Friday, February 25, 2011

Lone Pine Capital Buys, Sells Ashmore

Stephen Mandel's Lone Pine Capital recently purchased more of one security and sold some of another. First, due to a 13G filed with the SEC regarding portfolio activity on February 14th, Lone Pine now shows a 5.8% ownership stake in (CTRP). The hedge fund currently owns 7,893,233 American depositary shares.

This is a 83% increase in their position size as they owned 4,312,650 shares at the end of 2010. The company's shares recently sold-off after its first quarter revenue missed estimates. Lone Pine most likely utilized this drop to add to their position.

Second, the hedge fund firm also sold some Ashmore (LON:ASHM). After owning 6.21% of the company in January of 2009, Lone Pine has slowly reduced its stake to now under 3% of shares outstanding. Ashmore recently agreed to buy 63% of Emerging Markets Management for around $96 million in cash and $29.9 million in new stock.

Since this now falls below the regulatory threshold for reporting, we won't know if Mandel's hedge fund firm sold completely out of the name, or if they still hold a small position. One thing is clear though, they've steadily reduced exposure over the past two years. To see the rest of their positions, we recently updated Lone Pine's portfolio in the new issue of our newsletter.

Per Google Finance is "a travel service provider for hotel accommodations, airline tickets and packaged tours in China. It also sells packaged tours that include transportation and accommodations, as well as guided tours in some instances. The Company aggregates information on hotels and flights and enable its customers to make hotel and flight bookings."

"Ashmore Group plc (Ashmore) is engaged in providing investment management services. The Company is a fund manager across six core investment themes, such as external debt, local currency, special situations, equity, corporate high yield and multi-strategy."

Whitney Tilson Goes Activist on LECG Corp (XPRT)

Whitney Tilson and Glenn Tongue's hedge fund, T2 Partners, has filed an activist 13D with the SEC regarding shares of LECG Corporation (XPRT). Due to portfolio activity on February 14th, T2 now shows a 5.24% ownership stake in the company with 2,001,148 shares.

This is a substantial increase in their position as they only owned 614,816 shares at the end of 2010. All told, this marks a 225% boost in their stake. Their activist filing contains the normal boilerplate that they believe the company is undervalued and represent an attractive investment opportunity. The hedge fund currently does not have a present plan or proposal.

A press release from LECG could explain why T2 has become active:

"On February 7, 2011, the Company announced that it had received a non-binding indication of interest from an undisclosed company with a view toward entering into a definitive acquisition transaction for the entire firm. The Company is disclosing today that FTI Consulting, Inc. provided the non-binding indication of interest. The negotiations with this party are now focused on the possible acquisition of several specific practice groups within LECG and not an acquisition of the entire firm. LECG believes this alternative, whether with the identified party or one or more other parties, may be the most viable path for the Company to raise capital to address current liquidity concerns."

In other T2 Partners portfolio activity, we detailed how Tilson covered his Netflix (NFLX) short position. Some investors have always opined that a short-seller capitulation could possibly mark a top in a stock. While NFLX shares are down ever since Tilson covered, the market as a whole has seen weakness as of late. You can read why T2 cut short exposure as well.

Per Google Finance, LECG "provides services through its experts and professional staff whose skills and qualifications provide the Company the opportunity to address unstructured business and public policy problems. LECG delivers independent expert testimony and original authoritative studies in both adversarial and non-adversarial environments."

Kyle Bass Buys Seahawk Drilling (HAWK)

Kyle Bass' hedge fund firm Hayman Capital has disclosed an 8.4% ownership stake in Seahawk Drilling (HAWK) with 1,000,000 shares. Hayman filed this information via a 13G with the SEC per portfolio activity on February 15th, 2011. This is a new equity position as they did not own equity as of December 31st, 2010.

We've covered Bass on the site before, but if you're unfamiliar with him, he has gained notoriety over the years due to his prediction of not one, but two 'bubbles.' First, he predicted and profited from the subprime crisis. Second, he was one of the first to call for sovereign defaults and that thesis has gained steam over the past year. For our prior coverage on this hedge fund manager, check out Bass' presentation at the Value Investing Congress.

His position in HAWK is intriguing because the company just agreed to an asset purchase with Hercules Offshore (HERO). HERO is buying 20 jackup rigs and related assets from HAWK for $25 million and 22.3 million shares of HERO. This cash infusion will be used to pay HAWK's debtor-in-possession (DIP) loan which the company secured in connection with its bankruptcy. You can head to the Special Situations Monitor for an analytical look at the situation here.

Also, Hercules Offshore is up big today after receiving an upgrade from Credit Suisse. They highlight that HERO is just around the corner from covenant relief.

Per Google Finance, Seahawk Drilling "operates a jackup rig business that provides contract drilling services to the oil and natural gas exploration and production industry in the Gulf of Mexico."

Ken Griffin's Citadel to Sell E*Trade Financial (ETFC)

Ken Griffin's hedge fund Citadel Investment Group plans to sell a ton of its shares in E*Trade Financial (ETFC), a company it had aided in the past. As the company's largest shareholder, Citadel is planning to sell over 27 million shares.

Keep in mind that even after Citadel divests its almost 9% equity stake, they still own a sizable chunk of convertible debt. If converted, this would ratchet their stake to almost 30% ownership. But this is not the first time Griffin's firm has sold shares, as Citadel sold ETFC back in late 2009 when shares traded around $1.20 per share. Since then, the shares have undergone a 1:10 reverse split and shares trade around $15.85 today.

The company underwent turbulent times during the financial crisis as it strayed from its stock brokerage roots and into the mortgage market right at the peak. After slowly but surely returning solely to its core business, the company still sits in limbo as shares are only up around 2% over the past year.

Hedge fund legend Leon Cooperman and his Omega Advisors are long E*Trade and see it as a potential takeover target. (To see the rest of Omega Advisors' portfolio, head to our new issue of Hedge Fund Wisdom). This seems to be the common investment thesis on ETFC as many investors argue it could be a prime asset to bigger houses like TD Ameritrade (AMTD) or Charles Schwab (SCHW). This thesis has not played out over the past few years (obviously). Perhaps activity in this regard would be spurred once interest rates start to rise, as this would help improve brokerage profitability.

Per Google Finance, E*Trade Financial is "a financial services company, which provides online brokerage and related products and services to the individual retail investors, under the brand E*TRADE Financial. It also provides investor-focused banking products, sweep deposits and savings products, to retail investors."

What We're Reading ~ 2/25/2011

What top hedge funds have been buying [Hedge Fund Wisdom]

Free e-book on Texas HoldEm Investing [Texas Hold Em Investing]

Latest letter from Greenstone Value Opportunity Fund [Distressed Debt Investing]

Citigroup (C) offers attractive risk-reward [Greg Speicher]

Video: How Berkowitz got comfortable with Citi [Morningstar]

Summary of a recent talk with SAC Capital's Steven Cohen [Dealbook]

How Stevie Cohen changed my life [James Altucher]

Hedge funds buying more municipal bonds [CNBC]

Sum of the parts valuation of Yahoo (YHOO) [Minyanville]

Buffett says pricing power more important than good management [Bloomberg]

Passport Capital sees oil prices holding up [WSJ]

Bank loan funds drawing interest [InvestmentNews]

For more great links, scroll through this linkfest [AbnormalReturns]

Tuesday, February 22, 2011

New Issue of Our Hedge Fund Wisdom Newsletter Just Released

The new issue of's Hedge Fund Wisdom newsletter has just been released! Created in collaboration with other hedge fund analysts, our 90 page issue is your complete guide to what top hedge funds have been buying, selling and why. It is published four times a year (February, May, August, November). Included in this issue:

- Portfolios of 25 top hedge funds (2 new funds added this quarter)
- Expert commentary on each fund's new portfolio
- Equity analysis of 5 stocks hedge funds bought in the quarter
- Consensus buy/sell list

Hedge fund manager portfolios in this issue 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)
Andreas Halvorsen (Viking Global)
Carl Icahn (Icahn Capital)
Thomas Steyer (Farallon Capital)

... and we added 2 new funds this quarter: Barry Rosenstein's JANA Partners & Alan Fournier's Pennant Capital.

Take advantage of our introductory pricing! Click the 'subscribe' button and then on the next page look for the "Pay using your credit or debit card" link at the bottom. You can also pay via PayPal. If you would like to pay via check, please email us:

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