John Griffin's Blue Ridge Capital Buys McDonald's, Adds To JPMorgan Chase: 13F Filing ~ market folly

Thursday, February 18, 2010

John Griffin's Blue Ridge Capital Buys McDonald's, Adds To JPMorgan Chase: 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is John Griffin's hedge fund Blue Ridge Capital. Griffin graduated from the University of Virginia and holds an MBA from Stanford. Before starting Blue Ridge, he was Julian Robertson's right hand man at legendary hedge fund Tiger Management.

Blue Ridge invests in dominant companies and shorts those that have fundamental problems, all in search of absolute returns. Blue Ridge generally puts an investment into one of two categories: catalyst driven or time arbitrage. They realize that there are times where markets will be mis-priced as investment time horizons compress more than normal. They like to look for situations where people 'stop thinking.' To learn to invest like John Griffin, check out hedge fund Blue Ridge's recommended reading list.

The positions listed below were Blue Ridge's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.

Brand New Positions
McDonald's (MCD)
Teva Pharmaceutical (TEVA)
Charles Schwab (SCHW)
Teradata (TDC)
Credicorp (BAP)
Ares Capital (ARCC)
Xinyuan Real Estate (XIN)
TD Ameritrade (AMTD)
Liberty Media (LSTZA)
Green Mountain Coffee Roasters (GMCR)
Washington Federal (WFSL)
First Niagara (FNFG)
Iberiabank (IBKC)

Increased Positions
JPMorgan Chase (JPM): Increased by 48.7%
Dollar Tree (DLTR): Increased by 22.7%
Range Resources (RRC): Increased by 19.4%
Crown Castle (CCI): Increased by 7.5%

Reduced Positions
Berkshire Hathaway (BRK-A): Reduced by 54.9%
Monsanto (MON): Reduced by 45.3%
Gold Miners ETF (GDX): Reduced by 42.8%
Equinix (EQIX): Reduced by 36.8%
iShares Silver Trust (SLV): Reduced by 36.1%
Blackrock (BLK): Reduced by 28.8%
Pfizer (PFE): Reduced by 24.4%
Visa (V): Reduced by 37.9%

Removed Positions (Sold out completely):
Palm (PALM)
Wynn Resorts (WYNN)
Exterran Holdings (EXH)
Whole Foods (WFMI)
RenaissanceRe (RNR)
Broadridge Financial (BR)

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

  1. JPMorgan Chase (JPM): 6.78%
  2. Apple (AAPL): 5.52%
  3. Crown Castle (CCI): 5.49%
  4. Amazon (AMZN): 5.31%
  5. McDonald's (MCD): 4.53%
  6. Western Union (WU): 4.36%
  7. CME Group (CME): 4.16%
  8. Millipore (MIL): 4.12%
  9. Pfizer (PFE): 3.93%
  10. Thermo Fisher Scientific (TMO): 3.87%
  11. Microsoft (MSFT): 3.53%
  12. Express Scripts (ESRX): 3.12%
  13. Discovery Communications (DISCA): 3.07%
  14. Covanta (CVA): 2.95%
  15. Range Resources (RRC): 2.74%

Blue Ridge's biggest moves were starting a new position in McDonald's (now their fifth largest US equity holding) and adding heavily to their stake in JPMorgan Chase (JPM). We've seen a plethora of hedge funds playing the theme of: long 'too big to fail' banks and short regional banks. While we can't see Blue Ridge's short portfolio, it is very clear they are confident in JPMorgan as it is their top holding. (However, we did get a glimpse at one of Blue Ridge's short positions previously). The addition of McDonald's to their portfolio was also intriguing given that we saw fellow hedge fund colleague Bill Ackman and his Pershing Square sell out of MCD.

Griffin's hedge fund also seems to be playing the online brokerage theme by adding shares in both TD Ameritrade and Charles Schwab. Competition in this industry has definitely heated up as of late as brokers slash commission prices in an effort to retain/gain customers. Turning to core positions, we note that Blue Ridge has held positions in Apple, Western Union, Millipore, Thermo Fisher, and Pfizer at the top end of their portfolio for multiple quarters now.

Their sale of Palm is notable as we've seen lots of pessimism surrounding this name as of late and many hedge funds out there have shorted Palm. Other complete sales were in casino Wynn Resorts and in grocer Whole Foods. Blue Ridge also reduced exposure across a number of names including Warren Buffett's Berkshire Hathaway and Monsanto. We found this intriguing because many hedge funds have been buying BRK while Blue Ridge reduced their size. On the Monsanto play, Blue Ridge joins a slew of other hedge funds that have been selling MON shares.

Although Blue Ridge barely added to their position in Crown Castle, we highlight it because it is now one of their largest positions and they have held it for 3+ quarters now. For those tracking these funds for investment ideas, it's always key to identify a fund's core holdings that they are less likely to turnover frequently. In fact, many hedge funds are bullish on tower stocks as we've highlighted recently.

Blue Ridge is a part of the 'Tiger Cub' portfolio created with Alphaclone where you can replicate top hedge fund positions. We've been very impressed with the solid backtested returns and current market outperformance.

For investing insight from Blue Ridge, we highly recommend checking out their suggested reading list. Assets from the collective holdings reported to the SEC via 13F filing were $5.3 billion this quarter compared to $4.4 billion last quarter, so a noticeable increase in long invested assets. Remember that these filings are not representative of the hedge fund's entire base of assets under management.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, and David Tepper's Appaloosa Management. Check back daily for our new updates.

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