Friday, April 9, 2010

No One Would Listen: A True Financial Thriller By Harry Markopolos (Book Review)

If you want the 'straight from the horses mouth' exclusive story regarding Bernie Madoff's $65 billion Ponzi scheme, you'd have to go to Bernie himself. However, there is still a next best alternative that is an insider account of its own. Harry Markopolos' book No One Would Listen: A True Financial Thriller details how he and his team discovered what Madoff was up to long before Madoff's ultimate demise. The problem (obviously enough) was that nobody listened.

The crazy part about this whole scenario is that Markopolos and company had very critical evidence as early as 2000. His "Fox Hounds" team sniffed out the rat and yet the SEC seemed to completely miss the warning signs raised. Undoubtedly the best part of the book is the viewpoint from which it is told. Markopolos saw both Madoff's scam and the SEC's failure, so this chronicle is as direct as it gets.

No One Would Listen's foreword includes a segment written by David Einhorn of hedge fund Greenlight Capital (someone we cover frequently here on Market Folly). He writes that, "Harry Markopolos is a hero... The silver lining in the Madoff collapse, if there could be such a thing, is that for at least one moment in time, the SEC has been exposed. And for his role in making that happen, Harry Markopolos deserves all our thanks."

Markopolos is the definition of a whistleblower and we can only hope others like him exude comparable sleuthing skills within the regulatory bodies. His book helps expose just how vulnerable investors are when things go wrong as the regulatory bodies seemingly have done a poor job of shielding them.

While the storyline itself is telegraphed, there's something about the book that keeps pulling you in. Despite the fact that the book covers a timeline of almost a decade, it flows flawlessly and feels as if you are living it in real-time, unraveling the case alongside Markopolos. You know exactly how the story ends, yet you still want to read every detail. And No One Would Listen's timeline all starts with the intriguing chronicle of how Markopolos deciphered that Madoff's returns were unfeasible in the first place.

While this admittedly is not the best way to describe it, think of the book almost as a movie filled with flashbacks where you re-live past events through the protagonist's eyes. Roughly speaking, half of the book focuses on the recent fall of Madoff while the other half centers on Markopolos' rising conquest and the appalling ignorance on the part of the SEC.

The writing style is generally impressive, however there are a few cliché-laden segments. In the end, you'll finish No One Would Listen impressed with Markopolos' conviction & perseverance and absolutely flabbergasted with the SEC's (lack of) actions. It's definitely a thrilling tale.


For more insightful books on markets and investing, be sure to check out our other recent book reviews including Scott Patterson's The Quants and Jon Markman's annotated edition of Reminiscences of a Stock Operator. Additionally, we've assembled quite the compendium of recommended reading lists.

Jim Rogers Still Bullish on Commodities

Wait for it. Jim Rogers is... *gasp* bullish on commodities still! Now, who would have ever guessed that?! On a serious note, he still is adamant that 1999 was the start of the commodity bull market and he is bullish on the prospects. What's interesting is that he fully admits it will be a bubble at some point, but he's not worried about that right now as that's a 'way's off.' This interview comes after we saw Rogers recently start some short positions as he wagers the market is overdue for a correction.

Of course he also thinks gold is going up and he expects it to be at $2,000 at least by the end of this decade, if not higher. In the past we've posted up plenty of hedge fund research on gold, all of which we recommend checking out. He recently sat down with Bloomberg to discuss his most recent thoughts on April 7th. If you come to the site, below you'll find an embedded video of his quick interview:

So, he'll continue to ride the longer term trend that he feels is in-tact here. Rogers isn't a big believer in market timing and he'll gladly wait out the trend over the long-term. We check in on Rogers from time to time just to see what he's saying, but he appears in the media quite often, re-iterating a lot of his views anyways. Keep in mind that Rogers and George Soros previously managed the highly successful Quantum Fund and have since gone their separate ways. Head over to see Rogers' recent rationale for starting short positions as well as our coverage of George Soros' hedge fund portfolio.

PIMCO's Bill Gross Favors Quality Credit Spread Over Duration Extension (April 2010 Commentary)

Today we wanted to highlight the latest investment outlook from PIMCO's bond vigilante himself, Bill Gross. In his past March commentary, Gross focused on corporate versus sovereign bonds. His April commentary is entitled 'Rocking-Horse Winner' and it centers on American capitalism and how it is driven by printing, lending and borrowing money in order to make more money. Gross immediately notes that we face an environment with lower growth due to headwinds in deleveraging, deglobalization, and reregulation. Gross of course recently landed on Forbes' billionaire list, joining many prestigious investment managers.

The crux of Gross' message this time around comes later in his insight where he writes,

"The reason is complicated, but at its core very simple. As a November IMF staff position note aptly pointed out, high fiscal deficits and higher outstanding debt lead to higher real interest rates and ultimately higher inflation, both trends which are bond market unfriendly. In the U.S. in addition to the 10% of GDP deficits and a growing stock of outstanding debt, an investor must be concerned with future unfunded entitlement commitments which portfolio managers almost always neglect, viewing them as so far off in the future that they don’t matter. Yet should it concern an investor in 30-year Treasuries that the Congressional Budget Office estimates that the present value of unfunded future social insurance expenditures (Social Security and Medicare primarily) was $46 trillion as of 2009, a sum four times its current outstanding debt? Of course it should, and that may be a primary reason why 30-year bonds yield 4.6% whereas 2-year debt with the same guarantee yields less than 1%. The trend promises to get worse, not better."

Elaborating further on his thoughts, it's clear that Gross favors quality credit spread over duration. He argues that investment strategies should start to position themselves on the front-end of various yield curves that are subject to successful reflation. He specifically highlights the US and Brazil here. He also recommends positioning on the long end of curves that can survive debt deflation (namely Germany and most of the solid European nations).

Lastly, Bill Gross notes that, "Spreads in appropriate sovereign and corporate credits are a better bet as long as global contagion is contained. If not, a rush to the safety of Treasury Bills lies ahead." You can directly download Bill Gross' entire April 2010 investment outlook via .pdf here.

Interesting thoughts as always from PIMCO's bond vigilante and we'll continue to check in with him each month. You can also check out his March commentary as well as our compilation of investment insight from various gurus.

What We're Reading ~ 4/9/10

The inflation versus deflation debate [Humble Student of the Markets]

An interview with Richard Eckert, former CFO of Lahde Capital [Finance Trends Matter]

CBOE monthly equity put to call ratio nears all-time low [VIX and More]

Is the municipal market next to blow up? [Rick Bookstaber, formerly of Bridgewater]

Lots of congratulations are in order so here's the round-up:

- Congrats to Greenbackd who launched their maiden fund [Greenbackd]

- turns 1 [DDI]

- And also congrats to ValueHuntr who celebrated their site's 1 year anniversary [VH]

- Also, YCharts just got funded so head over there and type in a ticker to see their great resource in action [YCharts]

PIMCO is long the CAD, AUD, CNY & Short the EUR, GBP & JPY: Paul McCulley discusses [Zero Hedge]

Can Hugh Hendry teach us to love hedge funds? [The Independent]

A look back at Alfred Winslow Jones' hedge fund [Greenbackd]

Thoughts on Maiden Lane III [Aleph Blog]

A recent interview with hedge fund legend Leon Cooperman of Omega Advisors [Fortune]

I saw the crisis coming, why didn't the Fed? [Michael Burry of Scion Capital in the NYT]

And here's Alan Greenspan's response to Burry [ABC News]

Time to rebalance, but not your portfolio [The Economist]

How to attract institutional investors [AllAboutAlpha]

Thursday, April 8, 2010

H. Kevin Byun's Denali Investors: First Quarter Investor Letter

We've been awaiting various first quarter 2010 letters from hedge funds and various other managers as some of them are slowly starting to trickle in. So today, we wanted to share with you H. Kevin Byun's latest letter from Denali Investors. Since inception, Denali is up 62.5% compared to -20.1% for the S&P 500. For March, Denali was up 3.0%, lagging the S&P. You can check out how their performance stacks up against other managers in our round-up of 2010 hedge fund performance numbers. And as always, you can check in on our coverage of hedge fund letters here.

Right off the bat in his letter, Byun makes a very good point that by and large, at least some of this never-ending rally in stocks can be attributed to performance chasing as many funds struggle to cope with their highwater marks and try to recoup fees where they can. As he writes, "And so career risk, business risk, and behavioral finance, rather than the best interests of their investors, comes to the fore." He hopes that many fund managers aren't simply wishing for a full recovery of assets, but that very well may be the case here.

Turning to Denali's portfolio, we see that they are eyeing opportunities in spin-offs and corporate liquidations. Byun made a fantastic point that Warren Buffett was able to outperform even in market declines due to his special situation investments. As such, Byun likes to have a few positions that fit this mold and have solid risk/reward profiles.

Embedded below is Denali Investors first quarter 2010 letter to investors:

You can download a .pdf here.

More than anything, this letter is a good look into a methodical framework for a value oriented investment strategy. While he doesn't specifically name fund positions, we still found the letter intriguing. If you have access to any hedge fund investor letters, we'd love to hear from you as we're always looking to share resources anonymously as your privacy is our top concern. Send us a message.

And in the mean time, you can sort through previous hedge fund letters we've posted.

Michael Burry & Scion Capital's Primer on Credit Default Swaps & the Subprime Mortgage Short

A big hat tip to Greenbackd for originally bringing this to our attention. Below you will find a very interesting primer on credit default swaps and the subprime mortgage short from Scion Capital's hedge fund manager Michael Burry. Burry of course was recently featured in Michael Lewis' latest book, The Big Short (which we highly recommend reading) for his notable early short position in subprime mortgages.

Michael Burry penned his primer back on November 7th, 2006 and it's almost comical now to think about how he was running a value fund focused on equities and then all of a sudden has to explain his short subprime trade and complex derivatives to his certainly surprised and confused investors.

Embedded below is Michael Burry's primer on subprime mortgages and you can directly download the .pdf here. It is a truly fascinating read now looking back and here's the document embedded via two formats to make sure everyone can read it at work, etc:

And then here is the second iteration of the exact same streamed document so hopefully one of the two is visible for you on the site:

Needless to say, what better way to learn about subprime mortgages than from the man who was one of the first (if not THE first) to short them. To read Michael Burry & Scion Capital's fully story, definitely pick up Michael Lewis' new book, The Big Short. Additionally, you can see Burry & Lewis from their appearance on 60 Minutes. Lastly, if you're looking to learn from Burry's origins and evolution as an investor, StreetCapitalist has an excellent post up here.

Hedge Fund Glenrock Net Short Financials: Portfolio Update

Hedge fund Glenrock Global Partners recently issued their March 2010 performance update and we received a tiny glance into some of their portfolio positions. For March, their QP fund was down 0.7%. This brought their year-to-date total to -0.3%. You can compare these numbers to the slew of prominent hedge fund performance figures we posted up yesterday. While Glenrock has struggled this year, they'd be quick to point to their 11.6% compound annual return since 2000 versus the S&P 500 which compounded -0.4% over the same time frame.

First, some background for those unfamiliar. Glenrock Global Partners is a long/short equity fund, similar to many we cover in our hedge fund portfolio tracking series. Managed by Michael Katz and Mark Budris, they definitely have a global focus as you'll notice when we share some of their recent positions below. What's impressive about Glenrock is that they've had no down years, 10.3% volatility, and -0.4 beta since 2000. They focus on bottom-up fundamental stockpicking and also use macro factors to help guide them.

So, let's dive into their portfolio specifics. Their longs have had solid performance, but that has been more than canceled out by their short positions running against them. This is a common theme we've seen across hedge fund land as of late. Their five biggest individual losing positions were as follows:

- stub position in a French carmaker
- short positions in a US REIT
- a US national bank
- a Swiss investment bank
- a Japanese insurer

Of course hedgies always like to keep us on our toes, so let the guessing games begin. It's been no secret that many managers have tried to short REITs time and time again only to see their efforts go to waste. We've heard that names like SL Green (SLG), Macerich (MAC), Kimco (KIM), and CBL (CBL) were previously in the mix, but who knows if that's the case nowadays. Not to mention, we've previously taken a look at how high operating leverage is a common theme in hedge fund short positions. If anything, you can use these portfolio disclosures to get a better sense as to how their positioned by sector and exposure level.

Turning to Glenrock's five biggest gainers in March, they list:

- a US defense contractor
- a stub position trade in a German engineering and construction firm
- long positions in a Japanese consumer-electronics manufacturer
- Japanese office-machine company
- a Brazilian credit-card company

Immediately the most intriguing thing to us was their mention of the Brazilian credit card play. While this is speculation on our part, it's pretty likely that this position is either in Cielo, formerly VisaNet (trading under RDCD3 in Brazil) or in Redecard (trading under CIEL3 in Brazil and CIOXY on the pink sheets in the US). These two companies are essentially international versions/arms of Visa and Mastercard, respectively.

The thesis here has largely been hinged on an expansion of credit extension to Brazilian consumers and a secular shift from paying with legal tender to paying with plastic cards. This is a trend we've largely seen in prominent hedge fund US equity portfolios via plain-jane Mastercard (MA) and Visa (V) equity stakes. Since the SEC filings only cover US equity stakes, we can't see their stakes in foreign payment processors. However, it wouldn't be a stretch if some hedgies have acquired positions in these foreign credit card plays like Glenrock has. This was just the first time we'd seen it directly referenced.

Let's turn our focus now to Glenrock's portfolio exposure levels. The most notable thing here is that they are net short the North American region (-5.9% exposure). Additionally, their largest net long by region is in Asia with 8.7% net exposure. Their next highest exposure is in Europe at 3.0% net long. In terms of market cap exposure, they are net short large cap names to the tune of -5.8% and are net long midcaps at 8.4% exposure.

Lastly, let's shift to industry weightings. Glenrock is definitely net short financials at -10.9%, net short industrials at -4.4% and net short REITs at -3.3%. On the other side, they are net long information technology at 9.1%, healthcare at 7.1% and energy at 6.2%. So, that definitely gives you a clue as to how long/short hedge funds are possibly positioned on a geographical and sector level.

To see some other recent hedge fund portfolio & exposure figures, we just yesterday covered Dan Loeb's Third Point update. And for our constant coverage of the latest SEC filings, head to our posts on hedge fund tracking.

Wednesday, April 7, 2010

Third Point Still Net Long Distressed Debt & MBS: Latest Exposure & Positions

Dan Loeb's hedge fund recently sent out their performance update for their Offshore fund and in it we saw their latest exposure levels and top positions. Earlier today we learned that Third Point was up 15.58% for the year in our batch of first quarter 2010 hedge fund performance numbers. They were up 8.1% in March alone and had a solid month. Their $1.74 billion Offshore fund's cumulative performance is an astonishing 859% with annual standard deviation of 13.8% a correlation to the S&P of 0.39 and a Sharpe Ratio of 1.30, rounding out an impressive set of statistics. To learn to be a great investor like that, we point to Dan Loeb's recommended reading list.

Let's next check in on their exposure levels. In equities, they are net long consumer names at 12.2%, financials at 13.1%, and healthcare at 8.2%. They are ever so slightly net short the market indices and energy. In credit, they are net long distressed at 31.3%, Performing at 13.5%, and mortgage backed securities - MBS at 19.2%. The positive performance as of late can be attributed to their financial plays in equities and their distressed credit plays. Other exposure levels include a 6.5% net exposure to risk arbitrage and a 7.4% exposure to privates. In terms of geographic exposure, Loeb's hedge fund is net long America by 107%, net long Europe by 20% and neutral in Asia.

Third Point's top positions are as follows and keep in mind that they own multiple securities in all of these companies so it's not just simply an equity position or a debt position. Unfortunately, there is no further breakdown as to specifics:

- Chrysler
- Delphi Corp
- CIT Group
- PHH Corp
- Dana Holding Corp

So, they still own many of the names we saw referenced in their investor letter. Loeb's hedge fund also made note of some of their top winners and losers. Many of their losing stakes were un-named short positions which is understandable given the fact that the market doesn't seem to want to go down. They also lost on their Gartmore Group Ltd and Ford (multiple securities) positions. Their top winners include: PHH Corp, Delphi, Chrysler, SemCrude LP (multiple securities) and Liberty Media Corp Interactive. In terms of new portfolio activity, we saw they recently updated two positions and then reduced a position.

That wraps it up. To learn to invest like this fund manager, we defer you to Dan Loeb's recommended reading list. We'll continue to check in on Third Point each month to provide you updates. In the mean time, for more information you can head to Third Point's commentary, as well as our look at their equity portfolio.

Hedge Fund Performance Numbers: First Quarter 2010

Today we wanted to check in on how some of the prominent hedge funds have fared thus far in 2010. We've previously posted up some 2009 hedge fund performances and now it's time for the next update. Turning to this year, some hedgies just keep on chugging while others have surprisingly stumbled. Two days ago we noted how global macro funds have lagged, so let's see who else has been having trouble. Thanks to the anonymous investors who have sent us updates, HSBC, ZeroHedge, and CreditSuisse for the data.

Q1 2010 Performance

Third Point LLC: Dan Loeb's offshore fund was up 8.1% in March (and +15.58% for the year as of the end of March). Their Ultra fund was up 9.1% for the month (16.5% for the year), and their Partners fund was up 9% for the month (16.9% year-to-date). We recently took note that they were one of the best performing funds in 2010 thus far and we also posted up Third Point's commentary. Later this morning we'll post up an in-depth look at their portfolio & exposure levels as well.

Och-Ziff Capital Management: Their OZ Master Fund was up 1.14% in March and up 2.65% for the year. Their Asia Master Fund was up 4.01% in March and up 5.23% for the year. Their Global Special Investments fund was up 1.05% in March as well. Daniel Och and the Ziff brothers all appeared on the latest Forbes' billionaire list.

Greenlight Capital: David Einhorn's fund was down 1.33% for the year as of the end of March. We recently pondered whether Einhorn's Vodafone (VOD) thesis would would pan out or not and looked at Greenlight's investor letter.

Harbinger Capital Partners: Philip Falcone's hedge fund was up 1.77% for the year at the end of March. They also recently announced plans for a 4G wireless network.

Renaissance Technologies: Jim Simons' quant firm RenTec saw their RIEF (Class B) fund up 4.82% for the year as of the end of March. Simons is profiled in Scott Patterson's new book, The Quants.

Paulson & Co: John Paulson's various hedge funds have had mixed performance. His Advantage Plus fund was -1.18% for the year as of February, his Advantage fund -0.93%, his International fund up 0.47%, his Credit fund up 3.35%, and his Enhanced fund up 0.99%. In the past, we've also taken an in-depth look at John Paulson's new gold fund.

Viking Global: Andreas Halvorsen's hedge fund appears to be struggling as Viking was -0.1% for the first quarter. We've previously covered Viking Global's portfolio as well.

Shumway Capital Partners: Chris Shumway's fund was up 3.62% for the month of March and sat up 2.20% for the year at that time. For those interested, here's our coverage of Shumway's portfolio.

Pershing Square Capital Management: Bill Ackman's hedge fund was up 3.7% for the month of March and up 5.62% for the year. In the recent past we took a look at Pershing's economic exposure to General Growth Properties (GGP), one of their big-time winning positions.

Maverick Capital: Lee Ainslie's hedge fund was -0.30% for March and up 4.08% for the year at that time. We've previously taken a look at Maverick's portfolio.

Millennium Partners: Israel Englander's fund was up 0.98% in March and found themselves up 3.58% year to date for 2010. Israel recently appeared on Forbes' billionaire list.

Omega Advisors: Legendary hedgie Leon Cooperman saw his Overseas fund up 3.12% in March and up 3.26% for the year at that time. Fortune recently had a nice interview with Cooperman here.

Zweig-Dimenna: Down 2.18% for the year after gaining 0.81% in the month of March.

Eminence Capital: Ricky Sandler's hedge fund was up 1.70% gross for the first quarter. We recently took a look at Eminence's portfolio for those interested.

Everest Capital: Marko Dimitrijevic's Asia fund was -7.11% at the end of March and his China Opportunity fund was -6.69%. We covered Dimitrijevic's thoughts at a hedge fund panel and also covered a profile of Everest.

Altima: Their global special situations fund was -7.19% as of the end of March.

Bluecrest: Up 0.62% for March and up 5.10% for 2010.

Lansdowne: Their UK Equity fund was up 8.28% through the end of March. We've only covered Lansdowne's portfolio once in the past.

Bluemountain: Up 1.46% in March and 4.64% for the year at that time.

Owl Creek: Jeff Altman's overseas fund was up 7.98% through March. We previously posted up some of Altman's insight at a hedge fund panel and you can also read Owl Creek's latest letter here.

Tudor Investment Corp: Paul Tudor Jones' Global BVI Fund: -0.55% as of the middle of March. Their Tensor fund was -1.96% as well. We've covered Tudor's investor letter in the past.

Caxton Associates: Bruce Kovner's Alpha fund was up 6.34% for the year as of March and his Global fund was up 2.65% at that time.

Moore Capital Management: Louis Bacon's flagship fund: +1.58% YTD. Emerging Markets Fund -5.88% for the year as of the middle of March.

Clarium Capital: Peter Thiel's fund was -5.4% for the year after losing 6.1% in March. You can check out our coverage of Clarium here.

Brevan Howard Flagship fund: -0.53% YTD.

Perry Partners: This fund was up 2.70% for the month of February and found themselves up 6.99% for the year at that time. We previously posted up Perry's annual letter.

Traxis Partners: Barton Biggs' hedge fund was down 1.31% for the year at the end of March.

King Street: Up 1.18% in March and up 2.67% for the year at that time.

York Capital: Up 4.52% for the year after a boost of 3.6% in the month of March.

Capula Investment Management: Up 2.03% for the year at the end of March. They primarily run fixed-income arbitrage strategies and Goldman Sachs took a stake in this firm back in 2008. GLC Diversified Fund: -5.49% through March.

Odey European: They were up 2.52% for March and up 3.08% for the year at that time. We recently posted up Odey's investor letter for those interested.

Man AHL Diversified Fund: Up 5.40% in March and up 2.23% for the year at that time.

Toscafund: Up 0.97% for the year as of the end of March.

That wraps up the recent performance numbers thus far for 2010. Be sure to also check out the list of the world's largest hedge funds as well as our compilation of 2009 performance numbers.

Hedge Funds Aggressively Sell Japanese Yen: Trend Report

Bank of America Merrill Lynch is out with their latest iteration of the hedge fund monitor report where they check in on trends and exposure levels. Last time around, we saw that hedge funds were buying equities & re-shorting the euro. This time, we see that hedgies have been buying oil and copper, increasing their bullish bets there. Additionally, they've been selling the Japanese Yen (aggressively) and have added to their curve steepener trades.

Based on CFTC data, here's what various hedge funds were up to in various asset classes:

Interest Rates: As mentioned above, they continued to play a steep curve by adding to their shorts in the 10 year treasury and significantly adding to shorts in the 30 year treasury, all while buying 2 year treasuries. We've covered in the past how hedge fund Prologue Capital likes curve steepeners and how you can replicate legendary fund manager Julian Robertson's constant maturity swap play.

Equities: It should come as no surprise that hedgies continued to press their crowded longs. After all, this is the market rally that just won't end. What's interesting here is the dynamic between the various markets. They continued to buy the NDX futures (Nasdaq) but marginally added to SPX shorts (S&P 500).

Energy: Crowded longs in crude oil became that much more crowded as large specs bought more. Additionally, we see that they were modestly covering natural gas shorts.

Forex: Hedge funds were recently back to pressing crowded shorts in the Euro last week. Maybe more interesting is the fact that they've sold the Japanese Yen and have gone net short. BofA notes that the appetite for risk is clearly rising as the Yen is on the verge of a technical breakdown.

Turning next to various strategy exposure levels, we thought we'd check in with what market neutral and long/short equity hedge funds have been up to. We see that market neutral funds still have above average exposure and are net long. They are losing their appetite for low quality names and are overall favoring growth and large cap plays. Long/short equity funds, on the other hand, are now well below their typical net long exposure. While they still favor value and large cap stocks, it's clear that they are taking profits and protecting from any possible impending downside risk.

Embedded below is the latest edition of Bank of America Merrill Lynch's hedge fund monitor report:

You can directly download a .pdf here.

For more BofA hedge fund research, head to their list of most concentrated stock positions: the hedge fund generals list. And as always, venture over to our hedge fund portfolio tracking for the latest movements in the most prominent long/short equity portfolios.

Falcone's Harbinger Acquiring Spectrum Brands (SPB) Shares

We have some transactions to update you on regarding shares of Spectrum Brands (SPB), Philip Falcone's hedge fund Harbinger Capital Partners, as well as hedge fund D.E. Shaw & Co's Laminar Portfolios. Firstly, we see that Harbinger filed an amended 13D with the SEC and now shows a 39.68% ownership stake in SPB with 12,153,819 shares. The filing was made due to activity on March 30th and we also have some color on recent transactions. We initially covered when Harbinger went activist on Spectrum back in 2009 as the company was reorganizing from Chapter 11 bankruptcy. Shares of Spectrum recently switched from ticker symbol SPEB in the over-the-counter (OTC) market and began trading under ticker SPB on the NYSE.

In the fine print of the recent filing, we see that Falcone's hedge fund has entered into a 10b5-1 purchase instruction with Credit Suisse Securities, "pursuant to which the parties thereto established a trading plan to effect purchases of up to 100,000 shares per week." These purchases can be made Monday through Thursday of each week at a price not to exceed $31.50. This plan will exist until either August 6th or the mailing of a definitive proxy statement to stockholders in connection with the merger, whichever date comes first.

Secondly, we see that Harbinger has entered an agreement with fellow hedge fund D.E. Shaw & Co (Laminar Portfolios) where Harbinger acquired Shaw's 89,300 shares at a price of $30 per share. This transaction was reflected in Form 4's filed with the SEC by both D.E. Shaw Laminar and Harbinger. In addition to this, Falcone's hedge fund updates us on the amount of SPB shares they purchased on March 31st and April 1st. Here is a breakdown of their transactions and keep in mind that the purchases executed at $30 are the D.E. Shaw transactions:

(click to enlarge)

So, Harbinger is slowly but surely scooping up the shares of Spectrum Brands (SPB). Overall, Falcone's hedge fund firm has been quite busy as of late. They of course recently announced plans for a 4G wireless network and completed the SkyTerra merger. Additionally, we took note that they've been selling some New York Times (NYT) shares as well. They've definitely been active in the SEC filing department, that's for sure. In terms of other activity out of fellow hedge fund D.E. Shaw, we saw they recently updated a position and we covered their research on leverage as well.

Taken from Yahoo Finance, Spectrum Brands "together with its subsidiaries, operates as a consumer products company worldwide. The company offers consumer batteries, including alkaline and zinc carbon batteries, rechargeable batteries and chargers."

To see what other equity positions Falcone owns, you can view Harbinger's portfolio here.

Carl Icahn Continues Acquiring Take Two Interactive (TTWO) Shares

Yet again, Carl Icahn has bought more shares of Take Two Interactive (TTWO). In a Form 4 filed with the SEC, we see that Icahn's various investment vehicles purchased 168,700 shares of TTWO at $9.98 per share. The transaction took place on April 1st, 2010 and he now collectively owns 11,789,226 shares through his mix of investment funds and partnerships. This comes after we recently covered how Icahn has been adding TTWO shares repeatedly as he looks to shake-up things at the company to increase shareholder value.

The legendary rabblerouser and corporate activist has been quite active in the investment arena lately as he recently dumped his Blockbuster (BBI) shares and has been seeking to acquire Lions Gate Entertainment (LGF). You can read some of his investment theses and insight in Icahn's investor letter if you're interested in learning more. In the mean time, we'll continue to watch if he can institute change at TTWO and will monitor the SEC filings for the next time he purchases shares. Because if his rate of buying is any indication, it doesn't look like he's done yet.

Taken from Google Finance, Take Two Interactive is "a global publisher, developer and distributor of interactive entertainment software, hardware and accessories. The Company’s publishing business consists of Rockstar Games, 2K Games, 2K Sports and 2K Play publishing labels. The Company develops, markets and publishes software titles for gaming and entertainment hardware platforms."

For more from hedge fund Icahn Partners, check out Carl Icahn's portfolio.

Tuesday, April 6, 2010

Value Investing Congress Almost Sold Out: Last Chance

We just received word from the Value Investing Congress that the event on May 4th & 5th in Pasadena is 90% sold out. Register for one of the remaining seats and you can save $300 off the regular price of admission. Use discount code P10MF11 to receive the discount and sign-up here. At the event you'll receive actionable investment ideas from some of the top investment managers out there and be able to network with a ton of great industry professionals. Here's the list of speakers:

• Bruce Berkowitz, Fairholme Capital Management
• Eric Sprott, Sprott Asset Management
• Mohnish Pabrai, Pabrai Investment Funds
• Paul Sonkin, The Hummingbird Value Funds
• Thomas Russo, Gardner, Russo & Gardner
• David Nierenberg, The D3 Family Funds
• Lloyd Khaner, Khaner Capital
• J. Carlo Cannell, Cannell Capital
• Patrick Degorce, Thélème Partners
• Whitney Tilson and Glenn Tongue, T2 Partners
• Guy Spier, Aquamarine Fund
• Amitabh Singhi, Surefin Investments
• Richard Vogel, Alatus SA
• Lei Zhang, Hillhouse Capital Management

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Hedge Fund Lone Pine Capital Discloses New Stake in Longtop Financial Technologies (LFT)

Due to activity on March 25th, 2010 Stephen Mandel's hedge fund Lone Pine Capital filed a 13G with the SEC regarding shares of Longtop Financial Technologies (LFT). In the filing, we see that they now have a 5.5% ownership stake in LFT with 3,093,594 shares (via the ADR shares traded on the NYSE). This is a brand new position for them as they previously did not own shares when we looked at Lone Pine's portfolio.

It seems Mandel's hedge fund has been busy as of late because just yesterday we noted that Lone Pine started a new Live Nation Entertainment (LYV) stake. Yet, their newly initiated LFT position is intriguing because we've seen fellow Tiger Cub hedge funds active in this stock. Lee Ainslie's Maverick Capital started a new LFT position in the fourth quarter. At the same time, Chase Coleman's Tiger Global has been slowly selling shares of LFT and we've taken note of this several times. More often than not, you'll see Tiger Cub hedge funds share similar positions in their portfolios, so this is one of the somewhat rare occurrences when there is a divergence of opinion. That said, Coleman's hedge fund could merely have been reducing their position size as they still own LFT as far as we're aware. We'll have to see if any other funds begin adding shares.

For 2009, Lone Pine's main fund Lone Cypress was up 17.7% as noted in our hedge fund performance numbers post. Additionally, their Lone Kauri was up 12.1%, Lone Cascade up 44.4%, and Lone Dragon Pine up 72.9%. For other investment ideas from Mandel's hedge fund, we previously saw that they are bullish on education plays as well.

Taken from Google Finance, Longtop Financial Technologies is "ogether with its subsidiaries, provides a range of software solutions and services to the financial institutions in the People’s Republic of China (PRC), including the development, licensing and support of software solutions, the provision of maintenance, support, and other services, and system integration services related to the procurement and sale of third party hardware and software."

Monday, April 5, 2010

Hedge Fund T2 Partners: Long & Short Positions (March Letter)

Whitney Tilson and Glenn Tongue's hedge fund T2 Partners was up 4.6% for March and is up 10.1% year-to-date for 2010. In their brief March investor update letter posted below, we get a glimpse as to how some of their portfolio positions are faring.

If you're looking for long ideas, T2 is long General Growth Properties (GGP), Iridium (IRDM), Borders (BGP), Winn Dixie (WINN), Resource America (REXI), and Yahoo (YHOO). In the past, we've also posted up T2's presentations on their investment ideas.

In terms of shorts, Tilson's hedge fund has been short Lululemon (LULU), DineEquity (DIN), MBIA (MBIA), and Palm (PALM). Unfortunately, the only short that hasn't ripped higher with the market is Palm. In the past, we'd also gotten a look at some of T2's other short positions. Again we see evidence that hedge funds are struggling to find many profitable short positions as the market continues its overextended run.

If you're looking for more analysis, head to T2's annual letter but embedded below is T2 Partners' March letter to investors which is pretty brief:

You can directly download a .pdf here.

You can hear investment insight from Tilson at the upcoming Value Investing Congress where plenty of hedge fund managers will present investment ideas and we highly recommend attending. In terms of other recent coverage, Tilson was also on television where he talked about his positions and the market.

Global Macro Hedge Funds Lagging (Tudor, Moore, Brevan Howard, Clarium)

We've recently seen some performance numbers from some of the top dogs in the global macro hedge fund game. And, it's not what you'd expect. After all, these funds typically have free reign and can trade in interest rates, currencies, futures and sovereign debt... areas ripe with opportunity given the ever-changing dynamic of global economies. Yet, some of the world's largest hedge funds seem to be struggling.

As the FT notes, Paul Tudor Jones' flagship hedge fund Global BVI at Tudor Investment Corp was down 0.55% for 2010 as of the middle of March. Also, fellow global macro titan Louis Bacon seems to be seeing mixed results. His Moore Capital Management flagship fund is up 1.58% for the year. You'll remember that Moore Capital was recently raided by the FSA for alleged insider trading by one of their traders for his personal account (not for trades made on behalf of the fund). However, Moore's emerging markets fund was down 5.88% as of the middle of March. This fund is run by famed trader Greg Coffey (formerly of GLG). For more on Bacon's hedge fund, we've posted up some recent portfolio activity out of Moore, as well as some of their UK positions.

Even more shocking perhaps is that the downward spiral at Peter Thiel's hedge fund Clarium Capital has continued. ZeroHedge noted that Clarium lost 6.1% in the first three weeks of March and was now down 5.4% for the year. This all comes as US equity markets are up over 6.4% for 2010. We're not quite sure what's going on over there but after a fantastic start to the fund, the last few years have been quite rough on them, to put it politely. They were down 25% in 2009 according to our hedge fund performance numbers post. However, as of the recent performance data, they were still up 210% since inception.

In the past, we've posted up some of Clarium's research and have been impressed with the ideas and viewpoints expressed. However, it seems that they have had issues with market timing and converting those ideas into tradeable strategies. For more on this hedge fund, you can check out our Clarium coverage.

Additionally, we learn that Brevan Howard's flagship fund is down 0.53% year-to-date. As far as we're aware, it is Europe's largest fund at £13.3 billion. Keep in mind that many of these gentlemen of course graced the recently updated Forbes' billionaire list so they've certainly made plenty of money in the past. That said, their recent performance is not necessarily what you'd expect in an environment many have deemed as ripe with global macro opportunity.

Stephen Mandel's Lone Pine Starts New Position in Live Nation Entertainment (LYV)

Stephen Mandel's hedge fund Lone Pine Capital just filed a form 13G with the SEC regarding shares of Live Nation Entertainment (LYV) due to activity on March 22nd, 2010. In the filing, we learn that Lone Pine now has a 5.6% ownership stake in LYV with 9,585,320 shares. This is a brand new position for them as they did not previously own shares when we looked at their Lone Pine's quarterly portfolio update which shows positions as of December 31st, 2009. So, they've started their new stake somewhere in the past three months.

For 2009, Lone Pine's main fund Lone Cypress was up 17.7% as noted in our hedge fund performance numbers post. Additionally, their Lone Kauri was up 12.1%, Lone Cascade up 44.4%, and Lone Dragon Pine up 72.9%. In terms of other portfolio activity, we learned that Mandel's hedge fund is bullish on education plays. Additionally, Lone Pine apparently is focused on investments in outsourcing, smartphones, emerging market consumer-driven companies, national and global financial service leaders and internet-enabled business disrupters. Conversely, they've been shorting companies that have been hurt by technological obsolescence and companies in industries with global overcapacity. For more of our coverage on this hedge fund, head to our post on Lone Pine's UK positions as well as their US equity portfolio.

Taken from Google Finance, Live Nation Entertainment is "is a producer of live music concerts worldwide. Live Nation owns, operates, and has booking rights for, and has an equity interest in 142 venues, including House of Blues music venues and locations, such as The Fillmore in San Francisco, the Hollywood Palladium, the Heineken Music Hall in Amsterdam and the O2 Dublin. The Company operates in three business segments: North American Music, International Music and Ticketing."

For more of our daily coverage of investment managers, head to our hedge fund portfolio tracking series.

Ken Griffin's Citadel Investment Group Boosts Leap Wireless (LEAP) Stake

In a recent filing with the SEC, Ken Griffin's hedge fund firm Citadel Investment Group has updated their stake in Leap Wireless (LEAP). In a 13G filed due to activity on March 23rd, 2010, we see that Citadel now shows a 5.5% ownership stake in LEAP with 4,246,177 shares. This is an increase in their position as they previously held 1.6 million shares back on December 31st, 2009. This means they've increased their position size by over 160% in the past three months.

This increase is intriguing mainly because we've seen a lot of hedge fund interest in wireless plays as of late. Philip Falcone's hedge fund Harbinger Capital recently announced plans for a 4G wireless network and in the fourth quarter we noticed they added a large position in Sprint (S). Additionally, Greenlight Capital's David Einhorn has a potential catalyst play with his position in Vodafone (VOD). So, we'll have to see what Ken Griffin's firm has in store for this Leap Wireless position. Many analysts and investors have long pondered whether or not LEAP is a takeover/merger target within the wireless provider space but obviously that has yet to materialize.

To learn more about Citadel, we recommend checking out Scott Patterson's new book The Quants as Ken Griffin is featured in it. We also recently noted that Ken Griffin landed on Forbes' billionaire list as well.

Taken from Google Finance, Leap Wireless is "is a wireless communications carrier that offers digital wireless services in the United States under the Cricket brand. Its Cricket service offerings provide customers with unlimited wireless services for a flat rate without requiring a fixed-term contract or a credit check."

Steven Cohen's SAC Capital Discloses InterMune (ITMN) Position

In a 13G filed with the SEC, Steven Cohen's hedge fund SAC Capital has disclosed an updated position in InterMune (ITMN). Due to activity on March 22nd, 2010, SAC Capital now shows an 8.2% ownership stake in ITMN with 4,465,400 shares. This is a new position for Cohen's hedge fund as they previously did not own it as of December 31st, 2009 in their last 13F filing. However, SAC has owned shares of ITMN in the past. So, it appears as if they are fond of the name again. After all, shares of ITMN are up huge (over 200%) in the month of March.

Please keep in mind though that Cohen's hedge fund is a trading oriented firm and as such moves in and out of positions much quicker than the other hedgies we cover on Market Folly. In terms of other recent portfolio activity, we also saw SAC boost their Psychiatric Solutions stake (PSYS). SAC Capital finished 2009 up over 28% as noted in our post on hedge fund 2009 performance numbers. Famed manager Stevie Cohen of course was recently featured in Forbes' billionaire list as well.

Taken from Google Finance, InterMune is "a biotech company focused on developing and commercializing therapies in pulmonology and hepatology. In November 2008, InterMune together with Roche and Pharmasset, Inc. (Pharmasset) announced the initiation of INFORM-1, a dual combination clinical trial investigating the combination of two oral antiviral molecules in the absence of interferon."

For those of you interested in more portfolio activity out of this hedge fund, head to our posts on SAC Capital.