What We're Reading ~ 10/22/15

10 poor investment theses [Irrelevant Investor]

The case against short selling [Long Short Trader]

The five "why's" in problem solving [Wallbuilder]

The danger of 1-year performance numbers [A Wealth of Common Sense]

Latest post from the Valeant (VRX) bear camp [Bronte Capital]

How bad will it get for American Express? [Bloomberg]

China is not collapsing [Project Syndicate]

Kingmakers of China's internet: Baidu, Alibaba and Tencent [WSJ]

A look at wireless tower stocks [Barrons]

Tribune Media shares at a 50% discount [Barrons]

Fossil Group (FOSL): a value stock with temporary problems? [Value & Opportunity]

Netflix is creating a cordless nightmare for traditional media [Institutional Investor]

Light beer gets in touch with serious side [WSJ]

Auto parts retailers' immunity to Amazon drives stock surge [Bloomberg]

Why investors don't fund dating [Andrew Chen]

Robots and us [MIT]

Corvex Capital's Presentation on Crown Castle (CCI)

At the Robin Hood Investors Conference the past few days, Keith Meister of Corvex Capital sat down with CNBC to talk about his positions.

He owns almost $1 billion worth of Crown Castle International (CCI), the wireless tower operator.  He says it's the best combination of real estate and telco.  He likes their fixed cashflow and that they benefit from the big

He says the problem with CCI is they need to payout cash to shareholders by ramping up a dividend and growing that dividend at 10% a year.

Meister also noted that he's a passive shareholder of Allergan (AGN) and likes being aligned with Bill Ackman's Pershing Square.  Simply put, he wants AGN to sell their company for the highest price possible.


Embedded below is the video of Meister's interview at Robin Hood:



As well as Meister's interview on Allergan:





Additionally, here's Corvex's presentations on CCI via embedded slideshows below:

Letter to CCI Shareholders:




CCI Presentation:




Robin Hood CCI Presentation:




You can download the .pdf's here.

Lone Pine Capital Starts SBA Communications Position

Steve Mandel's hedge fund firm Lone Pine Capital has disclosed a brand new position in SBA Communications (SBAC).  They filed a 13G with the SEC indicating they own 6.4% of the company with almost 8.2 million shares. The filing was required due to portfolio activity on January 8th.

While this is a new stake, they've had exposure to the wireless tower stock play via their position in Crown Castle International (CCI). 

Their new SBAC position, however, is much larger and it's a bit curious that they would all of a sudden initiate their position now.  The thesis and valuation has largely been unchanged.  

It's also worth highlighting though that SBAC has been a longstanding top position for hedge fund White Elm Capital.  White Elm was founded by Matthew Iorio and before launching his own fund, he worked at Lone Pine.

While the bull case on tower stocks has been a play on the proliferation of wireless data usage, the bear case seemingly hinges on a potential rising interest rate environment and potential consolidation in the wireless carriers.

Per Google Finance, SBA Communications is "an independent owner and operator of wireless communications towers. The Company’s principal operations are in the United States and its territories."

We recently detailed some of Lone Pine's other portfolio activity here.

Lone Pine Capital's Current Investment Themes

Today we're covering the current investment themes from Steve Mandel's hedge fund Lone Pine Capital.


*Update: excerpt removed per request by representatives of Lone Pine


In more recent portfolio activity, we've detailed how Lone Pine nearly doubled its SolarWinds (SWI) stake and has been buying the dip in VanceInfo Technologies (VIT).

Equity Risk Premium 'Exceptionally Large' & Investors Shun Stocks: Jeff Saut

It's been a while since we've checked in on what market strategist Jeff Saut has to say so let's examine his latest commentary. In his weekly investment strategy, Saut points out the high correlation in markets these days, as pair trades don't seem to be working. He also highlights somewhat of a contrarian signal in the fact that money flows out of equity mutual flows are quite gargantuan. Everyone favors bonds and 'safety' these days as retail investors haven't been this unwilling to talk about stocks since the fourth quarter of 1974. As evidenced in the chart below, investors have shunned stocks and the equity risk premium (ERP) has been exceptionally large.

(click to enlarge)

Given the increased fear and pessimism in equity markets over the past few weeks/months, Saut believes that many people are ignoring corporate profitability. He feels the S&P 500 will climb to around 1120 (current market levels) and then stall out/ pause before rallying even higher. Needless to say, this is the most bullish we've seen him in quite a while.

So, what stocks to buy? The Chief Investment Strategist at Raymond James feels that technology is the sector to be in. He likes Intel (INTC) here as the company has taken steps to gain exposure to the booming cellular market. Interestingly enough, Saut also likes smartphone plays American Tower (AMT) and Crown Castle (CCI). We actually featured an in-depth analysis of one of these companies in our brand new quarterly newsletter: hedge fund wisdom. Hedgies have definitely favored the wireless tower operators and we examined the investment thesis to take you inside the head of a hedge fund manager. Lastly, Saut also offers CA Technologies (CA) as a play.

In summary, Saut acknowledges that the economy is slowing but he thinks we avoid the dreaded 'double-dip'. Given the recent encouraging market action, Saut thinks we're headed above the early August highs of 1130 after the market pauses to catch its breath first. He would turn negative if the market found a way to break below its 50 day moving average at around 1085.

Embedded below is Jeff Saut's latest market commentary:



You can download a .pdf copy here.

For previous commentary from the market strategist, you can head to his piece on how he thinks the March 2009 lows will hold. For more theoretical and application based discussions, Saut outlined his risk management principles as well as the businessman's risk portfolio.

John Griffin's Blue Ridge Capital Bets Big on Google (GOOG): 13F Filing Q1 2010

(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 filings.)

Next up is John Griffin's hedge fund Blue Ridge Capital. Griffin attended the University of Virginia for undergrad and Stanford for his MBA. Prior to founding Blue Ridge, Griffin served as Julian Robertson's right-hand man at legendary hedge fund Tiger Management.

Blue Ridge invests in companies that dominate their industry and shorts those that have fundamental problems. They generally classify an investment as either catalyst driven or time arbitrage. They point out that there are times when markets will be mis-priced as investment time horizons compress more than normal. Blue Ridge looks to exploit this by taking advantage of situations where people 'stop thinking.' To learn to invest like John Griffin, check out hedge fund Blue Ridge's recommended reading list.

The positions listed below were Blue Ridge's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Apollo Group (APOL)

Banco Santander (BSBR)

Boston Scientific (BSX)

CIT Group (CIT)

Citrix Systems (CTXS)

General Growth Properties (GGP)

Google (GOOG)

Morgan Stanley (MS)

Nvr (NVR)


Increased Positions
Market Vectors Gold Miners (GDX): Increased position by 180.5%

TD Ameritrade (AMTD): Increased by 158.6%

Iberiabank (IBKC): Increased by 64.1%

Teva Pharmaceutical (TEVA): Increased by 28.8%

Mastercard (MA): Increased by 17%

Ares Capital (ARCC): Increased by 14%

JPMorgan Chase (JPM): Increased by 11.3%

Amazon (AMZN): Increased by 3.7%


Reduced Positions

iShares Silver Trust (SLV): Reduced by 41.2%

Millipore (MIL): Reduced by 35.4%

Discovery Communications (DISCK): Reduced by 25%

Discovery Communications (DISCA): Reduced by 25%

Green Mountain Coffee Roasters (GMCR): Reduced by 21.9%

Crown Castle International (CCI): Reduced by 8.72%

Positions They Sold Out of Completely
Berkshire Hathaway (BRK.A)

Charles Schwab (SCHW)

Redwood Trust (RWT)

Pfizer (PFE)

Petrohawk Energy (HK)

Equinix (EQIX)

First Niagara Financial Group (FNFG)

Washington Federal (WFSL)


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

1. JPMorgan Chase (JPM): 7.03%

2. Apple (AAPL): 5.34%

3. Amazon (AMZN): 4.83%

4. Google (GOOG): 4.45%

5. Crown Castle (CCI): 4.25%

6. McDonald's (MCD): 4.20%

7. MarketVectors Gold Miners (GDX): 3.74%

8. Thermo Fisher Scientific (TMO): 3.62%

9. Teva Pharmaceuticals (TEVA): 3.42%

10. Western Union (WU): 3.41%

11. CME Group (CME): 3.39%

12. Millipore (MIL): 3.37%

13. Express Scripts (ESRX): 3.19%

14. CIT Group (CIT): 3.16%

15. Microsoft (MSFT): 2.66%

John Griffin's Blue Ridge Capital has probably the most intriguing set of portfolio moves we've covered this far. Starting with his new positions we see he added numerous hedge fund favorites including Apollo Group (APOL), a stock owned by many fellow Tiger Cub hedge funds. Keep in mind that while it shows they also started a new stake in General Growth Properties (GGP), they could have possibly already owned shares because GGP previously traded on the pink sheets and in previous quarters was not a security required for disclosure by the SEC. General Growth of course is the emerging-from-bankruptcy REIT play that Bill Ackman, Bruce Berkowitz, and Whitney Tilson all have large stakes in. Thirdly, they started a new CIT position just as Seth Klarman was selling out of it. On the other hand though, David Einhorn added to his CIT stake in the first quarter as well. However, Einhorn and Griffin differ in their view on Boston Scientific as John Griffin was starting a brand new stake in that company just as Einhorn was exiting. It's very interesting to see so many prominent managers take different views on hotly traded stocks.

Blue Ridge also started a new position in Citrix (CTXS), a cloud computing play. As we've covered in the past, David Stemerman's hedge fund Conatus Capital is bullish on cloud computing as well. And staying with technology for a second, Griffin started a hefty new position in Google (GOOG). Market participants will be well aware that GOOG has been trading down for quite some time now and believe it or not, some managers are actually touting it as a 'value' play now. Clearly Griffin sees something there, but shares are now trading below any level he could have purchased at in the first quarter.

Some readers will take note of Griffin's increase in his gold miners exchange traded fund stake (GDX) given that gold has been in the headlines so much recently. Griffin also added to hedge fund favorite names Mastercard (MA) and Teva Pharmaceutical (TEVA). In terms of sector dispersion, Blue Ridge currently has its largest allocations within financials and technology.

On the selling side of Blue Ridge's portfolio, they notably exited Pfizer (PFE), Berkshire Hathaway (BRK.A), and Equinix (EQIX). PFE is owned by a lot of hedgies, BRK.A is owned by a lot of value players, and EQIX is owned by a lot of Tiger Cub hedge funds as well. So, it's interesting to see Griffin's divergence from the pack here on these names and we'll have to see if he revisits them in the future. Yet at the same time, Blue Ridge still owns some of the 'consensus' hedge fund holdings such as Apple (AAPL), JPMorgan Chase (JPM), and Express Scripts (ESRX). That wraps up the notable changes to their portfolio. Make sure to check out Blue Ridge's extensive reading list if you're looking to become a more successful investor.

Assets reported on the 13F filing were $6.1 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, and Mohnish Pabrai's Investment Fund. Be sure to check back daily for new hedge fund updates.

Thomas Steyer's Farallon Capital Focused On Risk Arbitrage: 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 Thomas Steyer's hedge fund Farallon Capital. Steyer founded Farallon in 1986 and today it is a multi-billion dollar hedge fund that invests in equities, private investments, debt, and real estate. Typically though, they're focused on risk arbitrage strategies and you'll find a lot of evidence of this in their portfolio below. In terms of other recent activity, we saw that Farallon disclosed their large position in FreightCar America (RAIL) and have been selling shares of Knology (KNOL).

The positions listed below were Farallon'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
Sun Microsystems (JAVA) ~ inactive
Affiliated Comp Services (ACS) ~ inactive
Home Depot (HD) ~ inactive
Wells Fargo (WFC)
XTO Energy (XTO)
Dollar General (DG)
Encore Acquisition (EAC)
Sherwin Williams (SHW)
Verisk Analytics (VRSK)
Covidien (COV)
Energy Partners (EPL) ~ this was a result of a debt to equity conversion
Expedia (EXPE) Puts
Delta Airlines (DAL)


Increased Positions
Charles Schwab (SCHW): Increased by 309%
Beacon Roofing (BECN): Increased by 167% ~ we also detailed this increase
Burlington Northern (BNI): Increased by 137% ~ now inactive after the Berkshire Hathaway purchase
Old Dominion (ODFL): Increased by 103%
BMC Software (BMC): Increased by 98%
China Housing & Land (CHLN): Increased by 88%
Crown Castle (CCI): Increased by 75.5%
Monsanto (MON): Increased by 62.5%
SBA Communications (SBAC): Increased by 44.8%
Oracle (ORCL): Increased by 43%
Jones Lang Lasalle (JLL): Increased by 33.5%
Express Scripts (ESRX): Increased by 30.8%


Reduced Positions
Visa (V): Reduced by 53.8%
MSCI (MXB): Reduced by 47%
Hurray Holdings (HRAY): Reduced by 43.5%
GeoEye (GEOY): Reduced by 33.2%
JB Hunt (JBHT): Reduced by 22.4%
Discovery Communications (DISCA): Reduced by 20.4%
Knology (KNOL): Reduced by 14.8% ~ we already knew of these sales


Removed Positions (Sold out completely):
Aetna (AET) Calls
Capitalsource (CSE)
Apollo Group (APOL)
iShares Russell 2000 (IWM) Puts
Focus Media (FMCN)
Mastercard (MA)
America Movil (AMX)
Rockwell Collins (COL)
Eastman Kodak Bonds
Priceline.com (PCLN)
Marvel Entertainment (MVL)
Google (GOOG)


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

1. Sun Microsystems (JAVA): 12.97%
   
2. Burlington Northern Santa Fe (BNI): 7.63%
   
3. Affiliated Comp Services (ACS): 6.99%
   
4. Visa (V): 3.88%
   
5. Home Depot (HD): 3.69%
   
6. Wells Fargo (WFC): 3.59%
   
7. XTO Energy (XTO): 3.50%
   
8. Oracle (ORCL): 3.41%
   
9. Jones Lang Lasalle (JLL): 3.08%
   
10. Crown Castle (CCI): 3.06%
    
11. Dollar General (DG): 2.85%
    
12. Charles Schwab (SCHW): 2.80%
    
13. BMC Software (BMC): 2.77%
    
14. Monsanto (MON): 2.40%
    
15. Yingli Green Energy Bonds: 2.40%
    

As you can see, a lot of Farallon's holdings were arbitrage related. Their top three holdings are no longer active stocks as they've all completed their merger processes: Sun Micro, Burlington Northern, and Affiliated Comp. A lot of their top holdings were also brand new holdings including Wells Fargo, Home Depot and Dollar General. This is directly in line with what we've seen out of hedge fund land lately. In fact, Wells Fargo was one of the most added stocks by hedge funds in the fourth quarter. Overall, Farallon reduced exposure to services and increased technology exposure.

Steyer's hedge fund firm completely sold out of a number of notable stakes (including Capitalsource which we previously detailed). They also dumped shares of Apollo Group (APOL) which is interesting as we've started to see hedge funds take divergent paths on this name. Some funds like Farallon have sold out, while others like Chase Coleman's Tiger Global have taken large stakes. Another interesting choice Steyer's hedge fund made was to sell completely out of Mastercard (MA) while still holding shares of Visa. Previously, hedgies had owned both of the payment processors. Nowadays it seems many funds are choosing one or the other. Farallon has chosen Visa, but note that they did sell some shares of V as well.

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 $2.0 billion this quarter compared to $1.4 billion last quarter. 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, and Roberto Mignone's Bridger Management. Check back daily for our new updates.

John Griffin's Blue Ridge Capital Buys McDonald's, Adds To JPMorgan Chase: 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 John Griffin's hedge fund Blue Ridge Capital. Griffin graduated from the University of Virginia and holds an MBA from Stanford. Before starting Blue Ridge, he was Julian Robertson's right hand man at legendary hedge fund Tiger Management.

Blue Ridge invests in dominant companies and shorts those that have fundamental problems, all in search of absolute returns. Blue Ridge generally puts an investment into one of two categories: catalyst driven or time arbitrage. They realize that there are times where markets will be mis-priced as investment time horizons compress more than normal. They like to look for situations where people 'stop thinking.' To learn to invest like John Griffin, check out hedge fund Blue Ridge's recommended reading list.

The positions listed below were Blue Ridge's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.


Brand New Positions
McDonald's (MCD)
Teva Pharmaceutical (TEVA)
Charles Schwab (SCHW)
Teradata (TDC)
Credicorp (BAP)
Ares Capital (ARCC)
Xinyuan Real Estate (XIN)
TD Ameritrade (AMTD)
Liberty Media (LSTZA)
Green Mountain Coffee Roasters (GMCR)
Washington Federal (WFSL)
First Niagara (FNFG)
Iberiabank (IBKC)


Increased Positions
JPMorgan Chase (JPM): Increased by 48.7%
Dollar Tree (DLTR): Increased by 22.7%
Range Resources (RRC): Increased by 19.4%
Crown Castle (CCI): Increased by 7.5%


Reduced Positions
Berkshire Hathaway (BRK-A): Reduced by 54.9%
Monsanto (MON): Reduced by 45.3%
Gold Miners ETF (GDX): Reduced by 42.8%
Equinix (EQIX): Reduced by 36.8%
iShares Silver Trust (SLV): Reduced by 36.1%
Blackrock (BLK): Reduced by 28.8%
Pfizer (PFE): Reduced by 24.4%
Visa (V): Reduced by 37.9%


Removed Positions (Sold out completely):
Palm (PALM)
Wynn Resorts (WYNN)
Exterran Holdings (EXH)
Whole Foods (WFMI)
RenaissanceRe (RNR)
Broadridge Financial (BR)


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

1. JPMorgan Chase (JPM): 6.78%
2. Apple (AAPL): 5.52%
3. Crown Castle (CCI): 5.49%
4. Amazon (AMZN): 5.31%
5. McDonald's (MCD): 4.53%
6. Western Union (WU): 4.36%
7. CME Group (CME): 4.16%
8. Millipore (MIL): 4.12%
9. Pfizer (PFE): 3.93%
10. Thermo Fisher Scientific (TMO): 3.87%
11. Microsoft (MSFT): 3.53%
12. Express Scripts (ESRX): 3.12%
13. Discovery Communications (DISCA): 3.07%
14. Covanta (CVA): 2.95%
15. Range Resources (RRC): 2.74%
    

Blue Ridge's biggest moves were starting a new position in McDonald's (now their fifth largest US equity holding) and adding heavily to their stake in JPMorgan Chase (JPM). We've seen a plethora of hedge funds playing the theme of: long 'too big to fail' banks and short regional banks. While we can't see Blue Ridge's short portfolio, it is very clear they are confident in JPMorgan as it is their top holding. (However, we did get a glimpse at one of Blue Ridge's short positions previously). The addition of McDonald's to their portfolio was also intriguing given that we saw fellow hedge fund colleague Bill Ackman and his Pershing Square sell out of MCD.

Griffin's hedge fund also seems to be playing the online brokerage theme by adding shares in both TD Ameritrade and Charles Schwab. Competition in this industry has definitely heated up as of late as brokers slash commission prices in an effort to retain/gain customers. Turning to core positions, we note that Blue Ridge has held positions in Apple, Western Union, Millipore, Thermo Fisher, and Pfizer at the top end of their portfolio for multiple quarters now.

Their sale of Palm is notable as we've seen lots of pessimism surrounding this name as of late and many hedge funds out there have shorted Palm. Other complete sales were in casino Wynn Resorts and in grocer Whole Foods. Blue Ridge also reduced exposure across a number of names including Warren Buffett's Berkshire Hathaway and Monsanto. We found this intriguing because many hedge funds have been buying BRK while Blue Ridge reduced their size. On the Monsanto play, Blue Ridge joins a slew of other hedge funds that have been selling MON shares.

Although Blue Ridge barely added to their position in Crown Castle, we highlight it because it is now one of their largest positions and they have held it for 3+ quarters now. For those tracking these funds for investment ideas, it's always key to identify a fund's core holdings that they are less likely to turnover frequently. In fact, many hedge funds are bullish on tower stocks as we've highlighted recently.

Blue Ridge is a part of the 'Tiger Cub' portfolio created with Alphaclone where you can replicate top hedge fund positions. We've been very impressed with the solid backtested returns and current market outperformance.

For investing insight from Blue Ridge, we highly recommend checking out their suggested reading list. Assets from the collective holdings reported to the SEC via 13F filing were $5.3 billion this quarter compared to $4.4 billion last quarter, so a noticeable increase in long invested assets. Remember that these filings are not representative of the hedge fund's entire base of assets under management.

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, and David Tepper's Appaloosa Management. Check back daily for our new updates.

Goldman Sachs & Hedge Funds Bullish On Tower Stocks

While we don't typically highlight shifts in analyst sentiment, we found some moves out of Goldman Sachs late last week intriguing as they were out positive on tower stocks. They raised price targets on American Tower (AMT) from $52 to $53, on SBA Communications (SBAC) from $40 to $43, and on Crown Castle (CCI) from $42 to $46. While AMT is rated a 'buy,' SBAC in particular is on Goldman's Conviction Buy List.

With their updated coverage, Goldman also added Crown Castle to their Conviction Buy List. They believe that CCI trades at a discount to peers and note that shares have recently underperformed. Goldman also feels that of the tower companies, CCI is the most likely to increase guidance. So, now why did this recent adjustment catch our eye? Well, because plenty of hedge funds own these names, of course!

In our hedge fund portfolio tracking series we've noted that a sizable concentration of long/short equity hedge funds have built up large positions in these various tower companies. Now, before we begin, keep in mind that these funds are set to update their portfolio disclosures with the SEC in the next few weeks so their portfolios could have changed drastically. But for now, we want to focus on the data we have, as this has been a building trend for a few quarters now. Here's what we've found:

John Griffin's Blue Ridge Capital has held shares of Crown Castle for over 3 quarters now. It had previously been their 17th largest US equity holding but most recently CCI was their 6th largest position as they added to their stake in the third quarter of 2009.

David Stemerman's Conatus Capital has previously owned both American Tower and Crown Castle. Their most recent portfolio disclosures show they currently prefer SBAC and CCI (their 17th & 18th largest positions), as they sold out of AMT in favor of those names.

Lee Hobson's Highside Capital Management has owned American Tower (AMT) for at least three quarters now, although it has slipped from their 8th largest holding 3 quarters ago to now their 12th largest holding most recently (SBAC was their 14th largest).

Chase Coleman's Tiger Global has owned American Tower for the past few quarters and it has hovered around their 7th and 10th largest US equity holding. They had last sold some shares when we covered Tiger's portfolio.

Matt Iorio's White Elm Capital had CCI as their third largest US equity holding when we looked at their portfolio via 13F filing and we noted they had also started a new position in SBAC.

Chris Shumway's hedge fund Shumway Capital Partners has been involved with all three in some fashion as they were recently selling out of CCI, reducing their SBAC holdings and starting a new position in AMT which we noticed when looking at their portfolio.


So, quite a few prominent names involved in tower stocks as you can see (and that's not even all of them). Again, keep in mind that this data is set to be refreshed in a few weeks and we could see a completely different story then. However, the fact that many of the above funds have held various tower companies over the past three quarters should say something. We track fundamentally research driven hedge funds with longer-term investment timeframes in hope of finding their next big plays.

We've previously touched on how many of the 'Tiger Cub' funds often hold similar positions in their portfolios and this is no different. (A Tiger Cub is a fund started by someone who was previously involved with legendary hedge fund manager Julian Robertson's Tiger Management). In fact, hedge fund replicator Alphaclone even has a Tiger Cub portfolio that takes the most popular stocks amongst Tiger Cub hedge funds and combines them into a portfolio that outperforms the market by a wide margin. These tower stocks are by far some of their more common holdings.

So, given the recent bullishness out of Goldman Sachs on tower companies, we thought it would be prudent to examine the large hedge fund presence as well. We'll have to see if this theme continues when the new sets of portfolio disclosures come out in a few weeks. As always, we'll cover those in our hedge fund portfolio tracking series.

Matt Iorio's Hedge Fund White Elm Capital: A Portfolio Glance

This is the third quarter 2009 edition of our hedge fund portfolio tracking series. If you're unfamiliar with tracking hedge fund movements or SEC filings, check out our series preface on hedge fund 13F filings.

For the first time in our series we'll be tracking Matt Iorio's White Elm Capital. Previously, Iorio had spent six years at Stephen Mandel's Lone Pine Capital. Prior to that, Iorio graduated from the University of Virginia (McIntire School of Commerce) in 1993 and then went on to receive his MBA from Dartmouth's Tuck School of Business. After leaving Mandel's fund, he started his own hedge fund and we are tracking him due to his contributions to Lone Pine's success in the past. White Elm uses a long/short strategy with the goal of outperforming the market indices with less risk. They employ a fundamental, bottom-up investment process focused on company specific research, very similar to the process employed at Lone Pine (Stephen Mandel) and before that at Tiger Management (Julian Robertson).

Upon launching with $250 million last year, Iorio was said to be aiming for 'slow and steady' growth rather than ballooning his assets under management (AUM) as he targets fewer investors. And, there are many benefits to this approach as it has been well documented that smaller firms often outperform their larger counterparts. As funds grow and reach $1 billion and higher, their scope of potential investments often narrows since they have to put a lot of money to work. Smaller funds can be more nimble and can move in and out of whatever they please. Since White Elm is a newer fund, this is only their fourth 13F filing and we'll examine their portfolio holdings from the third quarter of 2009.

Below were their long equity, note, and options holdings as of September 30th, 2009 as filed with the SEC. We don't cover every single portfolio maneuver, as we instead focus on all the big moves. All holdings are common stock unless otherwise denoted.


Some New Positions
Brand new positions that they initiated last quarter:
Fifth Third Bancorp (FITB)
Vistaprint (VPRT)
SBA Communications (SBAC)
Denbury Resources (DNR)
Umpqua Holdings (UMPQ)
Harley Davidson (HOG) Puts
Martin Marietta (MLM)
Longtop Financial (LFT)
Pitney Bowes (PBI) Puts
ETrade Financial (ETFC)
Dolby Laboratories (DLB)
Green Mountain Coffee Roasters (GMCR)
XL Capital (XL)


Some Increased Positions
Positions they already owned but added shares to:
American Public Education (APEI): Increased position by 570.5%
American Express (AXP): Increased by 349.2%
Atwood Oceanics (ATW): Increased by 87.2%
JPMorgan Chase (JPM): Increased by 66.4%
Apple (AAPL): Increased by 64.7%
Pinnacle Entertainment (PNK): Increased by 54.4%
Monsanto (MON): Increased by 39.5%
SEI Investments (SEIC): Increased by 24.1%


Some Reduced Positions
Stakes they sold shares in but still own:
Eastman Kodak (EK) Puts: Reduced position by 80.5%
Priceline (PCLN): Reduced by 70.7%
Google (GOOG): Reduced by 66.1%
Brink Home Security (CFL): Reduced by 41.7%
Collective Brands (PSS): Reduced by 30.1%
RenaissanceRe (RNR): Reduced by 25.3%
Visa (V): Reduced by 22.4%


Removed Positions
Positions they sold out of completely:
Qualcomm (QCOM)
Lorillard (LO)
MetroPCS (PCS)
Transocean (RIG)
State Street (STT)
Riskmetrics (RMG)
Progressive (PGR)
Principal Financial (PFG)


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

1. CNInsure (CISG): 8.13%
2. Apple (AAPL): 7.18%
3. Crown Castle (CCI): 5.98%
4. JPMorgan Chase (JPM): 5.15%
5. Solera Holdings (SLH): 5.12%
6. Atwood Oceanics (ATW): 4.99%
7. American Express (AXP): 4.81%
8. Visa (V): 4.15%
9. Collective Brands (PSS): 3.86%
10. Mastercard (MA): 3.59%
11. Fifth Third Bancorp (FITB): 3.55%
12. Goldman Sachs (GS): 3.41%
13. Transdigm (TDG): 3.21%
14. Vistaprint (VPRT): 2.92%
15. National Oilwell Varco (NOV): 2.66%
    

White Elm Capital started brand new positions in Fifth Third Bancorp and Vistaprint (VPRT). We want to single out their VPRT stake because Matt Iorio's former employer Lone Pine Capital also has a large Vistaprint stake. White Elm also added significantly to their existing positions in American Public Education and American Express. Like many other hedge funds, Apple (AAPL) is one of White Elm's largest holdings.

The cellular tower theme is prominent amongst Tiger Cub hedge funds and White Elm has selected Crown Castle (CCI) as their play. Many other funds own competitor American Tower (AMT) so it's interesting to see more funds owning CCI. Sticking with the 'positions owned by Tiger Cubs' theme, we also see that Iorio's hedge fund owns the payment processors of Mastercard and Visa as well.

Interestingly enough, we could also be getting a glimpse at some of their short positions as they have isolated put options on the following names: Harley Davidson, Garmin, Pitney Bowes, and Eastman Kodak. Since they don't own long stock in any of these names, they could be using put options as their proxy to short these companies.

Lastly, White Elm sold completely out of some previously large positions for them, including Qualcomm, Lorillard, and MetroPCS. Their sale of Qualcomm is notable since this company is one of the most popular stocks held by hedge funds.

Below you'll find graphical representations of the recent shifts in White Elm Capital's portfolio courtesy of Drew Robertson at Financial Research Station:

(click to enlarge)

(click to enlarge)

Iorio's hedge fund was adding to their holdings in the financial sectors and basic materials. They decreased their technology and consumer goods positions. Assets from the collective holdings reported to the SEC via 13F filing were $227 million this quarter compared to $202 million last quarter. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. Also, please again note that these positions were as of September 30th so two months have elapsed and they've undoubtedly shifted around their portfolio since then.

This is just one of the 40+ prominent funds that we'll be covering in our Q3 2009 hedge fund portfolio series. We've already covered Seth Klarman's Baupost Group Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Dan Loeb's Third Point LLC, David Einhorn's Greenlight Capital, John Paulson's firm Paulson & Co, Lee Ainslie's Maverick Capital, Andreas Halvorsen's Viking Global, Chase Coleman's Tiger Global, Brett Barakett's Tremblant Capital, John Griffin's Blue Ridge Capital and Shumway Capital Partners (Chris Shumway), Thomas Steyer's Farallon Capital, and David Stemerman's Conatus Capital. Check back daily as we'll be covering new hedge fund portfolios.