Phil Hempleman's Hedge Fund Ardsley Partners Bullish On Pharmaceuticals: 13F Filing ~ market folly

Friday, March 12, 2010

Phil Hempleman's Hedge Fund Ardsley Partners Bullish On Pharmaceuticals: 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.)

This is the first time we've covered Philip Hempleman's Ardsley Partners so let's get a brief background. Hempleman founded the firm in 1987 and it is a long/short equity focused hedge fund that uses bottom-up stockpicking (the ideal type of fund for tracking purposes). Ardsley runs various funds including their Offshore Fund, Partners Fund, Partners Institutional Fund, etc and last we heard, they manage over $1 billion.

The positions listed below were Ardsley Advisory Partners' long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Brand New Positions
Google (GOOG) Calls
Merck (MRK)
Healthcare ETF (XLV) Calls
Merck (MRK) Calls
Apple (AAPL) Calls
Pfizer (PFE)
Teva Pharmaceuticals (TEVA)
Direxion Small Cap Bear 3x (TZA) Calls
Yuhe (YUII)
Baxter (BAX)
EGO Resources (EOG)
Healthcare ETF (XLV)
China Information (CPBY)
Fuel Systems (FSYS)
Aeropostale (ARO)
H&R Block (HRB)
Kenexa Corp (KNXA)
Avago Technologies (AVGO)
China Valves (CVVT)

Increased Positions
Telvent (TLVT): Increased position by 97.4%
American Public Education (APEI): Increased by 41.7%
Proshares Ultrashort 20 year Treasury (TBT) Calls: Increased by 40%

Reduced Positions
Zhongpin (HOGS): Reduced position by 4.8%
Mylan (MYL): Reduced by 1.15%

Removed Positions (Sold out completely):
Schlumberger (SLB) Calls
Google (GOOG)
Alcatel Lucent (ALU)
Apple (AAPL)
Schering Plough (SGP) ~ merger transaction complete
General Electric (GE) Calls
XTO Energy (XTO)
Gilead Sciences (GILD)
CVS Caremark (CVS)
China Natural Gas (CHNG)
Halliburton (HAL)
Chesapeake Energy (CHK)
Plains Exploration (PXP) Calls
State Street (STT)
Brocade Communications (BRCD)
Tellabs (TLAB)
Smart Balance (SMBL)
Exco Resources (XCO)
Asiainfo (ASIA)
Thermo Fisher Scientific (TMO)

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

  1. Google (GOOG) Calls: 6.12%
  2. Proshares Ultrashort 20 Year Treasury (TBT) Calls: 5.74%
  3. Merck (MRK): 5.41%
  4. Healthcare ETF (XLV) Calls: 5.11%
  5. Merck (MRK) Calls: 4.51%
  6. Telvent (TLVT): 4.39%
  7. Yongye (YONG): 4.25%
  8. Apple (AAPL) Calls: 3.47%
  9. Zhongpin (HOGS): 3.08%
  10. Rino International (RINO): 2.54%
  11. Pfizer (PFE): 2.24%
  12. Teva Pharmaceuticals (TEVA): 2.08%
  13. Direxion Small Cap Bear 3x (TZA) Calls: 2.03%
  14. Mylan (MYL): 1.95%
  15. American Public Education (APEI): 1.92%

The most intriguing aspect of Hempleman's portfolio is the fact that the majority of his top holdings are brand new positions and he sold completely out of previous large positions. So, we're definitely seeing some significant turnover here. It's apparent that Ardsley Partners fancies using options to make some of their investment wagers and we see that they are using calls on ultrashort exchange traded funds. Since they are betting that an ultrashort fund will rise via calls, we can interpret this as a short position, a hedge, or just a bearish bet. His largest bearish wager is on 20 year treasuries with calls on TBT. In the past, we've constantly detailed how many hedge funds are betting on rising interest rates.

Turning back to the equities portion of their portfolio, Ardsley initiated Pfizer as a new stake in the fourth quarter, a position we've noted that many hedge funds added. Interestingly enough, they also own two of the major generic pharmaceutical producers in TEVA and MYL. As you can see, health is a very apparent theme in Hempleman's hedge fund portfolio.

Of the stocks that Ardsley Advisory Partners sold completely out of last quarter, there are many notable names. Hempleman's hedge fund dumped past large positions in Schlumberger (SLB) Calls, Google (GOOG), Alcatel Lucent (ALU), and Apple (AAPL). So, there is an apparent shift in their portfolio here as they dump common stock of certain names in favor of call options. Overall, Ardsley reduced basic materials exposure and ramped up healthcare exposure.

Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $607 million this quarter compared to $525 million last quarter, a 15% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.

In our portfolio series we've already covered a ton of long/short equity hedge funds, including:
Value, Event-Driven or Activist focused funds such as: Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Warren Buffett's portfolio, David Tepper's Appaloosa Management, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, Bill Ackman's Pershing Square Capital Management, Ricky Sandler's Eminence Capital.

'Tiger Cub' and 'Tiger Seeded' funds (hedgies somehow tied to Julian Robertson): Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, Matt Iorio's White Elm Capital, David Gallo's Valinor Management, Tom Brown's Second Curve Capital, and Robert Citrone's Discovery Capital.

As well as hedge funds employing other strategies: John Paulson's hedge fund Paulson & Co, Philip Falcone's Harbinger Capital Partners, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management.

Be sure to check back daily for our new updates.

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