Friday, September 3, 2010

Carlson Capital Starts New Activist Position in Hot Topic (HOTT)

Clint Carlson's hedge fund firm Carlson Capital just filed a 13D with the SEC regarding shares of Hot Topic (HOTT). Due to portfolio activity on August 23rd, 2010, Carlson has disclosed a 3.96% ownership stake in HOTT with 1,764,800 shares. This is a brand new position as they did not show ownership back on June 30th in their last portfolio disclosure.

This stake cost them $8,858,729 as the hedge fund purchased shares in the $4.80 to $5.45 range. Their filing becomes interesting when you read in the fine print that Carlson has entered into a "group" agreement with Becker Drapkin Management for the purpose of this investment. Collectively between both parties, they own 9.042% of Hot Topic, or 4,030,749 shares. Both Carlson and Becker Drapkin operate in Dallas, Texas.

Carlson has filed a 13D signifying activist intent in their investment. The filing states that the hedge fund believes the company is undervalued and plans to engage with HOTT regarding "the assets, business, strategy, capitalization, financial condition and/or operations." Carlson manages six hedge funds with over $4 billion in assets under management (AUM). They primarily pursue risk arbitrage, relative value arbitrage (long/short equity pairs), and credit arbitrage. This is the first time the firm has appeared on Market Folly and we'll continue to cover their movements in the future.

Taken from Google Finance, Hot Topic is "is a mall and Web-based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. It sells a selection of music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22. At Torrid, the Company sells apparel, lingerie, shoes and accessories for plus-size females principally between the ages of 15 and 29."

For other recent hedge fund maneuvers, head to our coverage of the latest SEC filings.

David Einhorn Reduces F&C Asset Management Position (FCAM)

David Einhorn's hedge fund Greenlight Capital have just reduced their holdings in Foreign & Colonial Asset Management (FCAM). We originally covered when Greenlight initiated this position back in December of 2009 where they held 16,450,119 shares. After their recent sales, they now own only 2,201,293 shares of FCAM. This marks an 86.6% reduction in their position size, selling 14,248,826 shares. While they haven't completely exited the position, it somewhat looks like they're headed that way. Einhorn's sizable reduction is even more intriguing when you consider that a large activist, Sherborne Investors, has taken a large stake in FCAM.

Greenlight was required to file with the UK regulatory body because their position has now receded below a 3% ownership stake in the company. Hedge funds and institutional managers are required to disclose their position when they either go above or below that 3% threshold in the UK. To view the rest of Einhorn's positions (as well as a ton of other hedge fund portfolios), head to our brand new in-depth newsletter: hedge fund wisdom by market folly.

Taken from Google Finance, F&C Asset Management plc (F&C) is "principally engaged in the business of asset management. F&C is an active international investor but with a client focus on the United Kingdom and Continental Europe. As of December 31, 2008, the Company had £98.6 billion of assets under management."

Hedge Fund Axial Capital Acquires More QLT Inc (QLTI)

Hedge fund Axial Capital Management seems to have an insatiable appetite for shares of QLT Inc (QLTI) at current levels. Eliav Assouline and Marc Andersen's hedge fund firm have made the following acquisitions according to multiple SEC Form 4 filings:

August 26th: 50,000 shares @ $5.67
August 27th: 50,000 shares @ $5.78
August 30th: 7,400 shares @ $5.70
August 31st: 60,506 shares @ $5.75
September 1st: 5,318 shares @ $5.75

After all of their recent purchases, Axial Capital now owns a collective 6,615,036 shares of QLTI. We've detailed Axial's numerous buys in the past, and it seems they are always scooping up shares around the $5.7x range. Assouline and Andersen's hedge fund was seeded by Julian Robertson back in 2005 and offices a the same address as Tiger Management. Axial was named one of Institutional Investor's 'Hedge Fund Rising Stars' recently as well. We'll have to see when they eventually stop purchasing shares.

Taken from Google Finance, QLT is "a biotechnology company. The Company is engaged in the development and commercialization of therapies for the eye. The Company focuses on its commercial product, Visudyne, for the treatment of wet age-related macular degeneration (wet AMD), and developing its ophthalmic product candidates."

What We're Reading ~ 9/3/10

Investing in preferred stocks [Benzinga]

On Microsoft's (MSFT) softness [Abnormal Returns]

Tudor returns to its roots [Absolute Return+Alpha]

We are honored to be included in the top 50 stock market blogs [OnlineMBA]

MarketFolly was recently interviewed by TheKirkReport [Interview]

The best investment advice you'll ever get [Blog Maverick]

Exclusive interview with Jon Moulton [DistressedDebtInvesting]

Dividend stocks for a tough investing environment [Pragmatic Capitalism]

On Benjamin Graham's core principles [ValuePlays]

Microsoft's stock price attracts flock of value investors [Rational Walk]

Fairfax financial bets deflation [Street Capitalist]

Looking at the investment case for BP (BP) [FT Alphaville]

More on the for-profit education space [CNBC]

Case study on Eagle Rock Energy Partners (EROC) [Kerrisdale Capital]

Enhancing value for the equity, a case study of Energy Partners (EPL) [Kerrisdale Capital]

Free issues from the famous Grants Interest Rate Observer [GRO]

Apple's (AAPL) stock actually looks cheap [Peridot Capitalist]

Profitable lessons from Michael Price [ValueHuntr]

Furiex Pharma (FURX): A spinoff trading at net cash [Oozing Alpha]

How companies can exploit the spread between bonds and stocks [Money Game]

Why private equity is chasing the next satellite dream [Forbes]

The decline of the P/E ratio [WSJ]

Latest letter from Francis Chou [Chou Funds]

Jeff Gundlach begins selling treasuries [zero hedge]

Hedge funds are bigger, safer but duller [Economist]

Thursday, September 2, 2010

Hedge Fund Harbinger Capital Adds to Crosstex Energy (XTXI)

Per a 13G filed with the SEC, Philip Falcone's hedge fund Harbinger Capital Partners has updated its stake in Crosstex Energy (XTXI). Due to portfolio activity on August 17th, 2010, Harbinger has disclosed an 8.1% ownership stake in XTXI with 3,804,916 shares. This is a massive increase in their position because back on June 30th, they only owned 213,600 shares. As such, Harbinger has boosted its stake by over 1,681% in the past two months, adding 3,591,316 more shares.

Taken from Google Finance, Crosstex Energy is "engaged, through its subsidiary, Crosstex Energy, L.P. (Partnership), the gathering, transmission, processing and marketing of natural gas and natural gas liquids (NGL). The Partnership operates two segments: Midstream and Treating. Its combined midstream assets consist of over 3,300 miles of natural gas gathering and transmission pipelines, nine natural gas processing plants and three fractionators located in two primary regions: north Texas and Louisiana."

You can view all of our previous coverage of Harbinger's portfolio here.

John Paulson Files Activist 13D on NovaGold Resources (NG)

As we've detailed in the past, John Paulson's hedge fund has owned NovaGold Resources (NG). But per a recent SEC filing, we get an update on his stake. Paulson & Co has disclosed a 9.1% ownership stake in NovaGold Resources (NG) with 20,181,818 shares. The filing was made due to activity on August 31st, 2010 and keep in mind that a 13D signifies activist intent. In the past, this had merely been a passive stake for Paulson.

His hedge fund originally acquired NG shares in an offering at $5.50 per share. However, his most recent position size is the same as it was back on June 30th, so he has not added to the stake recently. This NG position is undoubtedly part of Paulson's strategy to take equity stakes in gold miners via his new gold fund. Other recent gold related portfolio activity from Paulson includes a reduction in his Centamin Egypt position. We'll have to monitor as to what kind of activist agenda Paulson potentially has with his NovaGold stake, seeing how there were no intentions outlined in the filing itself.

Taken from Google Finance, Novagold Resources is "a precious metals company, which is engaged in the exploration and development of mineral properties in Alaska, the United States and British Columbia, Canada. The Company conducts its operations through wholly owned subsidiaries, partnerships and joint ventures. The Company is primarily focused on gold properties, some of which also have copper, silver and zinc resources."

Make sure to check out all of Paulson & Co's recent portfolio changes in our new quarterly newsletter: Hedge Fund Wisdom by Market Folly.

Paolo Pellegrini & PSQR Capital's Last Insight Before Returning Capital

As many of you are already aware, Paolo Pellegrini's hedge fund PSQR Capital is returning outside investor capital. He is winding down because he believes that "substantial additional work" will be needed to profit from his global macro strategy. The investment vehicle will continue to manage Pellegrini's own money in the mean time. Through the end of July, PSQR was down over 10% for the year.

Pellegrini of course gained his claim to fame by calling the housing bubble while working with John Paulson at hedge fund firm Paulson & Co. Their collective story is chronicled in Gregory Zuckerman's enticing book, The Greatest Trade Ever. Afterward, Pellegrini struck out on his own, founding PSQR Capital. While he's currently closing to outside investors, he may re-open at some point in the future.

Given PSQR's abrupt closure to outside investors, we thought it would be prudent to examine Pellegrini's most recent thoughts via his last market commentary and analysis. Since we may not see his thoughts for an extended period of time, global macro enthusiasts are encouraged to soak this all in. Pellegrini's second quarter letter focuses on his brief notion that "equities will retrace further". On the policy side of things, he feels the government is digging the hole deeper and that using sovereign debt instead of private debt is the wrong move.

In terms of scanning the economy, Pellegrini highlights that workers' pay still lags and since consumer spending makes up such a large part of our economy, we're in for continued rough waters. This ties into his past concern that so few people are saving money these days. He goes on to write, "While some feel that the economy has stabilized and can only go up - and all the faster because it is rebounding from such a low level - the reality is that the exceptional amount of government borrowing has failed to add up to final demand sufficient to spur economic activity to anything approaching the cyclical upswings typical of post-war recoveries."

Embedded below is PSQR Capital's second quarter letter to (now former) investors:

You can download a .pdf copy here.

You can view the rest of Pellegrini's past commentary here. To see what other prominent hedge funds have been buying and selling, check out our brand new quarterly newsletter: hedge fund wisdom.

Tuesday, August 31, 2010

Introducing Hedge Fund Wisdom By Market Folly: A Quarterly Newsletter

Today we're very pleased to announce the first issue of Hedge Fund Wisdom, a brand new quarterly newsletter by Market Folly in collaboration with other professional hedge fund analysts/investors. Want to know what top managers have been buying and selling? Our in-depth 75 page issue is your complete guide.

Hedge Fund Wisdom by Market Folly includes the following:

- Complete portfolio updates on 20 of the most prominent hedge funds including what they bought, what they sold, and by how much

- Commentary and analysis of each fund's moves

- Consensus stocks bought & sold among the hedge funds covered

- In-depth analysis of 3 stocks hedge funds were buying in the second quarter. We take you inside the head of a hedge fund manager to examine the investment thesis, upside & downside, potential catalysts, market valuation, contrarian viewpoint, and more.

Managers covered in this inaugural issue of Hedge Fund Wisdom by Market Folly include:

Seth Klarman (Baupost Group)
Warren Buffett (Berkshire Hathaway)
David Einhorn (Greenlight Capital)
Stephen Mandel (Lone Pine Capital)
David Tepper (Appaloosa Management)
Bill Ackman (Pershing Square Capital Management)
Bruce Berkowitz (Fairholme Capital)
Chase Coleman (Tiger Global Management)
John Burbank (Passport Capital)
Leon Cooperman (Omega Advisors)
Dan Loeb (Third Point)
John Griffin (Blue Ridge Capital)
John Paulson (Paulson & Co)
Lee Ainslie (Maverick Capital)
Julian Robertson (Tiger Management)
George Soros (Soros Fund Management)
Roberto Mignone (Bridger Management)
Chris Shumway (Shumway Capital Partners)
Richard Perry (Perry Capital)
Larry Robbins (Glenview Capital)

To celebrate our launch, take advantage of our special introductory offer! Choose one of the following options to pay via PayPal or credit card:

HFW Member ~ Annual (most popular choice! lock in additional savings) @ $199/year

HFW Member - Quarterly (rates going up soon, limited time offer) @ $60/quarter

*To pay by credit card, look for the "No PayPal account? Pay using your credit or debit card" note at the bottom of the PayPal page you will be redirected to.

Also, you can enter your email address below to receive a free sample:

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