfolio courtesy of Drew Robertson at Financial Research Station:

(click to enlarge)

(click to enlarge)

Assets from the collective holdings reported to the SEC via 13F filing were $4.4 billion this quarter compared to $3.9 billion last quarter. 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. Also, please again note that these positions were as of September 30th so two months have elapsed and they've undoubtedly shifted around their portfolio since then.

This is just one of the 40+ prominent funds that we'll be covering in our Q3 2009 hedge fund portfolio series. We've already covered Seth Klarman's Baupost Group Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Dan Loeb's Third Point LLC, David Einhorn's Greenlight Capital, John Paulson's firm Paulson & Co, Lee Ainslie's Maverick Capital, Andreas Halvorsen's Viking Global, Chase Coleman's Tiger Global and Brett Barakett's Tremblant Capital. Check back daily as we'll be covering new hedge fund portfolios.

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