Friday, March 6, 2009

Wall Street Journal Discount: 75% Off

We're not sure how much longer this will last, so we wanted to make sure everyone who wants it has taken advantage of it; we sure did. These types of deals are one of the only good things about a recession.

Here's the print edition: 75% Off The Wall Street Journal
And here's both the print & online editions: 75% Off The Wall Street Journal


Jim Rogers Buys Farmland

In a recent interview with CNBC, Jim Rogers has taken his bullish stance on agriculture to the next level: He is buying Canadian and Brazilian farmland. He says,

"I am buying greenfield land in Brazil and existing farms in Canada and starting to farm it. The funds are clearing the land, fertilizing it, irrigating it and hiring farmers and some day will probably sell the land but that is a remote prospect."


We've known about Rogers' bullishness on agriculture for some time. But, this bet takes it up a notch. By purchasing the land itself, Rogers is securing a stream of future production in a world he argues will be pressed for food production in the future as demand rises. And, for what it's worth, Don Coxe agrees with Rogers.

Other notable agriculture bulls include Rogers' ex-Quantum fund partner George Soros. As we noted in our hedge fund portfolio tracking series, Soros has bought a ton of Potash. Rogers, though, has certainly taken it to the next level and has placed his bet on the next big real estate boom. For more thoughts from Rogers, check out his stance on currencies as well.

Here are Rogers' thoughts on video:












What We're Reading (3/6/09)

Hedge fund Overcrowding vs Undercrowding (All About Alpha)

Over the hedge (Vanity Fair)

In defense of hedge funds (Brett Steenbarger)

Polarization of retail (Value Plays)

Historical S&P PE Ratios (Trader's Narrative)

US Oil Fund (USO) finds itself at the mercy of traders (WSJ)


Thursday, March 5, 2009

Check Out Market Folly's Guest Post at INO

Hey everyone, we're proud to announce that MarketFolly just had a guest post published over at the INO.com Trader's Blog. The piece is entitled, 'A Technical Look At Top Hedge Fund Holdings.' Basically, we ran through some of the major hedge fund holdings such as Gold (GLD), Visa (V), and Potash (POT) and examined why the managers might be buying. Then, we took a look at the charts and annotated them with technical analysis to see how you can play them currently. This article won't be displayed on our blog so head over there, check it out, and spread the word! To receive the free article: Go Here.


Bret Barakett's Hedge Fund Tremblant Capital 13F Filing: Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up, we have Bret Barakett's Tremblant Capital. Tremblant is a $3 billion hedge fund based in New York and is run by Bret Barakett, who is a former portfolio manager at Moore Capital Management (the hedge fund run by the great Louis Bacon, whom we also track). If the last name of 'Barakett' sounds familiar, its because his brother, Timothy Barakett, manages fellow hedge fund Atticus Capital, whose portfolio we recently covered. 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 has worked with some of the best in the macro game and obviously is quite knowledgeable himself. But, as we noted back in September, Tremblant had a rough year. Over the course of last year, they disclosed a 5.2% stake in Advanced Medical Optics (EYE) and a stake in PharmaNet (PDGI). But, more recently, they've made a 13G filing on Chipotle, where they have been adding to their large position. We'll check out what else they've been up to below.

The following were their long equity, note, and options holdings as of December 31st, 2008 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):
Monsanto (MON)
Costco (COST)
Molson Coors (TAP)
Life Technologies (LIFE)
Energizer (ENR) Calls
Catalyst Health (CHSI)
Cheesecake Factory (CAKE)
Kellogg (K)
Thermo Fisher Scientific (TMO)
DirecTV (DTV)
Dell (DELL)
Pharmaceutical Product Dev (PPDI)


Some Increased Positions (A few positions they already owned but added shares to)
Walmart (WMT): Increased position by 1,843%
Advanced Medical Optics (EYE) Calls: Increased position by 658%
Google (GOOG): Increased position by 523%
Research in Motion (RIMM) Calls: Increased position by 110.6%
Mastercard (MA): Increased position by 86.8%
McKesson (MCK): Increased position by 71.5%
Red Hat (RHT): Increased position by 66.8%
Baidu (BIDU): Increased position by 49.8%
Chipotle Mexican (CMG-B): Increased position by 47%
Research in Motion (RIMM): Increased position by 21.4%
Apple (AAPL): Increased position by 16.7%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Hologic (HOLX) Calls: Reduced position by 77.6%
CVS Caremark (CVS) Calls: Reduced position by 74.9%
Hologic (HOLX): Reduced position by 69.5%
Eclipsys (ECLP): Reduced position by 63%
Ntelos (NTLS): Reduced position by 59.9%
Red Hat (RHT) Calls: Reduced position by 24.7%
Visa (V): Reduced position by 18.9%
Burlington Northern (BNI): Reduced position by 18.9%


Removed Positions (Positions they sold out of completely)
Charter Communications (CHTR) Calls
Charter Communications (CHTR)
Focus Media (FMCN) Calls
MEMC Electronics (WFR) Calls
Virgin Media (VMED)
Nuance Communications (NUAN)
IPCS (IPCS)
Exide (XIDE)
Airmedia Group (AMCN)
Navisite (NAVI)
Colfax (CFX)
Geoeye (GEOY)
Williams (WMB)
KBW Regional Banking ETF (KRE)
SXC Health (SCI)
Discovery Holding (DSY)
American Public Education (APEI)
Homebuilders ETF (XHB)
Hughes Communication (HUGH)
Monster (MNST)
Financials ETF (XLF)
Paetec Holding (PAET)
Focus Media (FMCN)
Gafisa (GFA)
Centennial Communications (CYCL)
Advanced Medical Optics (EYE)
Commscope (CTV)
Corning (GLW)
NYSE Euronext (NYX)


Top 20 Holdings (by % of portfolio)

  1. Qualcomm (QCOM) Calls: 11.43% of portfolio
  2. Visa (V): 7% of portfolio
  3. Apple (AAPL): 6.5% of portfolio
  4. Research in Motion (RIMM): 5.9% of portfolio
  5. Green Mountain Coffee Roasters (GMCR): 5% of portfolio
  6. Qualcomm (QCOM): 4.6% of portfolio
  7. McKesson (MCK): 4.5% of portfolio
  8. Red Hat (RHT): 4.3% of portfolio
  9. Mastercard (MA): 3.7% of portfolio
  10. Baidu (BIDU): 3.6% of portfolio
  11. Walmart (WMT): 3.1% of portfolio
  12. Melco Entertainment (MPEL): 2.9% of portfolio
  13. Chipotle (CMG-B): 2.9% of portfolio
  14. Corning (GLW) Calls: 2.55% of portfolio
  15. Research in Motion (RIMM) Calls: 2.34% of portfolio
  16. Red hat (RHT) Calls: 2.2% of portfolio
  17. CVS Caremark (CVS) Calls: 1.76% of portfolio
  18. Monsanto (MON): 1.57% of portfolio
  19. NYSE Euronext (NYX) Calls: 1.45% of portfolio
  20. Costco (COST): 1.43% of portfolio



Very interesting to see some similarities between his and his brother's portfolio (Atticus). Many of these positions are and have been on Goldman Sachs list of most common hedge fund holdings. Assets from the collective long US equity, options, and note holdings were $2.1 billion last quarter and were $ 1.6 billion this quarter. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, Andreas Halvorsen's Viking Global, Timothy Barakett's Atticus Capital, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, and Peter Thiel's Clarium Capital. Look for our updates as we will be covering a new fund each day.


Jim Chanos: Short Construction, Long Power Grid Buildout

Jim Chanos, noted short seller and manager of hedge fund Kynikos Associates recently appeared on CNBC and shared some of his views. His bearish stance on infrastructure in general is not necessarily new. He likes being short construction plays, but also likes being long infrastructure that plays the power grid buildout. Chanos says,

"We're short construction companies that are still doing physical build-out of buildings, say, for example, in Las Vegas."


In terms of the power grid, Chanos likes being long names such as Quanta Services (PWR). This name is intriguing because Jeffrey Gendell's Tontine Associates also once had a large stake in PWR. But, due to his funds troubles, he has since sold out of the name. CNBC suggests other ways to play the power grid are through McDermott (MDR), Jacobs Engineering (JEC), Shaw Group (SGR), and Foster Wheeler (FWLT). Keep in mind that these plays also have general infrastructure exposure and are not exclusively focused on the power grid. PWR certainly seems to have some of the most exposure in this area though, as Chanos has highlighted.

Additionally, Chanos is short numerous education plays such as DeVry (DV), Grand Canyon Education (LOPE), ITT Educational (ESI), Strayer Education (STRA), Universal Technical Institute (UTI). Being a shortseller, Chanos had a successful last year, but even he saw withdrawals as investors scrambled for cash.

Here's his video with CNBC:












Tudor Investment Corp Opens Momentum Fund

Tudor Investment Corp, the global macro hedge fund firm ran by legendary trader Paul Tudor Jones has opened its Momentum Fund. The fund, ran by Steve Evans (who also runs their Tensor fund) will trade in all sorts of futures markets. Both the Tensor and now Momentum fund use computer models and Steve Evans has seemingly done well for himself. Tudor's futures fund returned 36% last year in a market covered in red and the Tensor fund has seen 15% returns each year since it began trading in 2005.

There has been some shuffling around at Tudor as they continue to go about business. 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. But, James Pallotta, who was in charge of their equity focused Raptor fund has left Tudor to start his own fund. Just a few weeks ago, we noted they were shuffling around their equities portfolio as they amended numerous filings.

For insightful thoughts from Paul Tudor Jones himself, head over to our post on Hedge Fund manager interviews or our post on quotes from PTJ.


Wednesday, March 4, 2009

Peter Thiel's Clarium Capital 13F Filing: Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Clarium Capital Management, LLC ran by Peter Thiel, the co-founder of PayPal. Clarium is a $2 billion global macro hedge fund that currently has the majority of its holdings in the debt and currency markets. Keep in mind that the equity portion of their portfolio has always been minimal, so the stocks below only represent a small sliver of their overall holdings. 2008 was a roller coaster year for Thiel and company, to say the least. Earlier in 2008, they were up over 45%. But, with a mistimed move into equities, they began to give back their gains and found themselves -4.5% for 2008 as we noted in our year end post of hedge fund performance numbers. The bulk of the losses were sustained in October, where they were down 18% for the month. Assets under management had recently ballooned to the highest amount in Clarium's history, but that didn't last long as redemption requests rolled in and markets continued to tank.

Thiel's fund is unique in that it employs a slightly different management fee structure than most of the hedge fund world. Typical funds charge a flat 2% management fee on assets and then a 20% performance fee. Clarium, on the other hand, does not charge a management fee, but charges only a 25% performance fee. They obviously have more incentive to perform well, to ensure they get paid. And, 2008 didn't go too well in that regard. Thiel recently sat down and opined on numerous macro topics, including whether the US is the next Japan. And, to those who want a little more background on Thiel & his investment style, we first wrote about him here. Clarium has started off 2009 on a positive note, finishing the month of January up 6.7%, as we noted in our latest Clarium update. We'll have to see if they give back the gains like they did in 2008; hopefully they've learned from their mistakes.

The following were their long equity, note, and options holdings as of December 31st, 2008 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):
S&P 500 (SPY)
Walgreen (WAG)
Intel (INTC)
Playboy (PLA)
Teradata (TDC)
NCR Corp (NCR)
Meadow Valley (MVCO)
National Coal (NCOC)


Some Increased Positions (A few positions they already owned but added shares to)
American Express (AXP): Increased position by 1020%
T3 Energy (TTES): Increased position by 318%
Altria (MO): Increased position by 106%
NRG Energy (NRG): Increased position by 75%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Burlington Northern (BNI): Reduced position by 95%
Hewlett Packard (HPQ): Reduced position by 91%
Exxon Mobil (XOM): Reduced position by 90%
Procter & Gamble (PG): Reduced position by 85%
Philip Moriss International (PM): Reduced position by 84%
Interval Leisure (IILG): Reduced position by 83%
Microsoft (MSFT): Reduced position by 79%
Mastercard (MA): Reduced position by 73%
Schering Plough (SGP): Reduced position by 39%


Removed Positions (Positions they sold out of completely)
Pimco Municipal fund (PMF)
Wendys (WEN)
Nvidia (NVDA)
Oracle (ORCL)
Pimco Floating Rate fund (PFN)
Mylan (MYL)
Iron Mountain (IRM)
Consolidated Edison (ED)
Kimberly Clark (KMB)
Natus Medical (BABY)
Colgate Palmolive (CL)
Walmart (WMT)
Chevron (CVX)
Johnson & Johnson (JNJ)
CVS Caremark (CVS)
Ishares Municipal Bond fund (MUB)
Lazard (LAZ)
United States Oil Fund (USO)
Ishares Brazil (EWZ)
Canadian Superior Energy (SNG)
SPDR Gold Trust (GLD)
Occidental Petroleum (OXY)
Fairfax Financial (FFH)
Conoco Phillips (COP)
US Natural Gas fund (UNG)
McDonald's (MCD)
Google (GOOG)
Yahoo (YHOO)
Select Sector Financial (XLF)


Top 20 Holdings (by % of portfolio)

  1. S&P 500 (SPY): 21.35% of portfolio
  2. American Express (AXP): 16.38% of portfolio
  3. Walgreen (WAG): 11.67% of portfolio
  4. Altria Group (MO): 8.55% of portfolio
  5. NRG Energy (NRG): 5.15% of portfolio
  6. Microsoft (MSFT): 4.9% of portfolio
  7. Procter & Gamble (PG): 3.9% of portfolio
  8. Philip Morris International (PM): 3.43% of portfolio
  9. Schering Plough (SGP): 3.29% of portfolio
  10. Mastercard (MA): 3.16% of portfolio
  11. Hewlett Packard (HPQ): 2.86% of portfolio
  12. Alabama Aircraft (AAII): 2.2% of portfolio
  13. Diageo (DEO): 1.8% of portfolio
  14. Intel (INTC): 1.4% of portfolio
  15. Playboy (PLA): 1.28% of portfolio
  16. Exxon Mobil (XOM): 1.23% of portfolio
  17. T3 Energy (TTES): 1.17% of portfolio
  18. Teradata (TDC): 1.17% of portfolio
  19. Burlington Northern (BNI): 0.96% of portfolio
  20. MFA Mortgage (MFA): 0.93% of portfolio



Clarium's assets listed in the filing decreased, undoubtedly because of their move away from equities and into other asset classes. They completed sold out of some of their massive holdings from last quarter: GOOG, YHOO, & XLF. This isn't the first time that Thiel has had only a tiny sliver of his portfolio in equities. Assets from the collective long US equity, options, and note holdings were $2.8 billion last quarter and were $31 million this quarter. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, Andreas Halvorsen's Viking Global, Timothy Barakett's Atticus Capital, David Einhorn's Greenlight Capital, and Seth Klarman's Baupost Group. Look for our updates as we will be covering a new fund each day.


Thoughts From Bob Janjuah, RBS Chief Credit Strategist

I almost stopped reading this piece from Bob Janjuah, the Chief Credit Strategist at RBS after the first two sentences when he mentioned he was a fan of Liverpool Football Club (English soccer to those of you who might be confused). After all, I've supported Manchester United Football Club since I was 13, who just happen to be Liverpool's bitter rivals (and that's an understatement). Yet, it is a great read and you have no idea how much I'm struggling with the fact that a Liverpool fan's work is on the blog. But, a good read is a good read. Sigh. [hat tip again to Zero Hedge].


Bob's World - Free Legal Forms


Tuesday, March 3, 2009

Seth Klarman's Baupost Group 13F Filing: Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Baupost Group ran by Seth Klarman. Klarman received his MBA from Harvard Business School and started working at Baupost at age 25. Over the past 25 years, Baupost has seen an annual compound return of 20% and is ranked 49th in Alpha's hedge fund rankings. Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his recent interview with Harvard Business School. Baupost was very active in filing numerous 13Gs in January, and again in February. They've also been buying more RHIE (RHI Entertainment).

The following were their long equity, note, and options holdings as of December 31st, 2008 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):
Facet Biotech (FACTV)
Theravance (THRX) Bond
Capital Source (CSE) Bond
IStar Financial (SFI-PG) Preferred G Bond
Liberty Media (LCAPA)
Capital Source (CSE)


Some Increased Positions (A few positions they already owned but added shares to)
News Corp (NWS): Increased position by 237%
Capital Source (CSE) Bond: Increased position by 144%
Exterran Holdings (EXH): Increased position by 70%
Domtar (UFS): Increased position by 50%
Theravance (THRX): Increased position by 44%
Breitburn Energy Partners (BBEP): Increased position by 32%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Prepaid Legal (PPD): Reduced position by 75%
Atlas Pipeline Holdings (AHD): Reduced position by 40%
IAC Interactive (IACI): Reduced position by 22%
Linn Energy (LINE): Reduced position by 20%
Liberty Media (LMDIA): Reduced position by 13%
Horizon Lines (HRZ): Reduced position by 6%


Removed Positions (Positions they sold out of completely)
Wellpoint (WLP)
Acusphere (ACUS)
NRDC Acquisition (NAQ)
Claimsnet (CLA)
Triplecrown (TCW)
Prospect Acquisition (PAX)
Enterprise GP (EPE)
SP Acquisition Holdings (DSP)
Unitedhealth (UNH)
Atlas Pipeline Partners (APL)
Sapphire Industrials (FYR)


Top 20 Holdings (by % of portfolio)

  1. News Corp (NWS-A): 12.95% of portfolio
  2. Linn Energy (LINE): 10% of portfolio
  3. Theravance (THRX): 9.4% of portfolio
  4. Exterran Holdings (EXH): 8.8% of portfolio
  5. PDL Biopharma (PDLI): 7.5% of portfolio
  6. Liberty Media (LMDIA): 6.1% of portfolio
  7. Breitburn Energy (BBEP): 4.8% of portfolio
  8. Domtar (UFS): 4.7% of portfolio
  9. News Corp (NWS): 4.3% of portfolio
  10. IAC Interactive (IACI): 3.6% of portfolio
  11. RHI Entertainment (RHIE): 2.5% of portfolio
  12. Viasat (VSAT): 2.5% of portfolio
  13. Facet Biotech (FACTV): 2.2% of portfolio
  14. Syneron Medical (ELOS): 2.2% of portfolio
  15. Theravance (THRX) Bond: 2.1% of portfolio
  16. CapitalSource (CSE) Bond: 1.8% of portfolio
  17. GHL Acquisition (GHQ): 1.7% of portfolio
  18. IStar Financial (SFI-PG) Preferred G Bond: 1.5% of portfolio
  19. Alliance One International (AOI): 1.5% of portfolio
  20. Liberty Media (LCAPA): 1.4% of portfolio



As you can tell, Baupost has a fondness for News Corp and Liberty Media. Additionally, it was interesting to see them add a range of bond holdings. Assets from the collective long US equity, options, and note holdings above were $1.1 billion this quarter. For more information about Klarman, check out his most recent thoughts on the market, as well as his hedge fund manager interview. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, Andreas Halvorsen's Viking Global, Timothy Barakett's Atticus Capital, and David Einhorn's Greenlight Capital. Look for our updates as we will be covering a new fund each day.


Lone Pine Capital Files 13G & Discloses 8.4% Stake in Deckers (DECK)

Stephen Mandel and Lone Pine Capital are wagering that those fuzzy, borderline ridiculous looking, viking-esque UGG boots are more than just a fashion trend. In a new 13G filing, Lone Pine Capital has disclosed an 8.4% stake in Deckers (DECK), the makers of the popular UGGs. The filing was made due to activity on February 20th, 2009 and they now show ownership of 1,092,072 shares. In their most recent 13F filing in which they disclosed their entire portfolio of long positions as of December 31st, 2008, Lone Pine did not show a position in DECK. And, they also did not show a position in their 13F from the period ending September 30th, 2008 either. So, they've come in an added this new position with size.

Assumming they made their initial purchase before February 25th, Lone Pine is already losing on the position. On February 25th, DECK traded around $55 and as of yesterday (March 2nd) trades around $37. It will be interesting to see if they increase their position size given the recent plunge after DECK released earnings and guidance. This sort of play is right up Mandel's alley, as it is a value play in the consumer sector that he is so vastly familiar with. Such a play on discretionary spending in the midst of a consumer recession could also be seen as contrarian. Or, maybe he feels that the brand's popular UGG boots are more than just a fashion fad. Either way, this play is very Lone Pine-esque as it combines their expertise in the consumer sector with their value oriented strategy.

You can view the rest of Lone Pine's portfolio holdings here, which we recently updated last week. Mandel's $7 Billion fund has returned over 25% annually since its inception in 1997. But obviously, last year was rough on them and many others, as noted in our list of 2008 year end hedge fund performance numbers. Why is Mandel worth following you might ask? Well, he served as a consumer/retail analyst for Tiger Management back in the day for legendary investor Julian Robertson. Robertson's proteges/right-hand men have been nicknamed the "Tiger Cubs" and many have started their own funds. So, not only has Mandel learned from one of the best, but he has put up some very solid returns himself. Mandel is well versed in the ways of finding undervalued companies and his funds typically like to sniff out solid companies with good management that are trading below their intrinsic value. Make sure to check out the rest of the prominent hedge funds we're covering in our Q4 portfolio tracking series as we cover a new fund each day.


Jim Chanos' Kynikos Suffers Withdrawals & Perry Cuts Performance Fee

We wanted to take a second to highlight these two stories as they are very reflective of what is going on in the hedge fund industry. We all know that redemptions were rampant. And, to that point, they probably still are winding down. It was postulated that December could have possibly been the halfway point in redemptions. But, if the market tanks yet again, that could undoubtedly set off another wave of redemptions. People need capital. That's all there is to it. In such an environment, cash, quite literally, is king. Case in point: Short seller Jim Chanos has undoubtedly had a solid year given that the market has declined so much. Yet, despite his performance, he is still seeing clients redeem almost 20% of their investment in his Kynikos Associates hedge funds. Chanos cited that, "We were like an ATM machine." Doug Kass, another short seller and hedge fund manager, has recently said that markets cannot recover until redemptions ease.

Many funds out there have suspended redemptions, or 'gated' investors from pulling out their money. As such, investors were left scrambling to pull money from wherever they could. Luckily, some funds have started to release those gates and Citadel addressed this issue in their latest letter to investors. Additionally, investments in funds that have been obliterated are now pretty much worthless. So, what do those investors do when they need capital? They sell their winners. And, Chanos' funds are the perfect illustration of this. Despite his great performance, he still saw outflows due to market conditions and the overall cash crunch.

Secondly, we've also seen that Perry Capital has cut its performance fee to those willing to pay it immediately. Apparently, the offer is to cut the performance fee on their International fund in half, to 10%. If investors accept this cut, they will basically begin paying the performance fee right away, despite the water mark. Such a move illustrates yet another casualty of the markets: performance fees. Hedge funds raked in the gains when they were printing money left and right. But, with many funds having lost money in 2008, they didn't receive their performance fee. And, not only did they not receive this nice bonus, but they dug themselves a ditch in terms of a high water mark. In order for them to collect performance fees going forward, they will need to recoup all their losses from last year and more.

Simply put, cash is king. And, we're not just talking about from an investment standpoint here. Investors need their cash after many of them lost some in 2008. Hedge funds aren't making the cash they once were due to lack of performance fees in many instances. So, they're searching for new ways to generate cash flow. Its interesting to see the industry adapt on the fly like this, as we face a crisis on multiple fronts. And, only time will tell how the industry morphs going into 2010. But, we do know one thing: 2008 certainly expanded the hedge fund graveyard.


Recent Thoughts From Baupost Group's Seth Klarman

An excerpt from Value Investor Insight, where they extract thoughts from Seth Klarman's latest Baupost Group letter. [hat tip Zero Hedge].


Klarman - Free Legal Forms


Monday, March 2, 2009

David Einhorn's Greenlight Capital 13F Filing: Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Greenlight Capital, a $6 billion fund ran by David Einhorn that specializes in spin-offs and value investing and has seen annual returns of over 20%. Einhorn's name has been popping up in the media a lot over the past year, as he talked about his well documented short position in Lehman Brothers (LEH). And, while that position paid off handsomely for him, it barely offset losses he experienced from other positions. He was caught in the massive Volkswagen short squeeze as he detailed in one of his latest investor letters. Einhorn has also recently detailed the saga between his fund and Allied Capital, a company he shorted, in his book Fooling Some of the People All of the Time: A Long Short Story. It gives you an inside perspective as to how Greenlight constructs and researches their investment theses and we highly recommend it. Greenlight approaches things by identifying mispricings in the markets and going from there.

He has recently advocated getting long gold (GLD), gold miners (GDX), and the Japanese Yen. And, at the same time, he has advocated shorting commercial real estate property REITs, saying that a drop in rents of 10% hurts values due to leverage and also points to the difficulty they will have trying to refinance debt coming due. We covered more of his recent thoughts and ideas in our Greenlight portfolio update. In terms of recent performance, his offshore fund finished 2008 -16.5% as detailed in our 2008 year end hedge fund performance numbers list.

The following were their long equity, note, and options holdings as of December 31st, 2008 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):
SPDR Gold Trust (GLD)
Allegheny Energy (AYE)
Commscope (CTV)
Market Vectors Gold Miners ETF (GDX)
MEMC Electronic Materials (WFR)
CF Industries (CF)
Dow Chemical (DOW)
Aspen Insurance (AHL)
Proshares Ultrashort Treasuries (TBT)
JA Solar (JASO)
Focus Media (FMCN)
Cadence Design (CDNS)
Patterson-Uti Energy (PTEN)
Carpenter Technology (CRS)
Healthnet (HNT)
Foster Wheeler (FWLT)
McDermott (MDR)
Lawson Software (LWSN) Bond
Patriot Coal (PCX)
Western Digital (WDC)
Cadence Design (CDNS) Bond
Ensco International (ESV)
Colonial Properties (CLP)
Smithfield Foods (SFD)
Huntsman (HUN)
Aercap Holdings (AER)
Corning (GLW)
Duke Realty (DRE)


Some Increased Positions (A few positions they already owned but added shares to)
EMC (EMC): Increased position by 437%
Ticketmaster Entertainment (TKTM): Increased position by 283%
Guaranty Financial (GFG): Increased position by 234%
URS Corp (URS): Increased position by 86%
Teradata (TDC): Increased position by 66%
Echostar (SATS): Increased position by 49%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Dr Pepper Snapple (DPS): Reduced position by 91%
MDC Holdings (MDC): Reduced position by 91%
Dana Holding (DAN): Reduced position by 72%
Triple-S Management (GTS): Reduced position by 50%
Helix Energy Solutions (HLX): Reduced position by 37%
Health Management Associates (HMA): Reduced position by 35%
Energy Partners (EPL): Reduced position by 34%


Removed Positions (Positions they sold out of completely)
Ameriprise Financial (AMP)
Kinross Gold (KGC)
Pomeroy IT Solutions (PMRY)
Mercer (MERC)


Top 20 Holdings (by % of portfolio)

  1. SPDR Gold Trust (GLD): 15.9% of portfolio
  2. URS Corp (URS): 9.4% of portfolio
  3. Allegheny Energy (AYE): 7.5% of portfolio
  4. Target (TGT): 5.97% of portfolio
  5. Commscope (CTV): 5.4% of portfolio
  6. Market Vectors Gold Miners ETF (GDX): 5.4% of portfolio
  7. MEMC Eletronic Materials (WFR): 5.2% of portfolio
  8. EMC (EMC): 5.2% of portfolio
  9. Teradata (TDC): 4.8% of portfolio
  10. CF Industries (CF): 4.4% of portfolio
  11. Einstein Noah Restaurant Group (BAGL): 3.1% of portfolio
  12. Dow Chemical (DOW): 2.33% of portfolio
  13. Echostar (SATS): 2.3% of portfolio
  14. Helix Energy (HLX): 2.1% of portfolio
  15. MI Developments (MIM): 2% of portfolio
  16. Employers Holdings (EIG): 1.9% of portfolio
  17. Health Management (HMA): 1.3% of portfolio
  18. Aspen Insurance (AHL): 1.1% of portfolio
  19. Guaranty Financial (GFG): 1.1% of portfolio
  20. Republic Airways (RJET): 0.9% of portfolio


Considering how Einhorn brought Gold (GLD) up to his largest holding over the course of last quarter, he must be sitting pretty with the recent surge in gold, which is up over 18% or so since December. Assets from the collective long US equity, options, and note holdings above were $2 billion this quarter. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, Andreas Halvorsen's Viking Global, and Timothy Barakett's Atticus Capital. Look for our updates as we will be covering a new fund each day.


Dennis Gartman: Long Cheap Retail, Short Malls

Dennis Gartman says he has survived this mess because he is a hedger. He is long something, and short something against it; or vice versa. And, we track him on the blog for this exact reason. We run our portfolio in a similar manner and believe that if you're going to try to run a hedge fund-esque portfolio, you truly need to be hedged. So many funds these days have employed leverage and have ran such concentrated portfolios with 'all-in' bets that they have deviated from the original defintion of a hedge fund. We hope to highlight what a hedge fund should be in the true sense of the world. We like to keep it old school.

Noted trader and author of the Gartman Letter, Dennis Gartman, recently sat down and basically said that he likes being long Canada and short the US. Gartman likes Canada's commodity exposure and so he is bullish on Canadian equities, relative to the US, as well as the Canadian dollar compared to the US dollar. If you're unfamiliar with Gartman, check out his Rules of Trading to get a better idea of how he thinks and positions himself.

In terms of specific equities, Gartman likes Family Dollar Stores (FDO) in that they are the cheapest of the cheap. From the beginning of this recession, we here at Market Folly have preached that you want to be long the cheap goods and short the expensive. We've been long Walmart (WMT) and McDonald's (MCD) and short the retail indexes, some discretionary retailers, and commercial real estate plays that focus on malls and retail such as Simon Property Group (SPG). Gartman harps on this point and claims that FDO is the lowest of the low in terms of cheap retail and says he likes to be long the cheap plays. Additionally, he has joined us on our 'short the malls' play and is short SPG as well, as mall traffic and consumer spending continue to decline.

He also mentioned to keep an eye on the Yen/Euro Cross in forex markets. This pairing began to rollover as the crisis began and he has postulated that the recent turning in this cross could possibly be bullish for markets. He cautioned to monitor it carefully, as it could just as well rollover yet again and signal another leg down.

In terms of Canadian equities, Gartman specifically likes Canadian banks. He is long the Royal Bank of Canada (RY) because of the technicals. He stated that there is no way he can go in there and examine every little detail of their balance sheets. That's the big mystery of financials; their balance sheets are like an abyss. He's simply gauging the price action and has noted that the chart has shown some signs of improvement. He also mentioned that he was looking at CIBC and BMO. Plus, he's bearish on US banks, so that sets up nicely.

He has liked being long infrastructure and short the general markets. But, that position started to move against him and he has now shifted into a long Copper position. He sees this as an alternative infrastructure play for the mean time and would like to move back into his infrastructure play.

We've covered Gartman numerous times on the blog before, as he recently said he saw Gold becoming the world's second reserve currency. He has also mentioned to keep an eye on the Baltic Dry Index and Transports, as they are leading indicators of global economic activity.


Warren Buffett's Berkshire Hathaway Letter to Investors / Annual Report (BRK.A)

Hot off the presses, here's Warren Buffett's letter to Berkshire Hathaway investors. (RSS & Email readers will need to come to the blog to view it).

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