What We're Reading ~ 11/8/17

Lou Simpson explains his portfolio strategy [Kellogg Insight]

Carl Icahn's making a $5 billion bet on the future of cars [Bloomberg]

A closer look at Ray Dalio's 1937 scenario for current markets [A Wealth of Common Sense]

Bill Miller has 30% of his assets in bitcoin?! [WSJ]

Analysis of Equinix and Interxion: network effects in a box [Scuttleblurb]

The psychology of designer handbags [Business of Fashion]

The biggest stock collapse in history has no end in sight [Bloomberg]

JD.com shares a better deal than Alibaba's [Barrons]

Asia has more billionaires than the US for the first time [Daily Mail]

Caesars returns to building its gaming empire [Barrons]

A look at Snap Inc [Seeking Alpha]

The war to sell you a mattress is an internet nightmare [Fast Company]

Universities take a hard look whether MBA programs are worth it [WSJ]

On trying to boost your productivity [Thrive Global]

What We're Reading ~ 4/20/16

The Great Minds of Investing [William Green]

On simplicity versus complexity in investing [Reformed Broker]

Capital allocation - defining what is good and what is bad [Value and Opportunity]

Why we think we're better investors than we are [NYTimes]

Billing by millionths of pennies, cloud computing takes in billions [NYTimes]

Inside Amazon's cloud computing infrastructure [DataCenter Frontier]

Inside the nondescript building where trillions trade each day [Bloomberg]

The Energy Transfer - Williams poker game [SL-Advisors]

Kinder Morgan: asymmetric upside potential [Value and Opportunity]

India's thirst for oil is overtaking China's [Bloomberg]

HDR is TV's next big format war [CNET]

Profile on Google's Sundar Pichai [Buzzfeed]

How Jeff Bezos became a power beyond Amazon [Fortune]

Inside the house that Jack Ma built [Bloomberg]

The billionaire behind Walgreens' quest for global dominance [Fortune]

Media websites battle faltering ad revenue [NYTimes]

Ugg: the look that refused to die [The Guardian]

Critical things successful people do every day [Linked In]

What We're Reading ~ Analytical Links 3/4/15

12 things learned about investing from Howard Marks [25iq]

Feeling certain and other mistakes that trip up investors [WSJ]

What mistakes investors make and what they learned from it [EndlessriseInvestor]

Why don't we make good investment decisions? [Irrelevant Investor]

Warren Buffett on his early mistakes [Business Insider]

A look at Constellation Software [Value Venture]

A pitch on Cable and Wireless Communications [Scribd]

When will the US have its next recession? [Wealth of Common Sense]

Yahoo's incredible shrinking profitability in its core business [Forbes]

Altice's savvy playbook fuels rapid growth [FT]

Netflix and Google's plan to break out of Equinix's gilded cages [Data Center Knowledge]

Viewers don't add up to profit for YouTube [WSJ]

Is innovation more about people or process? [HBR]

Lone Pine Capital Restarts Equinix Position

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Equinix (EQIX).  Per the filing, Lone Pine has revealed a 5.6% ownership stake in EQIX with over 2.77 million shares.  The 13G was filed due to activity on April 17th.

The hedge fund firm had previously held a EQIX stake, but apparently sold out of the position in the fourth quarter of 2013 as it did not appear on their 13F filing that detailed year-end positions.

With the newly filed 13G, Lone Pine is back in the shares again after a brief hiatus.

Coatue Management, longtime holder of EQIX shares, dumped their position in the fourth quarter as well.  This was significant as it had been one of their top holdings.

Other hedge funds have been involved in this name too and we've posted JANA Partners' thesis on EQIX and then SPO Advisory has increased its EQIX stake.

Per Google Finance, Equinix "connects businesses with partners and customers worldwide through a global platform of data centers. The Company connects approximately 4000 customers, across the Americas, Europe, Middle East and Africa (EMEA) and Asia-Pacific. Platform Equinix combines international business exchange (IBX) data centers, a global footprint and ecosystems. The Company offers each customer a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs. Equinix offers customers direct interconnection to an aggregation of bandwidth providers, including the Internet Service Providers (ISPs), broadband access networks and international carriers. Its customers include carriers and other bandwidth providers, cloud and information technology services providers, content providers, financial companies and global enterprises."

You can view other recent portfolio activity from Lone Pine here.

John Scully's SPO Advisory Increases Equinix Position

John Scully's investment firm SPO Advisory has filed an amended 13G with the SEC regarding its position in Equinix (EQIX).  Per the filing, SPO now owns 10.4% of EQIX with over 5.1 million shares.

This marks an increase of over 1.18 million shares since the end of 2013.  The filing was made due to activity on March 19th.

Shares of EQIX have seen a ton of hedge fund activity over the past few months.  Some examples include: longtime owner Coatue Management sold its Equinix position, but then Barry Rosenstein's JANA Partners outlined their thesis on EQIX in their Q4 letter.  


About SPO Advisory

John Scully, William Patterson, and William Oberndorf founded SPO Advisory in 1989.  SPO runs a concentrated portfolio of public equities pursuing a value investing strategy.  Some of their other top holdings at the end of 2013 included Charles Schwab (SCHW), Liberty Global (LBTYK), and Pioneer Natural Resources (PXD).

About Equinix

Per Google Finance, Equinix is "connects businesses with partners and customers worldwide through a global platform of data centers. The Company connects approximately 4000 customers, across the Americas, Europe, Middle East and Africa (EMEA) and Asia-Pacific. Platform Equinix combines international business exchange (IBX) data centers, a global footprint and ecosystems. The Company offers each customer a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs. Equinix offers customers direct interconnection to an aggregation of bandwidth providers, including the Internet Service Providers (ISPs), broadband access networks and international carriers. Its customers include carriers and other bandwidth providers, cloud and information technology services providers, content providers, financial companies and global enterprises."

Coatue Management Dumps Longstanding Equinix Position

Philippe Laffont's hedge fund Coatue Management has just filed an amended 13G with the SEC regarding Equinix (EQIX).  The filing indicates that they no longer own a position in the company as of December 31st, 2013.

This is significant news when you consider EQIX had been one of Coatue's top holdings for quite some time.  At the end of the third quarter, they owned a stake worth over $820 million and so they liquidated their stake during the fourth quarter when shares traded between $152 and $185.

Earlier, we also pointed out JANA Partners' thesis on EQIX as they have built up a stake in the company throughout 2013.

JANA Partners' Thesis on Equinix: Q4 Letter

Barry Rosenstein's hedge fund JANA Partners returned 20.4% in 2013 and their Q4 letter details some of their activity before year-end.  They note that they've exited their activist stake in Agrium (AGU) and have started stakes in Equinix (EQIX), Juniper Networks (JNPR), and Airbus Group (AIR FP), among other names.


JANA Partners' Thesis on Equinix (EQIX)

JANA writes in its Q4 letter:

"EQIX is the market leader in low latency, network dense co-location data  centers. We have been following EQIX as a member of our “JANA Universe” for the last couple  of years, and we have waited patiently for an opportunity to buy at an attractive price. We started  building our position late in the second quarter and continued to purchase the shares in the third  and fourth quarters. We believe there is a wide moat around the specialized services that EQIX  provides, even though over-capacity in the lower value added wholesale segment of the data  center market has pressured the revenue growth rate and has completely altered investor  perception of the quality of EQIX’s franchise. We take comfort in the fact that 95% of revenue is  recurring monthly, and churn is less than 10% per year. EQIX has not had a down quarter year  over year in the last seven years in terms of revenue or OIBDA. In fact, both revenue and  OIBDA have grown in excess of 10% every year. Profitability is robust: OIBDA margins are  45% and FCF margins are 25%. Overall returns on invested capital are still low, a result of the  heavy investment in growth; but four wall returns are compelling, we estimate at 25%+ after tax,  and we pencil incremental returns on capital to be greater than 15%. CEO Steve Smith and CFO  Keith Taylor have been together at the company for six years and have managed through a similar  period of a slowdown in growth in the third quarter of 2010. Then, as now, investor confidence  was shattered by the slowdown, and to capitalize on the misplaced pessimism, then as now,  management announced a share repurchase program. In 2010 the repurchase announcement  turned out to be the absolute bottom as the stock went on to triple over the next three years.  While we have great hopes for EQIX, we do not expect a similar outcome this time around, but at  the current valuation of 12x our estimate of FCF (adjusted for growth capex) for 2014, we believe  even a modest acceleration in growth trends will be amplified dramatically in the stock price. We  also expect that EQIX will be granted a PLR by the IRS to convert to a REIT, which will yield  substantial tax savings."

*Update: An earlier version of this article stated that Coatue Management had been a large shareholder as well.  However, they literally just filed an amended 13G with the SEC and have indicated that they no longer own any EQIX shares as of the end of 2013.

Other hedge funds that have held positions in EQIX recently include Lone Pine, Paulson & Co, Senator, and Hoplite, among others.

EQIX shares sold off heavily during 2013, trading around $231 in Q2 and trading as low as $152 in Q4 and obviously JANA has taken advantage of the sell-off to build a position.  EQIX has rallied off the lows and now trades at $190, a level it was trading at in Q2 of 2013.

Check out past activity from JANA Partners here.

Coatue's Philippe Laffont on Apple, Google & Technology/Media Trends

Coatue Management's founder Philippe Laffont appeared on Bloomberg TV today to talk about tech stocks, including Apple (AAPL), Google (GOOG), and others.  He says that tech stocks are 'historically cheap' and he's always on the lookout for the new trends.


On Apple (AAPL)

"It’s cheap by any measure. The key is not to think whether stock will be up $50 in the next few months. The key is what would it take for Apple to get to $800. It would be a great return if just from today it went back to $600. To me, the company has to take back the offense. The company has been a little bit put on defense. Samsung and Google have been very strong competitors... at some point Apple is going to take back the offense."

Laffont was asked why he is still bullish on the name and while Coatue still owns shares, our Hedge Fund Wisdom newsletter flagged that the hedge fund sold 55% of its AAPL stake at the end of 2012 so that's worth keeping in mind.  They've been a long-term bull on the name. 

Laffont wants to see the company make product moves and make better use of cash, saying:

"The company is so big that how they use the cash is going to determine value, there’s no way about it. But there are going to be some new products coming in. I think they have some things up their sleeve."

Coatue reportedly hosted AAPL's CFO at their investor day earlier this year.  Laffont hinted that AAPL should make some acquisitions as well as he wants the company to bring on some new talent and ideas.


On Google (GOOG) 

Laffont thinks the tech giant could be a triple in 5-7 years from now, trading at just 5x earnings.


On Storage & "The Cloud" 

He sees storage as a long-term trend as data continues to move to the cloud.  One of his largest investments in public markets is datacenter provider Equinix (EQIX).  Coatue has recently started making private investments and Box.net was one of their first (another play on this trend).


Talking Other Tech Companies 

He also commented on how there's a new 'four horsemen' of tech: Google, Apple, and Amazon.com (AMZN), original members of the group remain, but he would add Samsung and Twitter to that bunch.  He says Twitter has huge strategic value, but little revenue so it's hard to value.  On Facebook (FB), Laffont feels that in an increasingly mobile world, advertising is a lot harder.


On Tech Value Traps & Shorts

The Coatue manager went on to note that while many investors in other sectors look for bargains and 'cheap stocks,' tech isn't necessarily the best place to do that because a lot of times in this sector these cheap stocks are actually value traps.  He listed Hewlett Packard (HPQ), Microsoft (MSFT), and Intel (INTC), citing a rising mobile computing world.

He also mentioned his firm was exploring a concept on the short side he called a 'paperless office' where people are all using iPads and people don't need/use paper as much.  He says that, "A lot of the companies stuck in the desktop/printer world are going to have a tough time going forward."


On Media & Content

Laffont's content theme focuses on smartphones and how everyone will have one eventually and want to consume content on those devices (citing Netflix (NFLX), HBO Go, ESPN).  He thinks the world will move towards content being monetized in very different ways.  He said he likes Time Warner (TWX), CBS (CBS), and News Corp (NWSA).


Embedded below is the Bloomberg TV video of Philippe Laffont's appearance:



To see the rest of Coatue's portfolio, head to the new issue of our Hedge Fund Wisdom newsletter that was recently released.

Market Strategist Jeff Saut: Best Stock Ideas For Next 3-5 Years

Given that markets have been ripping higher, we thought it a prudent time to check in with market strategist Jeff Saut.  His latest investment outlook is entitled "For All the Sad Words of Tongue and Pen" where he looks at how market rallies can last longer than one would think.

He highlights how at around the 18th day of a typical 17-25 day buying stampede, certain investors will start to question whether or not they've missed "the bottom."  This then leads to a new round of buying from people who don't want to miss the big move, and thus the rally extends.

So when might this rally cease?  Saut mentions rallies can typically last up to 30 sessions while today is session 18.  He points out some of the cautious signals he is seeing:

"The S&P 500 (SPX/1502.96) remains overbought with 92.6% of its stocks above their respective 50-day moving averages (DMAs), as  well the NYSE McClellan Oscillator is still overbought in the short-term.  However, the stock markets can remain overbought for longer than most think in a bull move.  Further, the Volatility Index (VIX/12.89) is not confirming the renewed stock strength and  some of the hitherto leading stocks are not acting well."


Raymond James' Best Stock Ideas For 3-5 Years

Saut recalls Ray Dalio's recent interview where the legendary manager said that "the shift of that massive amount of cash is what will be a game changer."  If it moves into stocks (from pension funds and other large institutions), he wants to be prepared.

As such, Saut has highlighted his analysts' best stock ideas for a 3-5 year holding period with the following criteria:

- Recurring revenue stream
- High barriers to entry
- Not as dependent on economy/financial markets
- Can grow EBITDA at 5-10% annually
- Competitive edge in its sector
- Strong management

His analysts recommended the following stocks: Altera (ALTR), Conceptus (CPTS), Denbury Resources (DNR), NIC Corp (EGOB), Equinix (EQIX), EV Energy Partners (EVEP), IDEXX Labs (IDXX), Iridium Communications (IRDM), LKQ (LKQ), National Oilwell Varco (NOV), Verisk Analytics (VRSK), and Wabtec (WAB).

Embedded below is Saut's weekly commentary:




For more from this strategist, we've highlighted how Saut has been short-term conflicted and long-term bullish and how he's focused on housing as the key driver.

Brand New Hedge Fund Wisdom Issue Just Released

The brand new Q1 2012 issue of our premium newsletter has just been released!  Subscribers please login at hedgefundwisdom.com to download it.

Included in the new 85-page issue:

- List of consensus buys & sells among top hedge funds

- Equity analysis on: Tempur-Pedic (TPX), AutoZone (AZO) & Equinix (EQIX)

- The latest portfolios of 25 top hedge fund managers: Seth Klarman, Warren Buffett, David Einhorn, John Paulson, David Tepper, Julian Robertson, Carl Icahn, Steve Mandel, Bill Ackman, Dan Loeb, Lee Ainslie, John Griffin, George Soros, Roberto Mignone, Leon Cooperman, John Burbank, Bruce Berkowitz, Chase Coleman, Philippe Laffont, Richard Perry, Larry Robbins, Andreas Halvorsen, Thomas Steyer, Barry Rosenstein & Alan Fournier.

- Expert commentary on what each fund has been up to


Want to see a sample?  Click here to download an old issue for free.


See What Top Hedge Funds Have Been Buying & Selling


1 Year Subscription (Save 20% with this option): $299.99 per year

Quarterly Subscription: $89.99 per quarter

Coatue Management's Philippe Laffont on Facebook, Apple, Equinix, Virgin Media & His Portfolio

Coatue Management's hedge fund founder Philippe Laffont gave his first-ever interview to Bloomberg Television yesterday and talked about Facebook (FB), Apple (AAPL), Equinix (EQIX), Virgin Media (VMED) and his portfolio in general.


On Facebook's IPO (FB)

"It is clearly an incredible company and it also has an incredible management team. One of the things to respect about Mark [Zuckerberg] is that he has surrounded himself with great executives. The tough part about an investment is you are looking for good businesses, good management team, but it is different if you buy a stock at 30 or at 100." 

"I would like to get as many shares as possible. That's what probably everyone wants to do.  I'm sure the stock is incredibly oversubscribed. The real decision is what will happen.  We have lots of previous examples (of risks), both in the year 2000, 1999, but even as recently as LinkedIn. LinkedIn had a small float. The stock started at a low IPO price. The stock moved all the way up, came all the way back down, and in a few months later it's back to where it started. It is possible the same happens to Facebook. I do not know.  It is a great business. Not only do they have the potential to grow their advertising a lot, but in addition they are making money with mobile games. They have a lot of new potential growth products."


On Apple (AAPL)

"[We invested in Apple] 2003. When we got involved with Apple, the stock was at $10. We did not get involved until maybe it was at $100. We missed the whole iPod. When the iPhone came in, we thought it would be a repeat of the iPod. Today you still have the iPhone 5 coming out, which I think will be an incredible product and then potentially Apple TV. This is an amazing company. They have so much growth going on. They represent 5-10% of the market and they can get a much bigger market share."


On His Concentrated Portfolio

"Concentration is a problem over the short-run, but it sort of goes away over the long run. We try to invest over the long-run and are willing to take the volatility. The less concentrated you are, the more your returns will look like the S&P or the Nasdaq. If you want to try to outperform, you have to focus on your best ideas. it is something we transmitted to investors from day one. They understand the risk. It puts a premium on being right."


On Equinix (EQIX)

"We pitched it at the Ira Sohn conference yesterday Equinix. It's a great story.  Basically, if I am Bloomberg, I want to get my news feeds from the NASDAQ and the New York Stock Exchange very close to me so I have the prices immediately.  By putting my servers right next to them, I can get those prices and send them out to all of my customers. Bloomberg needs to have their servers right next to the servers of these other companies, and that is what Equinix allows you to do." 

"I think the demand for the internet will continue to grow. We are in the early innings.  The company is growing 25-30% revenues and EBITDA. It should continue to do that…We started buying it years ago really and have just been adding on to the position. I think right now we might be the largest shareholder of the company."

MarketFolly note: What's interesting here is how Laffont mentions "we started buying it years ago really and have just been adding on to the position."  However, EQIX has only just now shown up as a 'new' position for them in the first quarter of 2012.  They did not disclose owning a stake in the fourth quarter of 2011.  

So, we searched through their previous 13F's filed with the SEC.  Going back a few years, we found that the last time they disclosed owning a stake in Equinix was in the first & second quarters of 2010.  EQIX then disappeared from their filings in the third quarter of 2010 as they apparently sold the stake.  And it hasn't shown back up in their 13F's. Until now.  

As such, Laffont's statement is a bit puzzling as his filings show they just re-entered the position.  The reason we bring this up is because there's a big difference between buying a position "years ago" versus establishing an entire stake in the first quarter.  

Maybe he simply meant to say that they've been involved in the name in the past and have recently acquired it again.  We've asked Coatue for clarification and will update if there's a response.


On Virgin Media (VMED)

"Virgin Media, whereas Equinix solves the problem at the core, Virgin Media solves the problem at the edge. Right now wifi enables many people to share the internet together in a household. Virgin Media has that pipe from the home back to the core back to Equinix.  It's the fastest pipe out there and with HD streaming and online games, you just need to have this fast pipe."


Coatue's Current Exposure

"Right now we have a conservative exposure to the market. It's sort of hard to dissociate. We have great equity valuations in the U.S. in some of the big tech names. But I can't ignore what is going on in Europe and China and elsewhere. I would say we are reasonably conservatively positioned.  It would be done though a combination that just in the way that we're looking for winners, we are also looking for losers, and we're hoping that our portfolio of winners and losers balances itself out. We also have some options of tail risk protection."



Embedded below is the video from Bloomberg TV's interview with Laffont:




For more from this manager, be sure to check out Laffont's presentation from Ira Sohn Conference two days ago.

Philippe Laffont on Equinix & Virgin Media: Ira Sohn Presentation

We're posting up notes from the Ira Sohn Conference.  Coatue Management's Philippe Laffont gave a presentation on going long Equinix (EQIX) and long Virgin Media (VMED).  He was previously a tech/media/telecom analyst at Tiger Management and currently runs $6 billion at Coatue.

"Old Internet Model is Broken"

Network based on safety, slow core, edge too slow. Shift from email, download video to HD streaming, cloud. "Speed is money" AMZN, 1 second of extra load time is $5B revenue loss.  Need to fix the core, and the edge of the internet.

Long Equinix (EQIX): Back in March, we flagged Coatue's purchase of EQIX. Laffont says Data-centers are the new core. "Network effect" because if FB is in the EQIX datacenter, everyone else wants to be there. Big cities, EQIX has huge share of internet backbone: SF 66%, Chicago 69%, DC 88%. Why can't everyone else just do this? Because carriers have set up peer points, and EQIX won the RFP for these spots, when no one knew how important it was. "Beach front property." 50% ROEs with minimal leverage. $1.6B revenue to 4.0B, EBITDA $700M to 2.1B. Stock triples or more.


Long Virgin Media (VMED): We highlighted when Coatue recently disclosed its VMED stake. $22. $6B company, $9B in debt. Edge. Need 50-100MBps now, up from 5-10-20 in past. (HD video) Fastest cable broadband network in UK. EBITDA $2500M less $1000M CAPEX, 20% unlevered ROIC. Broadband ARPU $26, $23 gross profit, better than cable TV, so mix shift helps. Only 4% revenue growth, 10% FCF growth, but they are also buying back shares, so 25% per share FCF. Buying 10% of shares this year alone, 25% in last few years. Has capacity to literally buy back all of it's shares in the next 5 years.


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.

Coatue Management Starts New Position in Equinix (EQIX)

Philippe Laffont's hedge fund Coatue Management has initiated a brand new position in Equinix (EQIX). The fund filed a 13G with the SEC revealing that they now own 6.7% of the company.

Coatue owns 3,127,341 shares and filed the disclosure due to portfolio activity on March 8th. Shares of Equinix have rocketed higher in 2012, starting the year at around $100 per share and now trading around $140 per share.

Other large institutional owners of EQIX as of year-end 2011 include Lone Pine Capital, Eminence Capital, Highland Capital Management, and Millennium Management.

Per Google Finance, Equinix is "connects businesses with partners and customers globally through a global platform of data centers, containing dynamic ecosystems and a range of networks."

To see more of Coatue's investments, head to the new issue of our Hedge Fund Wisdom newsletter.

Jeff Saut's Favorite Investment Ideas

Market strategist Jeff Saut's latest commentary is out and he focuses on some of his favorite investment ideas. They are:

Wiliams Companies (WMB): He writes that, "Our bullish thesis on Williams is supported by three main points: (1) we believe the company's E&P assets will garner a higher valuation in the market place as a stand-alone entity when the company splits itself into two parts; (2) we believe the market is undervaluing Williams' ownership of the Williams Partner GP, and (3) we expect strong growth from the Canadian midstream assets."

Market Folly readers will recall that Dan Loeb's Third Point outlined this exact WMB thesis as well, as the stock seems to be a hedge-fund-favorite.


Clayton Williams (CWEI): Saut notes, "What does set Clayton Williams apart from the rest of the group is its highly oil-weighted production profile (74%), growing position in high-return oil plays (namely the Permian and Delaware Basin), and cheap valuation. Raymond James Analyst John Freeman last week reiterated his Outperform rating on Clayton Williams and stated that he viewed any pressure in the stock as a buying opportunity."

In his commentary, Saut also explains the rationale behind bullishness on shares of Iberiabank (IBKC), and Equinix (EQIX).

He also points out some of the latest hedge fund moves from 13F filings. While he notes that HCA Holdings (HCA) was one of the largest new buys in the past quarter, he fails to mention that it was because the company had its initial public offering. To see what hedge funds have been buying, we of course point you the new 91-page issue of our Hedge Fund Wisdom newsletter.

For Saut's favorite stocks, you can download a .pdf copy here.

Analysts' Best Stock Picks For 2011

Raymond James is out with its Analysts Best Picks for 2011 report. We highlighted their picks from 2010 and those performed pretty well with a 22.3% return. In fact, their annual selections have a 10 year average return of 12.4%.

The report details analysis of the fundamentals, growth prospects and risks associated with each stock. They've selected 13 stocks again this year and in alphabetical order, here are the Analysts' Best Stock Picks for 2011:

- Allscripts Healthcare (MDRX)
- Bank of America (BAC)
- CONSOL Energy (CNX)
- Covidien (COV)
- Digital Realty Trust (DLR)
- Equinix (EQIX)
- Halliburton (HAL)
- HealthSouth (HLS)
- Lincoln National (LNC)
- NVIDIA (NVDA)
- Panera Bread (PNRA)
- Pioneer Natural Resources (PXD)
- Stanley Black & Decker (SWK)

There are some pretty familiar names in that bunch and a few prevalent themes. They've included multiple plays in the health space with MDRX, HLS, and COV. Also, technology is represented with two names in NVDA and EQIX. Also, energy/natural resources are abundant via PXD, CNX and HAL. We wanted to highlight a few of their selections below:

Bank of America (BAC): This name is interesting because it was also on the analysts' best picks list for 2010. However, over the course of last year the stock declined. Raymond James sees the price depreciation as further opportunity and is again a buyer of shares this year. Not to mention, some of the largest hedge funds in the game have sizable stakes in BAC, including John Paulson.

Halliburton (HAL): Arguably, the time to buy this name was during the Gulf oil spill when uncertainty abounded and the stock price was depressed. Yet, RJ feels the company will see near-term earnings momentum and a rebound in international activity. We've talked about how hedge funds are betting on higher oil prices as well.

Equinix (EQIX): This tech name is intriguing because it saw some volatility last year. And as we detailed in our Hedge Fund Wisdom newsletter months ago, a large shareholder (Shumway Capital) was reducing its position size and could be partially responsible for the volatility. Raymond James likes the company's dominant market position in the colocation market and data center industry.


Keep in mind that obviously with the market rally, a lot of these names have been bid up significantly already. Some strategists would obviously advocate waiting to purchase some of these names given that they're extended and knowing that the market doesn't go straight up forever. RJ's Chief Investment Strategist Jeff Saut expects a buyable pullback.

Embedded below is the full research on Analysts' Best Picks for 2011:



You can download a .pdf copy here.

For further research from this shop, head to the previous best stock picks for 2010 as well as Jeff Saut's risk management principles.

Lone Pine Capital Adds to Equinix (EQIX), Starts Dick's Sporting Goods (DKS) Stake

Stephen Mandel's hedge fund Lone Pine Capital after the market close filed two separate 13G's with the SEC, both which reflect portfolio activity as of August 12th, 2010. Firstly, Lone Pine Capital has disclosed a 5.8% ownership stake in Equinix (EQIX) with 2,664,251 shares. As you'll see in our impending second quarter hedge fund update, Lone Pine started Equinix (EQIX) as a brand new position in Q2 and they owned 1,731,835 shares as of June 30th, 2010. In the month and a half that has elapsed since then, Lone Pine has increased its stake by almost 54%, adding 932,416 more shares. This portfolio activity comes after we saw Lone Pine add to its stake in Lincare Holdings (LNCR).

Secondly, Mandel's hedge fund has also disclosed a 5.6% ownership stake in Dick's Sporting Goods (DKS) with 5,054,663 shares. This is a brand new position for the hedge fund. Lone Pine did not show a position in DKS as of June 30th, which means they could have built this position in Dick's Sporting Goods anytime over the past month and a half. However, they've obviously done some recent buying that took them over the regulatory threshold which required them to file the 13G with the SEC.

Taken from Google Finance, Equinix "provides global network neutral data center services. The Company operates 49 International Business Exchange (IBX) centers, or IBX data centers, across 18 markets in North America, Europe and Asia-Pacific where customers directly interconnect with a networked ecosystem of partners and customers."

Dick's Sporting Goods is "a sporting goods retailer offering a range of brand name sporting goods equipment, apparel, and footwear in a specialty store environment. As of January 30, 2010, the Company operated 419 Dick’s Sporting Goods stores in 40 states and 91 Golf Galaxy stores in 31 states."

Click here to scroll through Lone Pine's investments that we've continuously updated.

Philippe Laffont's Coatue Management Focused On Technology: 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 Philippe Laffont's hedge fund Coatue Management. The fund was founded in 1999 and specifically focuses on technology, media and telecom. Coatue employs a typical long/short strategy and like to avoid big directional bets. Interestingly, one of Laffont's mantras is to "dare to be different." This means that he likes to focus on stocks not necessarily right in the spotlight. Laffont focuses on technology specifically and reportedly Coatue were some of the first to get their hands on an iPhone when it was launched. For more thoughts on the sector from Coatue, check out excerpts from their technology trends presentation. Laffont had previously worked for Julian Robertson's Tiger Management and as such is classified as a 'Tiger Cub' hedge fund. As such, the fund is part of the Tiger Cub portfolio that was created with Alphaclone and replicates a basket of stocks handpicked by these hedge fund managers.

The positions listed below were Coatue'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
Crown Castle (CCI)
American Tower (AMT)
Qualcomm (QCOM)
SBA Communications (SBAC)
Palm (PALM)
MGM Mirage (MGM)
Popular (BPOP)
Amazon (AMZN)
Brocade (BRCD)
Amedisys (AMED)
Barnes & Noble (BKS)
Applied Materials (AMAT)
Emulex (ELX)
Fortinet (FTNT)


Increased Positions
F5 Networks (FFIV): Increased by 130%
Yahoo (YHOO): Increased by 51%
Synaptics (SYNA): Increased by 46.5%
Google (GOOG): Increased by 42.3%
Equinix (EQIX): Increased by 34.9%


Reduced Positions
E*Trade (ETFC): Reduced by 11.3% ~ we detailed their initial position back in August of 2009


Removed Positions (Sold out completely):
Research in Motion (RIMM)
Baidu (BIDU)
Sohu (SOHU)
Netease (NTES)
Taiwan Semiconductor (TSM)
Eastman Kodak (EK)
Bankrate (RATE)
Level 3 Communications (LVLT)
Synopsys (SNPS)
Microsemi (MSCC)
Netflix (NFLX)
Garmin (GRMN)
Nutrisystem (NTRI)
Silicon Motion (SIMO)
Sandisk (SNDK)
Novatel (NVTL)
Travelzoo (TZOO)
Gannett (GCI)
Utstarcom (UTSI)


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

1. Apple (AAPL): 17.27%
   
2. Google (GOOG): 10.01%
   
3. Equinix (EQIX): 8.85%
   
4. F5 Networks (FFIV): 8.55%
   
5. E*Trade Financial (ETFC): 6.20%
   
6. Citrix Systems (CTXS): 6.12%
   
7. Crown Castle (CCI): 5.93%
   
8. TD Ameritrade (AMTD): 5.16%
   
9. Visa (V): 4.1%
   
10. American Tower (AMT): 3.63%
    
11. Yahoo (YHOO): 3.16%
    
12. Qualcomm (QCOM): 2.47%
    
13. SBA Communications (SBAC): 2.41%
    
14. Palm (PALM): 2.19%
    
15. Synaptics (SYNA): 2.01%
    

As you can see, Coatue Management is definitely focused on technology. Hedgie favorites Apple and Google dominate the bulk of the reported long US equity positions in their portfolio. Not far behind though is Equinix (EQIX), another play we're starting to see more managers add and we already know Shumway Capital Partners has a large EQIX stake too. Additionally, the tower stocks theme is heavy here as Coatue owns all three majors: CCI, AMT, and SBAC. Not to mention, they just started these brand new stakes all this past quarter. This is a bit different as we've seen many other hedgies favor one tower stock over the other. John Griffin's Blue Ridge, for instance, favors CCI. Coatue has exposure to all three though.

Another thing we noticed was their exposure to the brokerages through a large position in E*Trade Financial and a slightly smaller one in TD Ameritrade. Price wars in the online brokerage industry are heating up and many see ETFC as a takeover target. In terms of positions they sold completely out of, Coatue dumped RIMM, BIDU, and SOHU, all which were previously quite large positions for them. They didn't alter their previously owned positions too much. The vast majority of their maneuvers were made via purchasing brand new positions or completely dumping others.

Given all the negativity surrounding shares of Yahoo (YHOO), it was also intriguing to see them add to their stake. Some argue this is now a value play, while others argue the company is quickly being left behind the rest of the tech pack. Clearly Coatue sees some sort of value here and this fits Laffont's road-less-traveled mantra. Overall, if you're looking for good bets on the technology sector, you've certainly come to the right place. Not to mention, many of their holdings are among the top stocks held by hedge funds.

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 $2.2 billion last quarter, a slight decrease in exposure. Remember that these filings are not representative of the hedge fund's entire base of AUM.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Philip Falcone's Harbinger Capital Partners, Roberto Mignone's Bridger Management, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, and George Soros' hedge fund Soros Fund Management. Check back daily for our new updates.

Shumway Capital Partners Bets Big On Wells Fargo (WFC): 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 Chris Shumway's hedge fund Shumway Capital Partners. Shumway uses intensive fundamental research to create long/short equity portfolios from the bottom-up. Chris Shumway was previously Julian Robertson's right-hand man at Tiger Management before launching his own fund. He received his B.S. from the University of Virginia and his MBA from Harvard Business School.

Shumway's returns are outstanding as they have a rolling 3-year annualized return of 28% according to Barron's top 100 hedge funds for 2009. We've long been an admirer of Shumway's intense due diligence. They are included in our Market Folly portfolio where we have combined various hedge fund portfolios to generate a unique replication strategy that has backtested over 25% annualized returns with the help of Alphaclone.

The positions listed below were Shumway'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
Bank of America preferreds (BAC-S)
Johnson & Johnson (JNJ)
Pfizer (PFE)
Freeport McMoran (FCX)
Brocade Communications (BRCD)
Gap (GPS)
Salesforce (CRM)
Amazon (AMZN)
CVS Caremark (CVS)
Radioshack (RHS)
MEMC Electronics (WFR)
Fifth Third Bancorp (FITB)
Dollar General (DG)
AOL (AOL)
Research in Motion (RIMM)
Biomarin Pharma (Notes 1.875%)
Kinross Gold (Notes 1.750%)


Increased Positions
Wells Fargo (WFC): Increased by 305%
Time Warner (TWX): Increased by 180%
Quest Diagnostics (DGX): Increased by 179%
JPMorgan Chase (JPM): Increased by 78.5%
Ingersoll Rand (IR): Increased by 69%
Pepsico (PEP): Increased by 54%
Qualcomm (QCOM): Increased by 50.5%
Universal Health (UHS): Increased by 48.7%
Las Vegas Sands (LVS): Increased by 43%
Laboratory Corp (LH): Increased by 40%
Walt Disney (DIS): Increased by 33.5%
Apple (AAPL): Increased by 32%


Reduced Positions
Monsanto (MON): Reduced by 77.8%
Allstate (ALL): Reduced by 75%
Baidu (BIDU): Reduced by 57.5%
Union Pacific (UNP): Reduced by 49%
Community Health (CYH): Reduced by 39.4%
Goldman Sachs (GS): Reduced by 39%
Colgate Palmolive (CL): Reduced by 37.6%
Urban Outfitters (URBN): Reduced by 34.2%
Visa (V): Reduced by 33.6%
Cisco Systems (CSCO): Reduced by 30%
Yum Brands (YUM): Reduced by 27.3%
Mastercard (MA): Reduced by 25.2%
Juniper Networks (JNPR): Reduced by 24.8%
EMC (EMC): Reduced by 21%


Removed Positions (Sold out completely):
Bank of America (BAC)
Procter & Gamble (PG)
Walgreen (WAG)
Zimmer Holdings (ZMH)
Google (GOOG)
Cemex (CX)
Bard (BCR)
Waters (WAT)
Charles Schwab (SCHW)
Weatherford International (WFT)
Nordstrom (JWN)
BB&T (BBT)
Wyeth (inactive ~ merger completed)
American Tower (AMT)
SBA Communications (SBAC)
CSX (CSX)
Williams (WMB)
Federal Realty (FRT)
XL Cap (XL)
Unilever (UL)
Lazard (LAZ)
SLM (SLM)
Genworth Financial (GNW)
Washington Fed (WFSL)
Melco Crown (MPEL)


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

1. Bank of America preferreds (BAC-S): 5.97%
2. Apple (AAPL): 5.4%
3. Wells Fargo (WFC): 5.3%
4. Johnson & Johnson (JNJ): 4.7%
5. Teva Pharmaceutical (TEVA): 4.7%
6. Equinix (EQIX): 4.6%
7. Pepsico (PEP): 4.3%
8. Pfizer (PFE): 4.1%
9. Walt Disney (DIS): 3.8%
10. Time Warner (TWX): 3.8%
11. Qualcomm (QCOM): 3.8%
12. JPMorgan Chase (JPM): 3.7%
13. Mastercard (MA): 3.7%
    
14. EMC (EMC): 3.2%
15. Freeport McMoran (FCX): 3.2%

Of Shumway's top holdings, four of them were brand new stakes: Bank of America preferreds, Johnson & Johnson, Pfizer, and Freeport McMoran. Take note that they completely dumped their BAC common stock and bought the Bank of America preferred on the offering, a trend we've seen many hedge funds take advantage of.

Looking over their portfolio though, it has a multinational blue-chip feel to it. What's interesting is that in the quarter prior they had purchased blue-chip stocks as well. This time around though, they were largely selling off those blue-chips and buying new blue-chip names. Shares of JNJ, PEP, and PFE find a place in Shumway's portfolio and are the definition of these 'safer' plays that are seemingly undervalued on a relative basis. We've seen this mantra out of numerous other hedge funds as they note 'junk' high beta stocks rallied the most during 2009, leaving solid blue-chip companies behind. As such, many hedgies have rotated into these multinational stocks for 2010, a year in which many think we'll see tepid growth.

It's also interesting to see hedge funds return to old favorite Freeport McMoran. Hedgies loved this play pre-crisis but dumped shares in a hurry once the global economy started heading south. It looks like some funds are starting to dip their toe back in the water with this name. Turning to financials, we also saw Shumway massively boost their holdings in Wells Fargo (WFC), something we've started to see more and more hedge funds do as of late as well.

Shumway dumped stakes in SBA Communications and American Tower, a move we found intriguing solely because tower stocks have been some of the most popular stocks amongst Tiger Cub hedge funds. Additionally, Shumway's sale of Google made us take notice as shares of the internet giant slowly seem to have fallen out of favor with many hedgies.

Data used for this article comes from Alphaclone. Using their hedge fund replicators, you can backtest strategies and sort through all the hedge fund portfolio maneuvers with ease, we highly recommend it. Assets reported on Shumway's 13F filing were $8.6 billion this quarter compared to $7.4 billion last quarter, so quite a noticeable uptick in assets. 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, and David Ott's Viking Global. Check back daily for our new updates.

Shumway Capital Partners Adds Long Exposure Via Blue Chip Stocks

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.

Next up in our series is Chris Shumway's hedge fund firm, Shumway Capital Partners. Chris Shumway runs an $8+ billion hedge fund and is best known for intensive fundamental research to create long/short equity portfolios. He is a 'Tiger Cub' because he formerly served as Julian Robertson's right-hand man while at Tiger Management. Taken from our post on 'Tiger Cub' biographies, "Chris Shumway is the Founding Partner of Shumway Capital Partners (“SCP”), an investment management firm founded in 2001. SCP, which manages a multibillion dollar group of private investment funds, uses a private equity-like research model for public market investment on a global basis. Prior to forming SCP, Mr. Shumway was a Senior Managing Director at Tiger Management (1992-1999), an Analyst at Brentwood Associates (1990-1991), and an Analyst at Morgan Stanley & Co. (1988-1990). He received an M.B.A. from Harvard Business School (1993) and a B.S. from the McIntire School of Commerce at the University of Virginia (1988)."

Shumway has an solid performance record since inception and a rolling 3-year annualized return of 28+%. Shumway's performance at this metric landed them at #11 in Barron's top 100 hedge funds for 2009. Shumway's portfolio is one of the hedge funds included in our Market Folly portfolio that replicates hedge fund portfolios. It was created with Alphaclone and has over 25.5% annualized returns.

Keep in mind that the positions listed 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:
Yum Brands (YUM)
Pepsico (PEP)
Colgate Palmolive (CL)
Procter & Gamble (PG)
Walt Disney (DIS)
JPMorgan Chase (JPM)
Zimmer Holdings (ZMH)
Google (GOOG)
Google (GOOG) Calls
Cemex (CX)
Bard (BCR)
Time Warner (TWX)
PNC Financial (PNC)
CTrip (CTRP)
Charles Schwab (SCHW)
Laboratory Corp (LH)
Weatherford International (WFT)
Nordstrom (JWN)
Omnicom (OMC)
BB&T (BBT)
American Tower (AMT)
Quest Diagnostic (DGX)
Ingersoll-Rand (IR)
CSX (CSX)


Some Increased Positions
Positions they already owned but added shares to:
Visa (V): Increased position by 400%
Juniper Networks (JNPR): Increased by 242.4%
Las Vegas Sands (LVS): Increased by 183.8%
Wyeth (WYE): Increased by 173.9%
Qualcomm (QCOM): Increased by 147.7%
Goldman Sachs (GS): Increased by 140.9%
Walgreen (WAG): Increased by 36.2%
Equinix (EQIX): Increased by 35.5%
Waters (WAT): Increased by 30.5%
EMC (EMC): Increased by 26.4%


Some Reduced Positions
Stakes they sold shares in but still own:
SBA Communications (SBAC): Reduced position by 58.8%
Bank of America (BAC): Reduced by 38.4%
Wells Fargo (WFC): Reduced by 28.1%
Mastercard (MA): Reduced by 21.2%
Urban Outfitters (URBN): Reduced by 19.7%


Removed Positions
Positions they sold out of completely:
Priceline (PCLN)
CVS Caremark (CVS)
Pfizer (PFE)
Research in Motion (RIMM)
RenaissanceRe (RNR)
Entergy (ETR)
Annaly Capital Management (NLY)
Bank of America (BAC) Calls
D&B (DNB)
Crown Castle (CCI)
Partnerre (PRE)
Arch Capital Group (ACGL)
Covance (CVD)
Nii Holdings (NIHD) Bonds
Cisco Systems (CSCO) Calls
Netease (NTES)
Citigroup (C)
Blackboard (BBBB) Bonds


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

1. Cisco (CSCO): 4.62%
2. Equinix (EQIX): 4.29%
3. EMC (EMC): 4.08%
4. Mastercard (MA): 3.93%
5. Teva Pharmaceutical (TEVA): 3.88%
6. Visa (V): 3.87%
7. Apple (AAPL): 3.68%
8. Bank of America (BAC): 3.37%
9. Juniper (JNPR): 2.96%
10. Yum Brands (YUM): 2.81%
11. Pepsico (PEP): 2.74%
12. Colgate Palmolive (CL): 2.73%
13. Procter & Gamble (PG): 2.71%
14. Qualcomm (QCOM): 2.47%
15. Walgreen (WAG): 2.46%
    

The main thing to takeaway from Shumway Capital Partners' portfolio update is that they increased long US equities exposure. And, the interesting thing is that it was mainly via brand new positions, many in large cap, blue-chip names including Yum Brands, Pepsico, Colgate Palmolive, Procter & Gamble, and more.

Shumway's top three holdings are very concentrated in the tech trade and in particular, data. They increased their positions in EMC and EQIX by over 25% each. One name they really boosted was Visa (V) as they added to it by a whopping 400%. Additionally, they increased stakes in Juniper Networks and Las Vegas Sands by sizable amounts. They sold completely out of Priceline (PCLN), CVS Caremark (CVS), Pfizer (PFE), and Research in Motion (RIMM) all positions that had previously been over 2% of their reported 13F assets.

They decreased their holdings in technology and increased their stake in services. Below you'll find graphical representations of the recent shifts in Shumway Capital Partners' portfolio courtesy of Drew Robertson at Financial Research Station:

(click to enlarge)

(click to enlarge)

Assets from the collective holdings reported to the SEC via 13F filing were $7.4 billion this quarter compared to $4.4 billion last quarter, so a substantial amount of capital was deployed on the long side. 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, and John Griffin's Blue Ridge Capital. Check back daily as we'll be covering new hedge fund portfolios.