We've finally had a chance to read Wall Street Journal reporter Scott Patterson's book. So today, we're reviewing The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It. Right off the bat, we can tell you that the majority of readers will find this book interesting. Why? Because it takes you inside the secretive world of hedge fund manager Jim Simons of Renaissance Technologies (RenTec). Not to mention, it also profiles Ken Griffin of Citadel Investment Group, Cliff Asness of AQR Capital, Peter Muller of Morgan Stanley's PDT (process driven trading) hedge fund, and Boaz Weinstein of Saba Capital (previously at Deutsche Bank).
If you're like us and crave information regarding these mysterious managers, then this is for you. Patterson's book reads like a narrative and paints a clear picture of each of the gentlemen that have been instrumental in the development of the quantitative side of Wall Street. The Quants starts by focusing on Ed Thorp, a mathematics professor known for making money via beating blackjack with his book, Beat the Dealer. It then shifts to how Thorp went on to help pioneer the quant field on Wall Street with his convertible arbitrage strategy. The book describes the history and evolution of quantitative trading, framing things nicely before shifting focus to the financial crisis.
As the tale progresses, we see how some quants nearly collapsed in 2007. Patterson highlights just how deadly leverage gone wrong can be. It seems quants began to stray from the most important tenets of risk management and, yet again, we're faced with a Wall Street story filled with greed, leverage, and hubris. And as the quant 'godfather' Thorp preached: you shouldn't bet more than you can afford to lose.
So, what's enjoyable about the book? The in-depth profiles of Simons, Griffin, Asness & more, of course. But what's also fascinating is the overall storyline regarding the near implosion of many of these managers during late 2007. Industry insiders will already be familiar with this 'crisis before the crisis,' but the book definitely showcases what a truly scary time this was. It details the stories that began to leak out back during their meltdown, including how Cliff Asness was punching computer screens and how Muller's fund unit lost $300 million in a single day. Also, the tie-ins and focus on poker in The Quants was intriguing as all these fund managers love to play and fittingly, are quite good at the game.
What the book lacks: Technical details. Given the subject matter, we expected more of an in-depth look at the methods within this ever-growing segment of Wall Street. However, we concede that when writing a book which will be read by a wider audience, concessions have to be made. Casual investors will find the book satiating while hardcore industry veterans might crave a bit more detail.
In the end, this book's story epitomizes the constant greed found on Wall Street. Equally important, it helps shine a spotlight on a mysterious and complex corner of the markets that many otherwise wouldn't normally gain access to. While Patterson often uses cliches in his writing, the in-depth focus on these quant hedge fund managers during perilous times more than compensates. The Quants is your ticket inside their seemingly secretive world.
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For other insightful books on markets and investing, be sure to check out our other book reviews, as well as our recommended reading lists.
Friday, March 12, 2010
The Quants By Scott Patterson: Book Review
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
- Google (GOOG) Calls: 6.12%
- Proshares Ultrashort 20 Year Treasury (TBT) Calls: 5.74%
- Merck (MRK): 5.41%
- Healthcare ETF (XLV) Calls: 5.11%
- Merck (MRK) Calls: 4.51%
- Telvent (TLVT): 4.39%
- Yongye (YONG): 4.25%
- Apple (AAPL) Calls: 3.47%
- Zhongpin (HOGS): 3.08%
- Rino International (RINO): 2.54%
- Pfizer (PFE): 2.24%
- Teva Pharmaceuticals (TEVA): 2.08%
- Direxion Small Cap Bear 3x (TZA) Calls: 2.03%
- Mylan (MYL): 1.95%
- 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.
Matthew Grossman's Hedge Fund Plural Investments: Portfolio Glance (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 we've covered Matthew Grossman's hedge fund so here's some background. Grossman founded Plural Investments in 2008 with $900 million after previously serving as the Chief Investment Officer of CR Intrinsic (of Steven Cohen's SAC Capital). Prior to that, Grossman was an energy analyst with Julian Robertson's Tiger Management. Needless to say, he has quite the resume when it comes to prominent fund managers.
Fourth quarter 2009 was actually the very first time that Plural filed a 13F with the SEC. So, we don't have any quarter over quarter portfolio changes to update you on. However, this is the first major glimpse at their portfolio and as such we'll provide their top holdings.
Top 20 Holdings by percentage of assets reported on 13F filing
- Alcon (ACL) Calls: 7.64%
- Grainger (GWW): 3.07%
- Goldman Sachs (GS): 2.64%
- SPDR Gold Trust (GLD): 2.33%
- Eaton (ETN): 2.05%
- Bucyrus (BUCY): 2.02%
- US Oil Fund (USO): 1.95%
- Goodyear Tire & Rubber (GT): 1.92%
- Dr Pepper Snapple (DPS): 1.91%
- Flowserve (FLS): 1.77%
- Alcon (ACL): 1.75%
- Humana (HUM): 1.67%
- Wellpoint (WLP): 1.55%
- Union Pacific (UNP): 1.37%
- CSX (CSX): 1.28%
- Watsco (WSO): 1.19%
- Bank of New York Mellon (BK): 1.12%
- Cablevision (CVC): 1.11%
- Lincoln National (LNC): 1.10%
- Norfolk Southern (NSC): 1.07%
So, an intriguing first look at Grossman's Plural Investments. Right away you can notice a few sector themes here. While they represent a smaller portion of his overall portfolio, railroads definitely catch the eye here. Grossman's hedge fund owns practically all the remaining majors left after Burlington Northern's acquisition by Warren Buffett's Berkshire Hathaway. Plural owns shares in CSX, UNP, and NSC. Also, we see that Grossman fancies healthcare here as he owns shares in both Wellpoint and Humana. By far and away their largest position though is Alcon as they own both calls and common stock on the name. Lastly, we'll make note of yet another hedge fund with exposure to gold (via GLD). Whether it be for hedging, a macro bet, or some other purpose though, we don't know. Overall, an interesting mix of stocks and we look forward to being able to compare portfolios next quarter.
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 $826 million this 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 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 various strategies ranging from long/short to merger arbitrage to global macro: 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, Phil Hempleman's Ardsley Partners.
Be sure to check back daily for our new updates.
What We're Reading ~ 3/12/10
Good interview with Paul Sonkin of the Hummingbird Value Fund [Value Walk] ~ Sonkin will be presenting at the upcoming Value Investing Congress as well
Reflections on gold as an asset class [Pragmatic Capitalist]
A great in-depth look at Ackman & Berkowitz's plan for General Growth Properties [Value Plays]
Value opportunities in insurance stocks says Wilbur Ross [Street Capitalist]
An interview with James Montier [Simoleon Sense]
An interesting look at Tudor's Tensor fund [CT News]
Gabriel Nechamkin is back with another hedge fund [FINalternatives]
Do newsworthy hedge funds underperform? [CXO Advisory]
Barton Biggs on why Large Caps are undervalued [Business Insider]
Top portfolio moves from their ultimate stock pickers [Morningstar]
A look at the for-profit education plays hedgies seem to be split on opinion [Seeking Alpha]
Interview with Meridee A. Moore, founder of Watershed Asset Management, a $2 billion hedge fund in SanFran [NYTimes]
The value of content that SeekingAlpha has received for free [World Beta]
Thursday, March 11, 2010
Falcone's Harbinger Dumps Calpine (CPN) Shares, Adds Options
In an amended 13D filed with the SEC, Philip Falcone's hedge fund Harbinger Capital Partners is now showing a 2.21% ownership stake in Calpine (CPN) with 10,000,000 shares. The filing was made due to activity on March 3rd, 2010 and the fine print reads, "This amount consists of Shares that the Reporting Person may be entitled to obtain upon the exercise of options." Digging into the filing further, we see that Harbinger has acquired options that are exercisable into shares within 60 days for their Master & Special Situations funds, as they bought $18,000 worth of options. This paints a vastly different picture from what we last saw when we looked at Harbinger's portfolio. After having a dismal 2008, Harbinger had a solid showing last year as they finished up 46.5% as we noted in our 2009 hedge fund performance numbers post.
These transactions comes after a wave of selling as Falcone's fund was disposing of CPN shares throughout January. We now also see that Harbinger's Master Fund sold 18,310,600 Calpine shares on March 3rd at a price of $10.75 per share. Their Special Situations Fund sold 9,155,300 shares at the same price on the same date. Then, interestingly enough, Harbinger purchased the above referenced options on the same day.
Here is a graphical breakdown of their recent transactions in Calpine:
(click to enlarge)In conclusion, they dumped a bunch of shares and then picked up options. So, they're definitely up to something here and we'll continue to watch the developments. For more from Philip Falcone's hedge fund, check out our coverage of Harbinger's portfolio.
Taken from Google Finance, Calpine is "a wholesale power company in the United States. Calpine owns and operates natural gas-fired and geothermal power plants in North America and has a presence in power markets in the United States. Its portfolio consists of two types of power generation technologies: natural gas-fired combustion turbines, which are combined-cycle plants, and renewable geothermal conventional steam turbines."
Philippe Laffont's Coatue Management Doubles Down on STEC (STEC)
In an amended 13G filing with the SEC, Philippe Laffont's hedge fund Coatue Management has disclosed a 7.5% ownership stake in STEC (STEC) with 3,763,221 shares. The filing was made due to activity on February 23rd, 2010 and represents a massive increase in their position. As we previously detailed in Coatue's portfolio, the hedge fund owned 1,864,941 shares of STEC back on December 31st, 2009. So, in the past three months, they've increased their position 101.8% by adding 1,898,280 more shares.
Coatue Management is a hedge fund founded by Philippe Laffont in 1999. They employ a long/short equity strategy and focus on technology, media & telecom stocks. For more on Laffont's hedge fund, head to our very recent post on Coatue's portfolio as well as our coverage of a technology trends presentation they've given in the past.
Taken from Google Finance, STEC is "a global provider of enterprise-class Flash solid-state drives (SSDs) for enterprise-storage systems and servers that companies use to retain and access their critical data. The Company’s products are designed specifically for storage systems and servers that run applications requiring a high level of input/output operations per second (IOPS) performance, capacity, reliability and low latency."
Keep up with the rest of our updates on hedge fund portfolios via our tracking series.
Hedge Fund Generals Index: Most Popular Concentrated Positions
Today we present you with Bank of America Merrill Lynch's quarterly report on hedge fund holdings. In this report (released four times a year), they examine the hedge fund landscape via public disclosures to identify which stocks hedgies are really wagering on. In essence, this research is very similar to Goldman Sachs' VIP list of the securities most important to hedge funds. While our hedge fund portfolio tracking examines portfolios of specific managers, BofA has profiled the broader hedge fund universe.
We'll first start with arguably the most desirable information: their 'Hedge Fund Generals index'. This is a list of top hedge fund holdings, but with a unique twist. The HF Generals is, "an equal-weighted basket of 20 stocks that is a combination of the most concentrated and most popular stocks among HFs ... To construct the HF Generals basket we took those stocks in each quarter that ranked in the top quartile of both the most widely held stocks (popular) and those with the heaviest HF ownership (concentration), sorted by concentration."
The performance of this strategy is notable as well. For 2009, this basket of stocks massively outperformed the S&P 500 by 46%. Year-to-date for 2010, it's up 4.1% versus 0.3% for the S&P 500. BofA notes that, "this strategy has outperformed the S&P 500 index by 89bp per month/260bp per quarter between September 2003 and February 2010." Those of you with Bloomberg Terminal access can pull this up via MLDIHFGN index. Remember that the list below is equal weighted:
The Hedge Fund Generals Index
1. Take-Two Interactive (TTWO)
2. Equinix (EQIX)
3. Terra Industries (TRA)
4. Wendy's Arby's Group (WEN)
5. E*Trade Financial (ETFC)
6. Black & Decker (BDK)
7. JDA Software (JDAS)
8. Pactiv (PTV)
9. ITT Educational (ESI)
10. VeriSign (VRSN)
11. First American Corp (FAF)
12. Mead Johnson Nutrition (MJN)
13. Palm (PALM)
14. Hologic (HOLX)
15. American Eagle Outfitters (AEO)
16. Carter's (CRI)
17. CommScope (CTV)
18. Teradata (TDC)
19. OfficeMax (OMX)
20. SLM Corp (SLM)
As you can see, this list is quite different from the most popular stocks amongst hedge funds. The 'most popular' list we detailed last week includes more mega cap, mainstream stocks. The Hedge Fund Generals list, on the other hand, contains a lot of special situation and edgy stocks that hedge funds are betting will soon see catalysts.
The HF Generals list does include a few intriguing stocks that we've focused on in the past. Just recently, we touched on why hedgies like Mead Johnson Nutrition (MJN). Also, various long/short equity funds that we track have been moving in and out of Teradata (TDC) for a few quarters now. Carl Icahn has been busy with his activist stake in Take-Two Interactive as he hopes to generate shareholder value. Chris Shumway's hedge fund Shumway Capital Partners has a large stake in Equinix (EQIX). Additionally, it was very interesting to see Palm (PALM) on this list given that many hedge funds have been short the name and shares have been in a proverbial deathspiral. And lastly, we note that a few of the hedgies we specifically track have previously held positions in Wendy's Arby's Group. However, of the funds MarketFolly focuses on, many have reduced their stakes and/or sold out of WEN in recent quarters.
Overall, while hedge funds saw some rotation in the fourth quarter, IT and Healthcare were the most favored sectors while telecom was the least favored. Additionally, BofA wagers that hedgies are still bearish on REITs and that hedge fund cash levels have returned to pre-crisis levels as well. Embedded below you will find Bank of America Merrill Lynch's entire quarterly hedge fund report. RSS & Email readers will need to come to the site in order to view it:
You can directly download a .pdf here.
For more coverage on specific hedge fund portfolios, head to our tracking series. And for more broader data like the above, head to Goldman Sachs' VIP list of popular hedgie holdings as well as BofA's recent report looking at hedge fund exposure levels that concludes they favor high quality growth stocks.
Forbes Billionaire List: Hedge Fund Managers That Made The Cut
Forbes is out with their annual list of billionaires and we're here to highlight the various hedge fund managers on the list. In the past, we'd also posted up last year's Forbes billionaire list if you wanted to compare between them.
Mexican billionaire Carlos Slim tops the list this time around, displacing Bill Gates from his previous perch. Slim's fortune now sits at $53.5 billion, up $18.5 billion from the year prior. Bill Gates increased his wealth by $13 billion to bring his total to $53 billion. Warren Buffett's fortune grew $10 billion, up to $47 billion now. We've covered Slim a few times on the site before, most notably for his investment in the New York Times (NYT). And of course we've detailed Warren Buffett's actions countless times on the blog, most notably with Buffett's portfolio and his recommended reading list. As for Gates, we'd posted his 2010 annual letter for those interested.
Here's the group of prominent hedgies that landed on Forbes' esteemed billionaire list with their rankings, respective fortunes, and links to our coverage of each manager:
1. Carlos Slim ~ $53.5b
2. Bill Gates ~ $53b
3. Warren Buffett of Berkshire Hathaway ~ $47b
35. George Soros of Soros Fund Management ~ $14b
45. John Paulson of Paulson & Co ~ $12b
59. Carl Icahn of Icahn Partners ~ $10.5b
80. Jim Simons of RenTec ~ $8.5b
113. Steven Cohen of SAC Capital ~ $6.4b
171. Stephen Schwarzman of Blackstone Group ~ $4.7b
212. Ray Dalio of Bridgewater Associates ~ $4.0b
212. Daniel, Dirk & Robert Ziff of Och-Ziff ~ $4.0b
212. John Arnold of Centaurus Energy ~ $4.0b
258. Bruce Kovner of Caxton Associates ~ $3.5b
258. David Tepper of Appaloosa Management ~ $3.5b
287. Daniel Och of Och-Ziff ~ $3.3b
297. Paul Tudor Jones of Tudor Investment Corp ~ $3.2b
316. Eddie Lampert of RBS Partners ~ $3.0b
354. Stanley Druckenmiller of Duquesne Capital ~ $2.8b
374. David Shaw of DE Shaw Group ~ $2.5b
437. Julian Robertson of Tiger Management ~ $2.2b
488. Philip Falcone of Harbinger Capital Partners ~ $2.0b
488. Ken Griffin of Citadel Investment Group ~ $2.0b
488. Bill Gross of PIMCO ~ $2.0b
556. Alan Howard of Brevan Howard ~ $1.8b
582. Izzy Englander of Millennium Partners ~ $1.7b
582. Charlie Munger of Berkshire Hathaway ~ $1.7b
655. Stephen Mandel of Lone Pine Capital ~ $1.5b
655. Louis Bacon of Moore Capital Management ~ $1.5b
655. Leon Cooperman of Omega Advisors ~ $1.5b
721. Marc Lasry of Avenue Capital ~ $1.4b
773. Richard Chilton of Chilton Investments ~ $1.3b
773. Glenn Dubin of Highbridge Capital ~ $1.3b
828. Peter Thiel of Clarium Capital ~ $1.2b
880. Nelson Peltz of Trian Partners ~ $1.1b
880. T. Boone Pickens of BP Capital ~ $1.1b
880. Henry Swieca of Highbridge Capital ~ $1.1b
On a year over year basis, Stephen Cohen increased his wealth by $900 million, while RenTec's Jim Simons boosted his fortune by $0.5b. Tiger Management's legendary fund manager Julian Robertson saw a $900 million increase in his net worth as well. David Tepper of Appaloosa Management saw an impressive increase as he gained $2.3 billion in one year's time as his hedge fund's bet on financials paid off handsomely. Besting Tepper though was John Paulson. The subprime maestro doubled his fortune from $6 billion last year to $12 billion this year as his impressive run continued. Overall though, the rich get richer. You can view Forbes' full list of billionaires here as well as Forbes' in-depth look here.
For more rankings in hedge fund land, head to the breakdown of the world's largest hedge funds, as well as last year's billionaires list.
Marty Whitman & Third Avenue's Investor Letter
For those interested, here is Marty Whitman's latest investor letter for his Third Avenue Management. In his first quarter 2010 commentary, he sets out to defend managed mutual funds. At the same time though, he highlights some intriguing points about markets and has some nice quotes. Most notably, he writes, "Value investors, control investors, distressed investors and skilled short sellers, tend to be very much involved in the in-depth fundamental analysis that permits them to make reasoned judgments about the existence of inefficient pricing". In the past, we've also posted up Whitman's fourth quarter '09 commentary as well.
Embedded below is Third Avenue's latest series of fund manager commentaries:
You can directly download the .pdf here.
If you're interested in more fund manager commentaries, check out the rest of the various hedge fund investor letters we've posted and scroll through all of them.
Wednesday, March 10, 2010
T2 Partners' Whitney Tilson Talks About His Positions & The Market
Whitney Tilson of hedge fund T2 Partners recently appeared on television to give his thoughts on the market and some of his positions. Specifically, he notes that they are still short Palm (PALM) and expect further downside to come. However, it is obviously a smaller sized position for them than it once was given the precipitous fall it's seen lately. We've also previously gotten a look at some of T2's other short positions.
Turning to General Growth Properties (GGP), Tilson argues that there is essentially a 'floor' here at $15 because there is a credible bid for the company at this level on top of Simon Property Group's previous bid at $9. So, the risk/reward skew is favorable here and he ultimately thinks someone will make a higher bid. Many other hedgies and prominent investors own shares and debt of this name as Bill Ackman's Pershing Square is one of the largest owners. Bruce Berkowitz's Fairholme Fund is also the largest unsecured creditor. Berkowitz and Ackman both recently teamed up to help provide funding for the latest proposed GGP bid.
Turning next to his position in Pfizer (PFE), Tilson argues that PFE is attractive because it is trading at less than 10x earnings and has a solid 4% dividend. Many other hedgies agree as we've seen Pfizer is one of the most popular holdings among hedge funds.
Embedded below is the video of T2 Partners' Whitney Tilson. RSS & Email readers will need to come to the site to view the video:
For more from Tilson and his hedge fund, head to T2's annual letter, as well as his presentation of three stock picks. Both Tilson and Berkowitz will be presenting investment ideas at the upcoming Value Investing Congress and we've secured a discount for our readers here.
Tom Brown's Hedge Fund Second Curve Capital Favors Wintrust Financial & Synovus Financial: 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 Tom Brown's hedge fund Second Curve Capital. His hedge fund exclusively focuses on the financial services sector as he has been a banking analyst for many years. Prior to founding Second Curve in May 2000, he was in charge of the financial services group at Julian Robertson's Tiger Management. In the past, he had also worked at Smith Barney, PaineWebber and more. He also runs the site BankStocks.com.
The hedge fund has had a volatile ride the past few years as one of its funds was up 68% in 2006 and then had a rough ride in 2007 as they fought the waterfall of bank stock declines. Brown has ardently argued that the bottom is in for financials. While these stocks rallied heavily in 2009, the problem with his enthusiasm is that he was making his call back in 2007 and 2008 when things were really starting to heat up in the financial crisis. As such, many of his holdings were hit big. He was definitely early on his call, and it cost him dearly.
The positions listed below were Second Curve'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
Western Alliance (WAL)
Increased Positions
Cobiz Financial (COBZ): Increased position by 408%
Pacwest Bancorp (PACW): Increased by 178.6%
Synovus Financial (SNV): Increased by 165.5%
Highbury Financial (HBRF): Increased by 149%
Wintrust Financial (WTFC): Increased by 139.5%
Taylor Cap Group (TAYC): Increased by 80.4%
Compu Credit Holding (CCRT): Increased by 62%
Tree (TREE): Increased by 43%
Nara Bancorp (NARA): Increased by 29.9%
Reduced Positions
Marshall & Ilsley (MI): Reduced by 78%
Pinnacle Financial (PNFP): Reduced by 60%
Regions Financial (RF): Reduced by 59%
Encore Cap (ECPG): Reduced by 47.5%
Ocwen Financial (OCN): Reduced by 41%
Fifth Third Bancorp (FITB): Reduced by 39%
Alisource Portfolios (ASPS): Reduced by 36.5%
Zions Bancorp (ZION): Reduced by 30.7%
Removed Positions (Sold out completely):
Legg Mason (LM)
Portfolio Recovery (PRAA)
MBIA (MBI)
Highbury Financial (HBRFW)
Top 15 Holdings by percentage of assets reported on 13F filing
- Wintrust Financial (WTFC): 17.4%
- Synovus Financial (SNV): 16.9%
- Primus Guaranty (PRS): 9.0%
- Boston Private (BPFH): 8.0%
- Nara Bancorp (NARA): 6.5%
- Taylor Cap Group (TAYC): 6.2%
- Zions Bancorp (ZION): 4.7%
- Encore Cap Group (ECPG): 4.6%
- Tree (TREE): 4.5%
- Cobiz Financial (COBZ): 3.7%
- Ocwen Financial (OCN): 3.3%
- Compu Credit (CCRT): 3.0%
- Regions Financial (RF): 3.0%
- Highbury Financial (HBRF): 2.8%
- Fifth Third Bancorp (FITB): 2.8%
So, given Brown's focus on financial stocks you already knew where his portfolio was headed. It's obvious from above that Second Curve has a few highly concentrated positions in Wintrust Financial, Synovus Financial, and Primus Guaranty. Of those large stakes, Brown added heavily to his WTFC and SNV positions in the fourth quarter. Other sizable position adjustments include boosting their Taylor Capital holdings by 80% and quadrupling their position in Cobiz Financial. In terms of bank stocks they reduced their holdings in, we highlight that they sold almost half of their Encore Capital stake and a third of their Zions Bancorp stake, as those two were previously big holdings for them.
Maybe the most notable thing about Second Curve's portfolio is that they have sizable long positions in Synovus and Zions, two banks that have been heavily shorted by hedge funds in the past. These regional banks have been part of the 'long moneycenter banks, short regionals' trade that has been omnipresent in hedge fund land. Brown has taken the other side of the trade and seems to like these stocks. If you're looking for particular bank stocks to do some due diligence on, Second Curve's portfolio is an intriguing list.
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 $196.8 million this quarter compared to $205.9 million 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: covered 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.
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.
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)
ASML (ASML)
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
- Apple (AAPL): 17.35%
- Creditcorp (BAP): 14.48%
- Google (GOOG): 9.16%
- iShares Emerging Markets (EEM): 7.18%
- Vimpelcomm (VIP): 5.82%
- CBS (CBS): 5.06%
- Morgan Stanley (MS): 3.48%
- Accenture (ACN): 3.29%
- Silver Wheaton (SLW): 3.17%
- Transocean (RIG): 3.14%
- Cemex (CX): 3.05%
- iShares Taiwan (EWT): 2.52%
- Telecom Argentina (TEO): 2.21%
- Core Labs (CLB): 2.12%
- 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.
Hedge Funds Favor Growth & High Quality Stocks: Trend Monitor Report
Bank of America Merrill Lynch is out with their weekly summary of hedge fund exposure levels so we thought we'd take a look. They note that hedge funds in general were buying the Nasdaq and oil. Also, we see that some hedge funds began to cover short positions in the Euro. There has been a big deal made lately about hedge funds "ganging up" on the euro. So, it appears that some funds have covered now after the currency had been heavily shorted over a two-week period.
Let's now take a look at their findings regarding market exposure levels. In the past, we had pointed out how long/short equity hedge funds had reduced their exposure to below historical levels. There was a multi-week period where hedge funds were largely de-risking and it appears that trend has reversed. They have slowly started adding back exposure and are around the 34-35% net long level (approaching the historical average of 35-40%).
BofA also outlined how hedge funds are proceeding in their specific strategies. Turning to market neutral funds, they find that these funds are favoring growth names and still have positive inflationary expectations. While their market exposure has fallen, it still remains above the average levels. Long/short equity hedge funds, on the other hand, continue to increase market exposure and have growth & high quality tilts. This is largely what we've seen out of hedgies lately as they see more compelling opportunities in 'high quality' stocks. In fact, the vast majority of the most important stocks for hedge funds fit this description.
Embedded below is Bank of America Merrill Lynch's hedge fund trend monitor report in its entirety:
You can directly download a .pdf here.
In the end, this data largely draws the same conclusions we've seen in recent weeks: hedgies love growth names and are partial to high quality stocks. We've seen this exact sentiment long echoed in our hedge fund portfolio tracking series. Some of the most prominent managers have sizable stakes in strong bluechip type companies like Microsoft (MSFT), Pfizer (PFE), Wells Fargo (WFC), etc. And, on the growth front, many funds favor stocks like Apple (AAPL), DirecTV (DTV), Mastercard (MA), & Monsanto (MON). These findings fall largely in line with the stocks listed on Goldman Sachs' VIP list as well.
For more research from BofA, we've previously posted up their research from the beginning of the year as they recommended to overweight equities and underweight bonds.
Tuesday, March 9, 2010
Last Chance For The Value Investing Congress Discount
A friendly reminder that this is your last chance to receive the discount to the Value Investing Congress we've secured. Market Folly readers can receive the final discount with code P10MF8. Take advantage of it while you can because it expires on March 16th.
The conference takes place on May 4th & 5th 2010 in Pasadena, California at the Langham, Huntington Hotel & Spa. Notable speakers include Eric Sprott, Bruce Berkowitz, Mohnish Pabrai, Whitney Tilson, Paul Sonkin, Guy Spier and many more fund managers. At the event you'll receive actionable investment ideas that will more than pay for your cost of admission. And not to mention, it will be a great opportunity to network with many other great investors.
The Value Investing Congress is already 75% full and again please note that this final discount expires at midnight on March 16th. After that, you will be paying $1,300 more to attend the conference. Click here to receive your discount with code P10MF8 before it expires next week!
Ricky Sandler's Hedge Fund Eminence Capital Boosts Bet On Financials: 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 Ricky Sandler's hedge fund Eminence Capital. Prior to Eminence, Sandler started his career as a research analyst for Mark Asset Management and then went on to start Fusion Partners at the age of 25 with Wayne Cooperman. As their investment styles started to differ, Sandler went on to start his new hedge fund. Sandler employs a 'quality value' approach to running his portfolio, spending equal time on both the long and short sides of his portfolio. In the past, he has said they employ gross leverage and are typically around 120% long and 70% short. Sandler attended the University of Wisconsin and holds a CFA designation. You can find a more in-depth look at Sandler and his investment process at the bottom of the article.
The positions listed below were Eminence'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
Becton Dickinson (BDX)
Accenture (ACN)
Carnival (CCL)
Baxter (BAX)
Northrop Grumman (NOC)
Fidelity National Information (FIS)
Henry Schein (HSIC)
Burger King (BKC)
Autodesk (ADSK)
Burlington Northern Santa Fe (BNI)
Talecris (TLCR)
Raytheon (RTN)
Walgreen (WAG)
Chipotle (CMG)
Increased Positions
Hasbro (HAS): Increased position by 1,342%
Goldman Sachs (GS): Increased by 349%
Lowes (LOW): Increased by 161.3%
Equifax (EFX): Increased by 107.4%
US Bancorp (USB): Increased by 105.6%
Qualcomm (QCOM): Increased by 98.5%
JPMorgan Chase (JPM): Increased by 96.9%
Thermo Fisher Scientific (TMO): Increased by 59.2%
Lockheed Martin (LMT): Increased by 57.4%
Ebay (EBAY): Increased by 38.7%
Abbott Laboratories (ABT): Increased by 29%
Walmart (WMT): Increased by 27.9%
Fiserv (FISV): Increased by 26.3%
Mastercard (MA): Increased by 19.4%
Apple (AAPL): Increased by 16.8%
Reduced Positions
Cognizant Technology (CTSH): Reduced position by 61.8%
Cisco Systems (CSCO): Reduced by 28%
Google (GOOG): Reduced by 24.6%
Removed Positions (Sold out completely):
Monsanto (MON)
Cintas (CTAS)
Abercrombie & Fitch (ANF)
Morgan Stanley (MS)
Top 15 Holdings by percentage of assets reported on 13F filing
- Oracle (ORCL): 5.63%
- Abbott Laboratories (ABT): 4.92%
- Apple (AAPL): 4.24%
- Lockheed Martin (LMT): 4.21%
- Thermo Fisher Scientific (TMO): 3.46%
- Walmart (WMT): 3.33%
- US Bancorp (USB): 3.15%
- Fiserv (FISV): 3.15%
- JPMorgan Chase (JPM): 3.11%
- Goldman Sachs (GS): 2.95%
- Equifax (EFX): 2.74%
- Becton Dickinson (BDX): 2.72%
- Qualcomm (QCOM): 2.71%
- ccenture (ACN): 2.70%
- Carnival (CCL): 2.61%
Ricky Sandler's hedge fund increased their long US equity exposure in dramatic fashion in the fourth quarter as assets reported via 13F filing were $5.2 billion, way up from the previous $3.1 billion. And obviously you can see that with all the increased and new positions listed above. Some of their more notable additions were massive increases in their positions in financials via US Bancorp, JPMorgan Chase, and Goldman Sachs. Just earlier this morning we saw that hedge fund Valinor Management added heavily to their GS stake, and Sandler's Eminence has as well.
In addition to financials, Eminence added to Hasbro, Qualcomm, Thermo Fisher Scientific, and Lockheed Martin. While their portfolio shows hints of the most popular hedge fund holdings with AAPL, WMT, & QCOM, they also have some interesting picks mixed in as well. We haven't seen many funds with positions in Equifax, Oracle or Lockheed Martin, but Sandler's hedge fund owns all three.
They also added a bevy of stocks as brand new positions and their new stakes in BDX, ACN, CCL and BAX are all pretty sizable as well, all in the top ten holdings. In terms of positions they sold completely out of, we see yet another hedge fund has dumped Monsanto. Overall, Eminence increased financials and healthcare exposure and reduced technology 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 $5.2 billion this quarter compared to $3.1 billion last quarter, a whopping 66% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.
For more on Ricky Sandler and Eminence's investing style, we've attached this old copy of Value Investor Insight:
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, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Philip Falcone's Harbinger Capital Partners, Roberto Mignone's Bridger Management, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management, and Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Bill Ackman's Pershing Square Capital Management, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, Matt Iorio's White Elm Capital, and David Gallo's Valinor Management. Check back daily for our new updates.
David Gallo's Valinor Management Adds Heavily to Goldman Sachs, Iconix Positions: 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 David Gallo's Valinor Management. Gallo founded Valinor after previously working at Roberto Mignone's Bridger Management. He received his MBA from Harvard Business School and the hedge fund is named after lands often inhabited by immortal souls from the books of J.R.R. Tolkien. We just started covering Valinor's portfolio, and in the past have detailed their recent position adjustments.
The positions listed below were Valinor'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
Check Point Software (CHKP)
Education Management (EDMC)
Cardinal Health (CAH)
Amedisys (AMED) Puts
PHH (PHH)
Bank of America preferreds (BAC-S)
Schweitzer mauduit (SWM)
Graphic Packaging (GPK)
Lear (LEA)
Boston Scientific (BSX)
Increased Positions
Goldman Sachs (GS): Increased by 457.4%
Gymboree (GYMB): Increased by 304.3%
Iconix (ICON): Increased by 132.7%
Popular (BPOP): Increased by 82.4%
Qualcomm (QCOM): Increased by 78.6%
Regions Financial (RF): Increased by 72.3%
Bank of America (BAC): Increased by 68.2%
Assurant (AIZ)): Increased by 44.8%
Dr. Pepper Snapple Group (DPS): Increased by 42.3%
Morgan Stanley (MS): Increased by 38.2%
Yahoo (YHOO): Increased by 33.8%
LM Ericsson (ERIC): Increased by 28.7%
Jarden (JAH): Increased by 19.4%
Covanta (CVA): Increased by 19.1%
Reduced Positions
DSW (DSW): Reduced position by 33.6%
Monsanto (MON): Reduced position by 21.5%
Removed Positions (Sold out completely):
People United Financial (PBCT)
Allegheny Energy (AYE)
International Speedway (ISCA)
Ecolab (ECL)
Hertz Global (HTZ)
Exterran (EXH)
Royal Caribbean (RCL)
Allergan (AGN)
United Community Banks (UCBI)
Eclipsys (ECLP)
MSC Software (MSCS)
YRC Worldwide (YRCW)
Top 15 Holdings by percentage of assets reported on 13F filing
- Wyndham Worldwide (WYN): 4.29%
- American Water Works (AWK): 3.18%
- LM Ericsson Telephone (ERIC): 3.15%
- Popular (BPOP): 3.10%
- Goldman Sachs (GS): 3.06%
- Covanta (CVA): 3.06%
- Assurant (AIZ): 3.04%
- Transdigm Group (TDG): 2.97%
- Jarden (JAH): 2.96%
- Iconix (ICON): 2.92%
- Qualcomm (QCOM): 2.92%
- Dr. Pepper Snapple (DPS): 2.92%
- Yahoo (YHOO): 2.91%
- Regions Financial (RF): 2.78%
- Monsanto (MON): 2.49%
Wyndham Worldwide is their largest holding and this is certainly the first time we've seen a hotel at the very top of a hedgie's portfolio. In fact, Valinor's portfolio as a whole doesn't resemble many of the other hedge funds we've looked at as it seems they take the road less traveled. Some examples of this would be positions in Yahoo, Regions Financial, and American Water Works. However, Valinor does join the plethora of other hedge funds betting on Transdigm Group (TDG).
Of the positions they added the most to, Goldman Sachs takes the cake as they boosted their position by over 450%. Other large additions include Popular (BPOP) and Iconix Brand (ICON). There weren't many reductions in their portfolio at all, especially when you consider their reported assets rose 28% on a quarter over quarter basis. Overall, Valinor increased their long US equity portfolio via consumer goods and financials exposure and they reduced services 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 $1.2 billion this quarter compared to $956 million last quarter, almost a 28% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.
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, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Philip Falcone's Harbinger Capital Partners, Roberto Mignone's Bridger Management, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management, and Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Bill Ackman's Pershing Square Capital Management, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, and Matt Iorio's White Elm Capital. Check back daily for our new updates.
