Robert Citrone's Hedge Fund Discovery Capital: Portfolio Update (13F Filing) ~ market folly

Wednesday, March 10, 2010

Robert Citrone's Hedge Fund Discovery Capital: Portfolio Update (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 Robert Citrone's hedge fund Discovery Capital Management. Citrone graduated from Hampden-Sydney College in 1987. Prior to founding Discovery, Citrone was a portfolio manager at Fidelity Investments and Julian Robertson's Tiger Management. When analyzing investments, Discovery focuses on liquidity, valuation multiples, earnings & revenue growth, and potential for future earnings growth.

Before we even proceed to their long US equity holdings, we need to emphasize that Discovery truly employs a global focus and the holdings below are only one sliver of their overall portfolio as they are invested in markets around the globe, as well as in other asset classes they are not required to disclose. We have learned that in total, the 13F assets reported below represent less than 15% of their global portfolio, so just keep that in mind. The positions listed below were Discovery's 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
Vimpelcomm (VIP)
Accenture (ACN)
CTrip (CTRP)
Mobile Telesystems (MBT)
Shanda (GAME)
Amgen (AMGN)
Bank of America Preferreds (BAC-S)
Coventry Healthcare (CVH)
KKR Financial (KFN)
Centene (CNC)
Lennar (LEN)
The rest of their new stakes were each less than 0.5% of reported assets (small positions): Grupo Financiero (GGAL), Momenta Pharmaceuticals (MNTA), Range Resources (RRC), BHP Billiton (BHP), Concord Medical (CCM), & China Mass Media (CMM)

Increased Positions
Citigroup (C): Increased position by 6,347%
Banco Macro (BMA): Increased by 1,202%
Silver Wheaton (SLW): Increased by 152.9%
Cemex (CX): Increased by 141.8%
NII Holdings (NIHD): Increased by 118%
Transocean (RIG): Increased by 79.4%
Telecom Argentina (TEO): Increased by 41.3%
Morgan Stanley (MS): Increased by 33.5%
Citizens Republic Bancorp (CRBC): Increased by 26.6%
Apple (AAPL): Increased by 22.8%

Reduced Positions
Google (GOOG): Reduced position by 17.4%
iShares Emerging Markets (EEM): Reduced by 8.9%

Removed Positions (Sold out completely):
Texas Instruments (TXN)
Goldman Sachs (GS)
JPMorgan Chase (JPM)
Banco Bradesco (BBD)
Emcore (EMKR)
Weatherford International (WFT)
Leap Wireless (LEAP)
Barrick Gold (ABX)
MetroPCS (PCS)
Research in Motion (RIMM)
Lazard (LAZ)
Deere (DE)
National Oilwell Varco (NOV)
XTO Energy (XTO)

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

  1. Apple (AAPL): 17.35%
  2. Creditcorp (BAP): 14.48%
  3. Google (GOOG): 9.16%
  4. iShares Emerging Markets (EEM): 7.18%
  5. Vimpelcomm (VIP): 5.82%
  6. CBS (CBS): 5.06%
  7. Morgan Stanley (MS): 3.48%
  8. Accenture (ACN): 3.29%
  9. Silver Wheaton (SLW): 3.17%
  10. Transocean (RIG): 3.14%
  11. Cemex (CX): 3.05%
  12. iShares Taiwan (EWT): 2.52%
  13. Telecom Argentina (TEO): 2.21%
  14. Core Labs (CLB): 2.12%
  15. Banco Macro (BMA): 2.07%

Well, this doesn't look like a hedge fund portfolio at all, does it? (/sarcasm). Discovery has a massive allocation to their position in Apple and a pretty big stake in Google as well, both companies that we recently saw on Goldman Sachs' list of most important stocks for hedge funds. While Discovery has a few of the token hedgie names in their portfolio, they've also got some intriguing positions in Creditcorp (BAP), Vimpelcomm (VIP) and Accenture (ACN). These are positions we haven't seen many hedgies own as of late and so it's always interesting to stumble on new ideas.

While hedgies that are focused on emerging markets will have owned VIP in the past, the other two stocks (ACN & BAP) caught our attention as well. Discovery Capital started brand new positions in ACN and VIP in the fourth quarter and added slightly to their BAP stake. They also sold completely out of previously large positions in Texas Instruments, Goldman Sachs and JPMorgan Chase.

Focusing on their most sizable moves, Discovery boosted stakes in Banco Macro (BMA) and Citigroup (C) in a big way. They added to their C position by over 6,300% and boosted their BMA stake by over 1,200%, definitely something worth paying attention to. In terms of other notable portfolio maneuvers, Citrone's hedge fund added heavily to Silver Wheaton, Transocean, and Cemex. Overall, Discovery decreased financials exposure and ramped up services exposure. Again please keep in mind that the above are only Discovery's long US equities position and represent less than 15% of their actual global hedge fund portfolio.

Data used for this article comes from Alphaclone, our source for sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $1.14 billion this quarter compared to $1.09 billion last quarter. 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 hedge funds, including value and/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.

Various '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, and Tom Brown's Second Curve Capital.

As well as some merger arbitrage focused funds & hedgies that employ various other strategies too: 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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