Friday, September 18, 2009

Band of Analysts: Learn From Hedge Fund Analysts

Given the fact that many of our readers are hedge fund managers, analysts, traders and the like, we're always looking to share resources that are specific to this industry niche. At the same time, we also recognize that we have a large amount of readers who are passionate investors, employed in some other branch of finance, or are simply looking to break into the hedge fund industry. This resource is aimed directly at those readers. Here's your chance to learn from hedge fund analysts themselves in order to hone your understanding of fundamentals. It serves to bridge the gap between retail investing and the type of methodologies employed at many of the hedge funds we track here at Market Folly. Upon discovering this resource, we made it a priority to arrange a discount exclusively for our readers as the Band of Analysts team are Market Folly readers themselves. So, we are proud to offer you an exclusive 30% recurring discount to Band of Analysts with the code: MFolly.

Band of Analysts is a community of hedge fund analysts committed to sharing experience, knowledge, and most importantly, ideas. They give you access to the actual Excel financial models, Powerpoint presentations, and various other related materials regarding an actionable investment idea. Regardless of whether you're working in the hedgie world or not, this is an excellent resource. You can see an example of one of the Powerpoint presentations here. That lesson discusses event-driven investing with a particular focus on binary outcomes using CIT Group as an example. This is just one type of the many analytical resources that get posted on the site.

Undoubtedly, many of you are familiar with sites like SumZero or the Value Investor's Club. These communities are great tools to share your investment ideas, read others' picks and interact with each other. Given their exclusivity though, those sites are often reserved for industry professionals. Band of Analysts looks to break down that barrier by letting you learn from hedge fund analysts themselves. Their videos are literally as if you're looking over the shoulder of a hedge fund analyst as they explain their work. These serve as a great starting place to jump right into in-depth fundamental research. Secondly, they also offer many educational videos analyzing current situations. This is all on top of the discussion forums where community members can interact and really discuss what they're seeing in the markets. Their focus is on those of you looking to bridge the gap from retail to professional investor or from an associate in the financial world to an analyst at a hedge fund or major financial firm. We think their resource is an ideal fit for that portion of our reading audience and so that's why we wanted to share it with you.

In order to receive the exclusive 30% recurring discount, make sure you sign-up with the code: MFolly. We look forward to interacting with many of you there.

Hedge Fund Harbinger Capital Files 13D on Spectrum Brands (SPEB)

In an SEC filing made due to activity on August 28th, 2009, Philip Falcone's hedge fund firm Harbinger Capital Partners has disclosed a 42% ownership stake in Spectrum Brands (SPEB). Their 13D shows that they now own 12,604,216 shares.

This filing is interesting because it details how SPEB filed for reorganization relief under Chapter 11 bankruptcy back in February. Then just recently back in late August the plan became active. When this occurred, SPEB's old common stock and their various notes (some of which Harbinger owned) were deemed surrendered and exchanged for an aggregate of 11,405,281 shares to Harbinger. SPEB then issued an additional 2,970,000 shares to participants in a supplemental loan to the issuer in consideration for their participation. Due to their participation, Harbinger received a total of 1,198,395 additional shares. This brings you to the grand total of shares listed at the beginning of this article. This 13D is unique in that it gives us a glimpse as to how Phil Falcone has gone back to his distressed roots and invested Harbinger's capital in such a transaction. Check out the rest of Falcone's holdings in an article where we recently covered Harbinger's portfolio.

We also want to highlight that fellow hedge fund D.E. Shaw & Co recently filed a 13G on Spectrum Brands as well. In their filing, David Shaw's firm disclosed they now have a 14% ownership stake. So while D.E. Shaw has opted for a passive stake with their 13G, Harbinger's filing is a 13D and has represented an activist stake where they can press for change at the company.

Harbinger Capital Partners is a $6 billion hedge fund ran by Philip Falcone. While Harbinger deals in equity markets, Falcone's roots are in distressed investing and he is opening a new fund to return to these roots. His investment style focuses on bankruptcies (as evidenced above), proxy fights, and intensive research on credit. Since their equity positions are easily tracked via SEC filing, we've kept tabs on their moves in this regard for some time now. In terms of recent activity, Harbinger has been decreasing their position in Cliffs Natural Resources (CLF), dumping some of their Calpine (CPN), and most recently amended their 13D on SkyTerra. Last, but certainly not least, they've also been selling shares of Solutia (SOA) as if it were going out of style.

Taken from their company website, Spectrum Brands includes brands such as 8 in 1, Cutter, Jungle Labs, Rayovac, Remington, Schultz, and more.

Don Coxe's Basic Points - September 2009 Market Commentary

Market strategist Don Coxe is back with his 'Basic Points' for September 2009 and we have embedded them below. Alternatively, you can download the .pdf here. We've typically covered Coxe's commentary in months prior but after a brief hiatus on our part, we're back with his latest edition. If you're interested in his past work as well, you can view his June commentary here and an excellent question and answer session with Coxe himself.

If you're not familiar with Coxe, he's a market strategist and has quite a large following due to his opinions and forecasting. He currently likes commodities, precious metals and the like. He is an agriculture bull and actually shares a lot of views with that of legendary investor Jim Rogers (we've covered Rogers' market thoughts in the past as well).

RSS& Email readers: come to the blog to view the embedded document.

Don Coxe Basic Points Sept 2009

What We're Reading 9/18/09

Why the Natural Gas Fund (UNG) is issuing new units [FT Alphaville]

Evaluating S&P fair value target [Peridot Capitalist]

How the giants of finance shrunk, then grew, under the financial crisis - animated graphic [NY Times]

The nightmare portfolio of 2009 [Money & Co] ~ Alternatively, you could have just been net short with leverage... that'd be pretty abysmal as well.

Rail traffic continues to show weakness [My Investing Notebook]

A new era of hedge fund transparency? [zero hedge]

Thursday, September 17, 2009

Value Investing Congress (VIC) Discount: MF Readers Save $800

If you enjoy reading Market Folly, then you'll love the Value Investing Congress (VIC), hands down. That's all we can really say, because it's the truth. And not to mention, you can do so at a substantial discount off normal price. The VIC is like a live, in the flesh version of Market Folly as you'll get to hear presentations and investment ideas direct from some of the best managers in the hedge fund game. We track these managers on the site religiously and here's an excellent chance to receive stock picks, refine your investment methodology and network at one of the industry's premier events. We've arranged a discount for our readers with the VIC and so hopefully many of you will get to take advantage and attend this great event. Click here to receive the discount and make sure to enter discount code: N09MF2.

Clear your schedules and get your firm to pay for your admission so that you can hear the likes of Julian Robertson, David Einhorn, Bill Ackman, Eric Sprott, Whitney Tilson and many more speak. We cover these managers every single month on the blog and here's your chance to gain insight directly from them at the conference. Not to mention, this is an awesome event to network at as you'll meet plenty of great people to connect with. The schedule of the event is as follows: On Sunday (Oct 18th) there is an optional workshop from 8 AM to 5 PM: An Advanced Seminar on Value Investing. Then on Monday (Oct 19th) the main event begins as the Congress runs from 8:45 AM to 5 PM, followed by a networking cocktail reception. Then on Tuesday (Oct 20th) the Congress picks up again from 8:45 AM til 4 PM.

And, here is the full list of excellent speakers you'll hear from:

- Julian Robertson, Tiger Management
- Bill Ackman, Pershing Square
- David Einhorn, Greenlight Capital
- Alexander Roepers, Atlantic Investment Management
- Eric Sprott, Sprott Asset Management
- Patrick Degorce, Theleme Partners
- Sean Dobson, Amherst Securities
- Lloyd Khaner, Khaner Capital
- David Nierenberg, The D3 Family Funds
- William C. Waller & Jason A. Stock, M3 Funds
- Zeke Ashton, Centaur Capital Partners
- Kian Ghazi, Hawkshaw Capital Management
- Whitney Tilson & Glenn Tongue, T2 Partners

The discount we've organized with the Congress decreases each week, so it's in your best interests to sign-up ASAP. Last week you saved $1,400 and this week you can still save a sizable $800 off the normal price. Next week it drops down to $500 off, so get the $800 discount now with discount code: N09MF2. We're dead serious when we say that you will absolutely not regret attending this event. Simply put, if you read Market Folly then you'll love the VIC.

Hedge Fund Coatue Management Files 13G on Silicon Motion Technology (SIMO)

In keeping with the theme of tracking Coatue Management's portfolio, we wanted to also post up their most recent portfolio activity as indicated by SEC filings. Since we hadn't been tracking them in-depth, we need to play a little bit for catch-up here. Philippe Laffont's hedge fund filed a 13G on Silicon Motion Technology (SIMO). They disclosed a 7.4% ownership stake in the company with 2,067,014 shares. This is an increase from their previous 795,514 shares reported on their most recent 13F filing (which shows holdings as of June 30th, 2009). As such, in the past 3 months Coatue has significantly boosted their SIMO stake. Just yesterday, we disclosed some of Coatue's positions in UK markets.

Coatue is a long/short equity hedge fund in the true sense of the definition. They specialize in technology, media and telecom. Fund manager Philippe Laffont is a 'Tiger Cub' and worked for Julian Robertson at Tiger Management. Now running his own fund, Laffont focuses on in-depth proprietary research of individual companies and sectors. Head over to our background post on Laffont and Coatue for more information on them.

Taken from Google Finance, Silicon Motion Technology is "a fabless semiconductor company that designs, develops and markets, high-performance, low-power semiconductor solutions for the multimedia consumer electronics market. It has three product lines: mobile storage business, multimedia systems-on-a-chip (SoC) business, and mobile communications business."

S&P500: Highest Level Above Its 200-Day Moving Average In 25+ Years

Pardon the terse posts that only include a single chart lately, but they really speak for themselves. Hat tip again to the great folks over at Bespoke for generating this great research as always. They've highlighted the fact that the S&P 500 is now more than 20% above its 200 day moving average on the chart. Now, this would be all fine and dandy except for one thing: this hasn't happened in 25 years! The last time this happened? May 1983. What's even more interesting is that back then the market still continued to rally after breaching that threshold.

(click to enlarge)

This is yet another awesome fact to add to our statistics-that-make-us-cautious list (which by the way just keeps growing). After all, just a few days ago we highlighted that short interest is at the lowest level in over 2 years. Not to mention, many of the smart hedge fund minds we track on the blog have become skeptical of the rally as well, as legendary trader Paul Tudor Jones has called this a bear market rally. Additionally, other global macro firms like Clarium Capital are skeptical of the recovery.

Nevermind the fact that we are also seeing a multi-day rally of strange proportions. If the S&P were to close up 9 days in a row, that would be quite a rare occurrence. Pull up a chart of the S&P and you'll be a bit amazed. This feat has occurred a handful of times, with the most recent being in 2004 (thanks to tendollartommy for the data correction). Nothing goes up in a straight line. Well, nothing that isn't on LSD, ecstasy, bionic, turbo or whatever the kids are calling drugs these days. Then look at the rally on the chart below that preceded the current one. After going near vertical from S&P 880to 980, it still slowly chugged along up to 1010. While we don't think anyone would argue with the fact that the market is due for a pullback, it continues to defy odds and rationality. After all, the market can remain irrational longer than you can remain solvent. At the very least, we've become more cautious.

(click to enlarge)

Back on March 8th, 2009, we penned a piece entitled 'Ranting, Raving & Contrarian Signals' highlighting the ubiquitous negativity in the markets and noted that it might be a prudent time to take a contrarian viewpoint. Little did we know that our article would be published merely a few days after the market bottomed (for now at least). Now, with all the data we've been seeing, we are slowly starting to get the contrarian itch again. Maybe it's time to pen another piece, this time in the opposite direction. After all, the economy has completely recovered because Dennis Kneale said so, right?

Companies Most Likely To Declare Bankruptcy

In addition to the updated problem bank list we posted up the other day, we saw this and thought it would be worth flagging for those interested. Audit Integrity, an independent research firm, has highlighted the top 20 companies that they believe have the highest probability of filing for bankruptcy. They limited this specific list to publicly traded firms that have over $1 billion market capitalization. In no particular order:

  • Advanced Micro Devices, Inc.
  • Amkor Technology, Inc.
  • AMR Corporation
  • Apartment Investment and Management Co.
  • CBS Corporation
  • Continental Airlines, Inc.
  • Federal-Mogul Corporation
  • Hertz Global Holdings, Inc.
  • Interpublic Group of Companies, Inc.
  • Las Vegas Sands Corp.
  • Liberty Media Corporation (Capital)
  • Macy's, Inc.
  • Mylan Inc.
  • Oshkosh Corporation
  • Redwood Trust, Inc.
  • Rite Aid Corporation
  • Sirius XM Radio Inc.
  • Sprint Nextel Corporation
  • Textron Inc.
  • The Goodyear Tire & Rubber Company

They rate over 12,000 companies so as always take these with a grain of salt and obviously do the necessary due diligence on them. One particular company on the list is intriguing though: Textron (TXT). The private jet manufacturer has been on a volatile ride over the last year (to say the least) and our friends over at Zero Hedge have done some excellent sleuthing regarding various activities Textron has conducted with Goldman Sachs as of late.

Source: Reuters

Wednesday, September 16, 2009

Philippe Laffont's Coatue Management: Technology Trends Presentation

Philippe Laffont’s Coatue Management is a specialist hedge fund that focuses on the sectors of Technology, Media and Telecom. The fund was established in 1999 and Laffont typically keeps a low profile, rarely doing media interviews. However, we recently found a presentation that Laffont gave to MIT Alumni in May of this year that we thought readers would enjoy. While it is a few months old, the themes are still very much relevant as they examine at the technological landscape from a top-down perspective. If you are interested in long/short equity hedge funds, technology stock picks, or both, we highly recommend you take a look at Laffont’s whole presentation by downloading the .pdf from MIT here (make sure you download it before MIT takes it down).

In particular, we wanted to highlight slide 14 from the presentation. This slide (pictured below) highlights the trend cycles in the technology sector as we progress from mainframes to personal computing to networking to the internet. They highlight possible winners in the current environment to be Google (GOOG), Apple (AAPL), Research in Motion (RIMM), Qualcomm (QCOM), and Amazon (AMZN). This would be par for the course in hedge fund land as we have highlighted numerous times in the past that GOOG, AAPL, and QCOM are some of the most widely held stocks amongst hedge funds. Additionally, Goldman Sachs' hedge fund trend monitor report highlighted the fact that the remaining technology plays RIMM and AMZN are highly favored as well.

(click to enlarge)

We also wanted to highlight slide 18 that examines current trends in TMT. They see smartphones as an obvious trend going forward as customers prefer mobility, playing right into the hands of AAPL and RIMM. They see Nokia (NOK) as a possible loser here due to their lack of growth in the smartphone arena. Instead, NOK has typically been successful in selling run-of-the-mill mobile phones. Additionally, Coatue highlights the expansion of cloud computing and virtualization and notes Citrix (CTXS) and VMWare (VMW) as key winners.

(click to enlarge)

In terms of management style, Coatue follows a classic long/short equity strategy in which big directional bets are avoided. Typically, long/short hedge funds have 100% gross long exposure and 70% short, producing a net long exposure of 30%. Very loosely speaking, long/short funds tend to underperform the market in strong rallies (like the one we have seen since March) but outperform when markets fall. And, if they are successful at stock picking, they will outperform in flat markets and generate alpha regardless of circumstances.

Laffont is one of the so-called 'Tiger Cubs,' or managers who once worked for Julian Roberson at Tiger Management that have gone on to start their own funds. (We have covered the Tiger Cub family tree before for those of you unfamiliar). Robertson will be speaking at this year's Value Investing Congress and we highly recommend attending, as we have secured a discount to the event for our readers. Laffont’s investment principles were certainly influenced by his mentor. Following Robertson’s dictum that “The market never spoke to him,” Laffont does not follow market timing or macro economic forecasts to get him in and out of the market. Instead, he favors an approach based on in-depth proprietary research of individual companies and sectors. Laffont encourages his staff to identify and research long term investment trends. The diagram we posted above (slide 14) shows some of the very long term trends in computing. These are the types of trends they look to predict, ride, and capitalize on.

One of Laffont’s stockpicking mantras is “dare to be different”. In other words, he seeks to take the road less traveled by focusing on stocks besides the ones in the spotlight. Given that Coatue is a sector specific fund, Laffont believes that specialization is important for success and he urges his staff to stay passionate about technology. Coatue staff members were reportedly amongst the first to get their hands on an iPhone when it was launched.

A final investment principle that Laffont emphasizes is the importance of capping your losses. He does not spell out exactly how losses are capped at Coatue which is a shame because it would be interesting to find out more in this regard. For example, do they use stop losses or are they prepared to sit with a losing position for a long time if they still like the story - in the way perhaps that Julian Robertson would have in years gone by?

Given all of the technology trend talk above, we now want to turn to Coatue's portfolio. In expanding our coverage of hedge fund positions in UK markets, we have this update for you. Coatue have two disclosed long holdings in the UK market at present:

symbol date No. shares % of equity Estimate of price paid Group mony 11/01/2008 18167261 3.7 na

01/06/2009 45959122 9.1 115p

Taken from Google Finance, Group PLC operates a United Kingdom price comparison Website. The Company provides customers with a free online service enabling them to compare a range of products in the insurance, money, travel and home services markets, and to find the product most suited to their needs. The Company’s Website enables customers to compare products by price, product features and service. In addition to these comparison services, the Company helps and supports customers to research the product they wish to purchase. This includes news articles, guides, video blogs, Web chats, and the ability to ask the views either directly of its employees or other customers in the Company’s forums. The Company operates two principal Websites: and

Secondly, Coatue has also disclosed another stake:

Telecity Group Plc TCY 27/12/2007 6014538 3 na

15/01/2008 8485557 4.3 276p

Taken from Google Finance, TeleCity Group Plc is a pan-European provider of network independent data centers offering a range of scalable data centre services, and value added services, which include security, storage, messaging, disaster recovery, monitoring, application, and database management services. It has 20 data centers, which act as a content and connectivity hub, facilitating the storage, sharing and distribution of data, content and media.

Overall, very interesting information and a great glimpse into how a prominent hedge fund frames and researches their strategy. In the past, we've covered Coatue's E*Trade (ETFC) stake in US markets as well. We'll be covering Coatue more in-depth going forward so be on the lookout for more updates on this fund. And on the topic of various UK positions that hedge funds hold, we've already covered Moore Capital Management's positions, Lone Pine Capital's UK holdings (and their recent movements as well), Sprott Asset Management's defensive UK portfolio, as well as Citadel's positions.

Last, but certainly not least, make sure to visit our hedge fund portfolio tracking series for following all the footsteps the big funds make in US equities.

Recent Interview With Hedge Fund Manager Jim Chanos

CNBC recently had noted short seller and hedge fund manager Jim Chanos of Kynikos Associates on as a guest host. In his interview (video embedded below), he speaks on the subjects of executive pay, mark to market accounting, transparency, and other interesting topics in today's economy. Also, Chanos mentions the debut of a new website he has helped release, It is a hedge fund advocacy site with a focus on dispelling myths related to hedge funds and short selling. This site is certainly a step in the right direction in terms of removing the 'villainous' title hedge funds are often labeled with.

It's been a while since we covered Chanos on the blog so it's good to have something to post up. Interestingly enough, in the interview he also mentions that he (along with others) met with director Oliver Stone regarding the upcoming film, Wall Street 2. Chanos and others urged Stone to take the focus away from hedge funds and to put it more on the banking system in general. For more on Chanos, you can check out some of his past investment ideas as presented at the Ira Sohn Investment Conference.

RSS & Email readers come to the blog to view the embedded video:

Tuesday, September 15, 2009

Morningstar Discount

Just wanted to pass along this discount for those of you interested. We just got word from their team that Morningstar has $20 off a one year subscription to their Premium membership. So, if you're a financial advisor or asset manager who uses those resources, here's a quick way to save some money. Or, if you're a retail investor looking for research resources, this is a great tool. You can also get a free 14 day trial if you want to check things out beforehand as well. Definitely worth a spin since it's free.

Don't forget to also check out the list of discounts on financial publications we've compiled. We've covered all the major financial news sources and some of the highlights include:

Gotta love the discounts when newspapers are struggling.

Hedge Fund D.E. Shaw & Co Boosts (PCLN) Stake

We've got two portfolio adjustments to cover regarding the holdings of quant focused D.E. Shaw & Co. Firstly, in a 13G filed with the SEC, David E. Shaw's hedge fund firm has disclosed a 5.1% ownership stake in (PCLN). They now own 2,096,755 shares and the filing was made due to activity on August 31st, 2009. They have boosted their stake in this name because as of June 30th, 2009 (their 13F filing), they owned 336,302 shares of common stock as well as 411,100 shares represented by Calls in options markets. Additionally, they also owned 202,000 shares worth of Puts on PCLN. So, in the last 3 months, they've certainly boosted their holdings and have acquired a sizable stake. This is interesting to see mainly because numerous other prominent hedge funds we track have entered large positions in Priceline.

Secondly, we see that D.E. Shaw & Co has filed a 13G on Spectrum Brands (SPEB) as well. The hedge fund now shows a 14% ownership stake with 4,201,138 shares. In addition to the 13G, they also filed a Form 4 to show that their current share tally was achieved by selling 25,000 shares at $23 per share and selling 40,000 shares at $22.40 per share, with both transactions taking place on the 3rd of September. While they sold a few shares, they still obviously have a large stake left. Shares of SPEB trade on the OTC Bulletin Board.

In terms of other recent notable activity, we saw back in June that D.E. Shaw filed a 13G on Medicis Pharma (MRX). While we haven't seen their performance figures the past few months, we did note that their Oculus fund was up 2.8% for the year as of the end of June. Their Composite fund was up 12.5% over the same timeframe. While D.E. Shaw & Co is a hedge fund, it is also a private equity firm and technology development shop all in one. Founded in 1988 by David E. Shaw, they manage over $33 billion and recently announced they would be opening an office in Dubai. Please note that they employ mainly quantitative and statistical arbitrage strategies. As such, tracking and cloning their portfolio is not necessarily recommended since we can't necessarily follow the rhyme or reason behind their portfolio maneuvers.

Shaw oversees strategic maneuvers at the firm, but no longer is active in the day to day operations. He received his Ph.D. from Stanford University. Some notable former employees include Jeff Bezos (before founding and Lawrence Summers, who left the firm to serve on President Obama’s economic team. In Alpha's hedge fund rankings, D.E. Shaw was ranked 6th in the world. We haven't covered their portfolio in its entirety yet, but stay tuned to our hedge fund portfolio tracking series for updates.

Taken from Google Finance, is "a global online travel company that offers its customers a range of travel services, including hotel rooms, car rentals, airline tickets, vacation packages, cruises and destination services. Internationally, the Company offer its customers hotel room reservations in over 75 countries and 27 languages."

Taken from their company website, Spectrum Brands includes brands such as 8 in 1, Cutter, Jungle Labs, Rayovac, Remington, Schultz, and more.

Updated Problem Bank List

We wanted to take a moment and post up some updated data regarding the 'problem bank list' since we saw late last week that yet another major bank (Corus Bank) has failed. The FDIC releases this data monthly with a delay and Calculated Risk (a great Economics blog by the way) with the help of a reader did a great job of aggregating the spreadsheet of information. This data was posted up on September 4th, so hopefully timelag isn't too bad since the information is already released on a delayed basis much like the SEC filings we track in our hedge fund portfolio tracking series.

Below is the table of problem banks and make sure you scroll (both horizontally and vertically) as the list is pretty comprehensive. RSS & Email readers come to the blog to view the table:

Under the 'Class' column, note that N stands for national chartered commercial bank, SM stands for state charter Fed member commercial bank, NM stands for charter Fed nonmember commercial bank, SA stands for state or federal charter savings association, and SB stands for state charter savings bank.

Very interesting stuff to examine as always. Lastly, since we're on the topic of bank collapses, we just went back and read a piece on Washington Mutual's failure and thought it would be interesting reading for those of you who haven't seen it. If you're all gloom and doom now that you've seen yet again the poor state our financial system is in, we can do you one better. Nevermind bank failures, hedge fund manager Kyle Bass of Hayman Advisors has previously predicted sovereign defaults. Now wouldn't that be just dandy? So, we'll end with a toast: here's to many more anticipated bank failures.

Short Interest At Lowest Levels In Over 2 Years

Thanks to the fine folks over at Bespoke as always for flagging this data. We now see that short interest in the S&P 1500 is at the lowest levels since February 2007, sitting currently at 6.6%. Take it for what it's worth:

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Monday, September 14, 2009

Hedge Fund Moore Capital Management's UK Positions

Moore Capital Management’s London Listed Holdings

Thanks to a reader's help, we're now cruising along nicely in our hedge fund portfolio tracking series: UK holdings edition. We've already covered Lone Pine Capital's UK positions, Lone Pine's recent movements, Sprott Asset Management's defensive UK portfolio, as well as Citadel's positions. Today we’re going to take a look at the UK holdings of legendary macro investor, Louis Bacon. In particular, we will focus on those investments that Bacon has made through the London Stock Exchange (LSE) and London’s Alternative Investment Market (AIM). Before proceeding, we recommend checking out our informational preface on tracking a hedge fund's UK positions. And now, onto the good stuff:

Bacon lives in London and in a recent interview with Absolute Return and Alpha he said that living in London gave him a broader perspective on a variety of countries. He also noted that the London time zone allows him to be well prepared for the US trading day. Bacon’s flagship investment vehicle is the Moore Macro Fund but he also operates the more regionally focused and smaller, Moore Europe Capital Management. In April of last year, Bacon hired talented portfolio manager Greg Coffey to become Chief Investment Officer of Moore Europe. Coffey had previously worked at London based hedge fund GLG, and brought a team of 12 with him to Moore. Reports at the time speculated that whilst at GLG Coffey had been responsible for 60% of GLG’s performance.

As well as his outstanding returns, Bacon is renowned for his risk management. He has animal-like instinct for sensing turns in the market and an itchy trigger-finger that sometimes leads him to trade in and out and around positions, even when they are moving in the predicted direction. While others might see a mountain top in the distance, Bacon notices the valley en route to getting there. Other traders and managers might ride out that valley while waiting for the mountain top. Not Bacon. Instead, he'll trade in and out of positions in order to make money in the short-term while navigating toward the long-term thesis.

Now, let's dive right into Moore's UK regulatory disclosures. There are a couple of interesting patterns in Moore’s UK holdings that we want to touch on. Firstly, six out of seven of their positions are in investment funds or insurance companies where investment and actuarial acumen determine success to a large extent (Helphire Group Plc is the only exception). Moore’s approach here seems to be to try pick out talented managers in specific niches with good track records at the right price.

Secondly, we also noted that five of the seven holdings are registered and incorporated in off-shore locations such as Jersey, Guernsey, Isle of Man and Bermuda. Of course, these locations convey lighter tax and regulation than the UK mainland. What is more difficult to determine is whether these advantages are priced into the stock price. The large number of off-shore holdings in Moore’s portfolio possibly suggests that they don’t think so.

As we mentioned earlier, Louis Bacon is well known for trading. Yet, there is little sign of the famous itchy finger in the filings below. At first sight, Moore Capital appears to have built up their UK positions steadily and in turn sold them in similar fashion. Turnover has been low and their investment style looks to be surprisingly conservative (at least with regards to these positions). As always, keep in mind this is only one tiny piece of their overall portfolio and they are a true global macro hedge fund. In regards to these specific positions though, we wonder if it is possible that Moore have been using CFDs and other derivatives to trade around and hedge the equity positions? When going through Moore’s filings, we only found one CFD position and that was in Helphire Group Plc in early June 2009. Helphire Plc, however, is the only UK mainland incorporated company and is therefore covered by the new rules on CFD disclosure that came into action on June 1 2009. (See our article on the implications of the CFD rule change for hedge fund disclosure in the UK). One of the weaknesses in these new rules is that they only apply to UK mainland companies and not those registered off-shore. So, we have no idea whether Moore have been using CFDs in six out of seven of their holdings. Their holdings are listed below:

Camper and Nicholsons

Marina Investments Ltd

date No. shares % of issued stock Estimate of price
(AIM: CMI) 29/01/2007 3500000 7 na

02/11/2007 3200000 6.4 67p

22/12/2008 3150000 5.81 22p

Camper & Nicholsons Marina Investments Limited (CNMI) is a closed-ended investment company. It is an off shore fund that is registered and incorporated in Guernsey. CNMI listed on AIM in January 2007 and raised money for the acquisition, development and operation of an international portfolio of marinas and related real estate in the Mediterranean, the Caribbean and the United States. CNMI regards the marina market as highly fragmented, undervalued and ripe for consolidation.

Trading Emissions Plc 23/01/2009 41410948 15.31 na
(AIM: TRE) 03/06/2009 35148218 13.78 95p

04/06/2009 36388718 14.26 97p

15/06/2009 38415718 15.1 102p

Trading Emissions PLC is an investment fund that invests in tradable environmental instruments. It is an off shore fund and was registered in the Isle of Man in 2005. Moore has been a long-term holder of TRE stock. They purchased 20,000,000 shares in the company in 2005, probably on issue. The Company is managed to be long only in environmental commodities with a view that these commodities will appreciate in value. The core of the portfolio is a long position in carbon assets. The Company is also involved in aggregation, monetization, and collateralization in the carbon market. This is interesting because in an interesting piece on Goldman Sachs, writer Matt Taibbi hypothesized that Goldman's next big 'bubble' was the carbon market. Moore could very well agree with this given their investment. The company’s fund manager is EEA Fund Management Limited an investment advisory firm based in the City of London. EEA is also advisor to Climate Exchange PLC, another investment company listed on AIM.

Omega Insurance Holdings Ltd 22/01/2009 11635362 7.87 na
(AIM: OIH) 14/04/2009 9544963 3.97 139p

17/06/2009 10445875 4.33 128p

21/08/2009 9398416 3.86 134p

Omega Insurance Holdings is an insurance underwriting company. It is listed on the AIM market and is registered and incorporated off shore in Bermuda. The majority of the Omega Group’s premium income is derived from its business operations in the United States. The companies in the Group focus predominantly on short-tail property insurance and reinsurance which they provide to small to medium-sized insurance companies. The company is most active in property insurance but it is also involved in motor insurance and professional indemnity insurance.

Juridica Inv Ltd


11/03/2009 3719999 4.65 na

Juridica Investments Limited is an investment company registered off shore in Guernsey which seeks to invest in a new asset class: litigation funding. It trades on AIM and was listed in late 2007. Juridica provides third-party litigation funding to law firms seeking capital for expensive litigation cases. Juridica aim to back those claims that statistically are likely to be won.

Helphire Group Plc 01/06/2009 15874400 4.79 na
(LSE: HHR) 17/06/2009 16561123 5 na

26/08/2009 16293953 4.92 na

Helphire Group plc is a United Kingdom-based company that provides assistance to vehicle owners who have been involved in road accidents. The Company's main revenue is derived from replacement vehicle hire and the financing of vehicle repairs arising from insurance claims. The Company employs 2,600 people across six sites and operates a national branch network of 30 depots. It has a fleet of over 17,000 vehicles.

Max Property Group Plc


17/06/2009 10000000 4.55 100p

Max Property was admitted to the AIM in May 2009. It is likely that Moore purchased shares at the initial public offering @ 100p. Max Property Group Plc is an off shore, closed-end real estate investment company incorporated in Jersey. The company has an experienced board and is externally managed by Prestbury Investments. The company is aiming to exploit the current cyclical weakness in the UK real estate market through investment and active management with a view to realizing cash returns for shareholders over an investment cycle of approximately seven and half years. Hedge fund Och-Ziff owns 15.9% of Max’s shares.

Chaucer Holdings Plc 13/02/2009 4999990 1.44 na
(FTSE: CHU) 27/02/2009 20671722 3.77 43

09/03/2009 25019347 4.56 38

11/03/2009 27119347 4.95 40

07/04/2009 28990072 5.29 39

09/04/2009 29333460 5.35 40

28/04/2009 29133460 5.32 42

05/05/2009 28633460 5.22 41

21/07/2009 25631976 4.68 43.7

26/08/2009 25786746 4.7 45

01/09/2009 26036746 4.75 45.4

08/09/2009 21095740 3.85 49

Chaucer is a specialist insurance and reinsurance underwriter. Their Lloyd’s Syndicates 1084 and 1176 provide the main focus of the business. Chaucer Syndicate 1084 accepts risks across international aviation, marine, energy, property and specialist lines markets and the UK motor market. Nuclear Syndicate 1176 is one of the leading insurers of nuclear risk.

That concludes the coverage of Louis Bacon's Moore Capital Management, for now at least. As always, we'll continue to provide updates as they filter in through various regulatory filings. If you're interested in positions other prominent hedge funds hold in UK markets, check out our
articles on Lone Pine Capital's UK holdings, Lone Pine's recent movements, Sprott Asset Management's defensive UK portfolio, as well as Citadel's positions. While we haven't yet covered Moore's US holdings in our portfolio tracking series, we have covered their previous positions in the past for those interested.

Tracking A Hedge Fund's UK Positions

Before we continue to look at the positions prominent hedge funds hold in UK markets, we thought it would be prudent to post up an informational piece regarding the nature of the UK regulatory system as it applies to hedge fund disclosure. Firstly, there is no UK equivalent to the SEC’s 13F filing in which funds have to file their holdings on a quarterly basis here in the United States. In the UK, hedge funds do not have to file on a periodic basis at all. Instead, large shareholders are only required to flag long holdings that are greater than 3% of a company’s issued equity. This means that small hedge funds often do not register on the filing radar at all unless they invest in very small companies. Large funds on the other hand often leave a footprint and we can track their activities with ease (particularly when they are buying small and medium sized companies). Their investments in large cap companies, however, often go (legally) unreported and unnoticed because they do not trigger the 3% threshold. This is most similar to an SEC 13G filing (or 13D filing sans the activism) in the United States whereby a fund has to disclose after they have acquired a 5% or greater ownership stake in a company. We routinely cover 13G filings here at Market Folly and these UK filings can be regarded as their regulatory version of a 13G.

In the UK, once a fund crosses above 3% of a company’s equity in issue it has to report any further changes at 1% increments (regardless of whether it is a purchase or a sale). For example, if a fund moves from 3 to 4% of equity in issue or from 4 to 5, they must report. They must also report sales, for example, from 7 down to 6% until it gets below the 3% threshold where one final filing is required to acknowledge that the fund no longer has a concentrated ownership stake.

The additional filings made at 1% increments are interesting because the funds have to provide the trading date on which the threshold was crossed. This date can then be used to make a rough estimate of the price the fund was willing to pay for a company. Arguably, purchase price information is particularly useful if the fund being tracked is well known for excelling at fundamentally driven or deep value research. It is perhaps less meaningful if the fund follows momentum driven investment strategies such as those used by many Commodity Trading Advisers as these funds often move in and out of positions with much more alacrity and disregard for valuation.

Finally, just like in the United States, we can only provide information on a fund's long positions in UK markets. Short positions do not have to be disclosed except if they are in financial companies or companies involved in rights issues. We will cover the UK disclosure rules on shorts and disclose some hedge fund short positions in a later article, so stay tuned.

Hopefully this gives everyone unfamiliar with the subject a brief background on how regulatory disclosures work in the UK. Now that we've presented this preface, look for more articles relating to various positions hedge funds hold in UK markets going forward. We've already covered Lone Pine Capital's UK holdings, Lone Pine's recent movements, Sprott Asset Management's defensive UK portfolio, as well as Citadel's positions. Then later this morning we’re also going to take a look at the UK holdings of legendary macro investor, Louis Bacon. And, as always, we'll continue to track the US holdings of prominent hedge funds in our portfolio tracking series, so check back daily.