Goldman Sachs VIP List: Most Important Stocks To Hedge Funds: Q1 2012

Goldman Sachs is out with its Q1 2012 Hedge Fund Trend Monitor report.  In it, they reveal the latest VIP list of 50 stocks that are most important to hedge funds.  These are the positions that appear most frequently in the top 10 holdings of fundamental focused hedge funds.

This quarter, they've also released a new list of very important short positions to hedge funds which we've posted up as well.

Goldman's VIP list of the most important holdings is accessible on Bloomberg via < GSTHHVIP >.  It has "outperformed the S&P 500 by 55 bp on a quarterly basis since 2001."

Goldman Sachs VIP List (Q1 2012)

Stock: Number of funds with stock as top 10 holding

1. Apple (AAPL): 106
2. Google (GOOG): 73
3. Express Scripts (ESRX): 56
4. Microsoft (MSFT): 46
5. Qualcomm (QCOM): 38
6. Citigroup (C): 31
7. General Motors (GM): 29
8. Priceline.com (PCLN): 29
9. JPMorgan Chase (JPM): 27
10. Liberty Media (LMCA): 26
11. Delphi Automotive (DLPH): 24
12. BP (BP): 23
13. Pfizer (PFE): 23
14. Tyco (TYC): 22
15. Visa (V): 21
16. Yahoo (YHOO): 21
17. LyondellBasell (LYB): 20
18. Anadarko Petroleum (APC): 19
19. Bank of America (BAC): 17
20. Ford Motor (F): 17
21. WellPoint (WLP): 17
22. American International Group (AIG): 16
23. Charter Communications (CHTR): 16
24. eBay (EBAY): 16
25. Rock-Tenn (RKT): 16


It's no surprise that Apple (AAPL) is the most widely owned top position amongst fundamental hedge funds.  But despite that, Greenlight Capital's David Einhorn argued hedge funds actually have less than 2% of assets in his Ira Sohn conference presentation.  We've also posted Dan Loeb's thesis on AAPL as he was a big buyer of shares.

Both Tyco and Priceline were featured in the equity analysis section of our Q4 2011 Hedge Fund Wisdom newsletter due to heavy ownership by top funds.  TYC is an event-driven play while PCLN is a huge growth and international play.


Here's the rest of Goldman's VIP list:

26. Seagate Technology (STX): 16
27. Berkshire Hathaway (BRK.B): 15
28. Cisco Systems (CSCO): 15
29. Equinix (EQIX): 15
30. Hertz Global (HTZ): 15
31. Liberty Interactive (LINTA): 15
32. Pioneer Natural Resources (PXD): 15
33. Visteon (VC): 15
34. Valeant Pharmaceuticals (VRX): 15
35. Wells Fargo (WFC): 15
36. Baidu (BIDU): 14
37. Dollar Thrifty (DTG): 14
38. Hess (HES): 14
39. Mastercard (MA): 14
40. News Corp (NWSA): 14
41. Williams Companies (WMB): 14
42. Barrick Gold (ABX): 13
43. CIT Group (CIT): 13
44. Capital One (COF): 13
45. Calpine (CPN): 13
46. Devon Energy (DVN): 13
47. EMC (EMC): 13
48. Hewlett Packard (HPQ): 13
49. Illumina (ILMN): 13
50. Salesforce.com (CRM): 12

Of the above, we've previously highlighted why Passport Capital likes LINTA.  And in the brand new issue of our Hedge Fund Wisdom newsletter, we've analyzed Equinix (EQIX), a big new position by Philippe Laffont's Coatue Management and John Thaler's JAT Capital.

Some of the stocks on the list are brand new additions as enough hedge funds boosted their positions in Q1: ABX, AIG, BRK.B, COF, CPN, CRM, DVN, EBAY, EMC, EQIX, F, HES, HTZ, ILMN, RKT, WLP.


Be sure to also check out Goldman's brand new list of hedge fund very important short positions.

Corsair Capital Provides Updates on Their Positions: Q1 Letter

Jay Petschek and Steven Major's hedge fund Corsair Capital is out with their Q1 letter and in it they detail updates on their investments in: LyondellBasell (LYB), Shaw Group (SHAW), Republic Airways (RJET), Neo Material Technologies (NEM) and TNS (TNS).

Given that LYB has been owned by numerous hedge funds, we wanted to highlight their commentary:

LyondellBasell (LYB) - "Though the company reported a weak Q4 as expected, the market anticipates record-low gas prices will continue to suppress ethane prices, one of LYB's main input costs, thereby supporting high ethylene margins.  If current ethane prices are sustainable, the industry could enter a 'super-cycle' where LYB would show earnings previously not thought possible.  The company also took advantage of the current strong credit markets and refinanced $3 billion of debt, benefitting by both extending maturities and lowering interest payments."


Also, the fund addressed their position in Shaw Group (SHAW): "two of its main customers received the final requisite Nuclear Regulatory Commission licensing to construct two new nuclear power plants and the EPA's increased environmental standards drove power plant maintenance contract wins.  The company also reported a strong fiscal Q2 and the upcoming divestiture of the Energy and Chemicals division in the next few months should create additional shareholder value.  We estimate that SHAW could earn $3.00/share in FY 2013, which would increase its net cash position to over $17.00/share."

We've previously posted up Corsair's investment thesis on Shaw Industries for further color.



Embedded below is Corsair Capital's Q1 letter:



Later this morning we also posted up Corsair's investment thesis on SunCoke Energy.

Corsair Capital Talks Lyondell Basell, Six Flags & Innophos: Q4 Letter

Jay Petschek and Steve Major's hedge fund Corsair Capital is out with their Q4 letter. For 2011, the hedge fund finished -3.7% and since inception in January 1991, the firm has seen a compound net annual return of 14.4%.

They note that 2011 was a difficult year because, "correlations between stocks and most asset classes were near record highs, seemingly subject to the whims of investors choosing to either put 'risk on' or to take 'risk off.' "

Corsair also touches on some of their positions noting that Lyondell Basell (LYB) saw strong insider buying during the stock's dip. They continue to also like Neo-Material Technologies (TSE:NEM) as think it's worth $15+ (it currently trades around $8.30).

The hedge fund likes that Six Flags (SIX) has refinanced its debt and announced a new $250mm buyback plan. Lastly, Corsair fancies Innophos Holdings (IPHS) as "the company trades at under 10x our cash estimate for 2012 and we continue to believe it is worth 15x given the quality of its business model and clean balance sheet." We've previously highlighted Corsair's thesis on Innophos.

Embedded below is Corsair Capital's Q4 letter (email readers click the link to come view it):



We've also posted up their new write-up of a core investment: Corsair's thesis on Aperam (APAM NA).

Corsair Capital: Is Negativity "Priced In" the Market? (Q3 Letter)

Jay Petschek and Steve Major's hedge fund Corsair Capital outline how their portfolio has performed in their third quarter letter. They pinpoint the notion that fear has been driving markets for the past few months. Instead of focusing on hindsight, they look to what investors should be doing today.

Simply put, Corsair does not believe this is a repeat of 2008. They point to better liquidity, solid corporate balance sheets, and insider buying. While they acknowledge that things are not "rosy," they wonder if all the negativity is now priced in the market.

Their letter goes on to talk about their positions in Globe Specialty Metals (GSM), Lyondell Basell (LYB), Neo-Material Technologies (TSE:NEM), Reader's Digest (RDA), and TNS (TNS). They also mention they sold their position in Keystone Industries (KYCN) in a negotiated transaction.

For some of the hedge fund's latest investments, we posted Corsair's investment thesis on Shaw Group (SHAW).

Embedded below is Corsair's letter (email readers click the link to come read it):




As noted in our September hedge fund performance numbers update, Corsair was -9.5% for the year at the end of September but has seen 14.2% annualized returns since inception in 1991.

Dan Loeb's Third Point Buys El Paso (EP)

Dan Loeb's Third Point Offshore Fund is out with its monthly update on positioning and exposures. The key takeaway here is that Third Point has initiated a position in gas producer El Paso (EP) since the fourth quarter.

The second most notable takeaway is that Potash (POT) is no longer among their top holdings. The stock sold-off hard recently, so that could be the culprit. Or, perhaps they sold shares, other holdings appreciated in value, or they ramped up their stakes in other names; it's tough to discern.

Third Point's Top Positions

1. Gold
2. Delphi (both equity & debt)
3. Chrysler (multiple securities owned)
4. El Paso (EP)
5. LyondellBasell (LYB)


Some of the fund's top winners were gold, NXP Semiconductors (NXPI), El Paso (EP), Technicolor (multiple securities owned), and Williams Companies (WMB). Per their latest disclosure, Third Point also now owns multiple securities in NXPI after previously owning just the equity.

El Paso is the second gas related entity they've invested in recently. Third Point bought WMB in the fourth quarter, as did many other hedge funds. You can read about the investment thesis on WMB in the equity analysis section of our new issue of Hedge Fund Wisdom.

The top losers last month in Third Point's portfolio included Wells Fargo (WFC), BioFuel Energy (BIOF), CIT Group (CIT), Accuride (ACW), and Rentokil Initial PLC (RTO in London, RTOKY on the pink sheets). Wells Fargo also appears to be a new equity position for the hedge fund, unless it is a debt stake that has previously been undisclosed; the disclosure is unclear.

Overall, Loeb favors post-reorganization equities. In particular, he's been active in Smurfit-Stone Container (SSCC), opposing the takeover. LyondellBasell (LYB), another post-reorg equity, continues to be one of Loeb's largest positions.

For the month of February, Third Point was up 3.6% and is up 7.6% for 2011 thus far. Its Offshore Fund has now seen an impressive 19% annualized return since inception in December 1996.


Exposure Levels

Regarding their latest exposure levels, Third Point is 56.2% net long equities with its largest net long exposure in basic materials at 12.1% and consumer at 11.5%. Over the past month or so, Third Point has reduced net long equity exposure by almost 5%.

In credit, the hedge fund is 11.5% net long distressed, 16.5% net long asset backed securities (ABS) which include residential mortgage backed securities (RMBS) and commercial mortgage backed securities (CMBS). They are also net short -5.4% government securities, cutting their short exposure to this asset class almost in half.

For a full assessment of Loeb's portfolio and the investment thesis behind some of his picks, head to the brand new issue of Hedge Fund Wisdom that was just released.

Dan Arbess' Xerion Fund Likes Chemical Stocks

Per Bloomberg's Hedge Fund Brief, Dan Arbess' Xerion Fund (part of Perella Weinberg Partners) is betting on chemical stocks. In particular, he likes those companies that utilize lower-cost natural gas in production, such as LyondellBasell (LYB).

Chemical maker LYB emerged from bankruptcy last year and has been a big favorite amongst investment managers. In fact, LyondellBasell was a consensus buy in the fourth quarter amongst hedge funds we track in our Hedge Fund Wisdom newsletter. In addition to Xerion, Dan Loeb's Third Point LLC holds a large stake in LYB as it is their fifth largest position.

Arbess said that, "There are a lot of companies that can just take higher feedstock costs and pass them right on to their customers. They are being sold off very aggressively right now and can be picked up. We liked them 10-15% higher before the sell-off; we love them down here." In addition to LYB, Arbess fancies Solutia (SOA) and Rockwood Holdings (ROC).

Arbess also reiterated his positions in exploration and production oil companies in Brazil and West Africa. We've posted about these investments in a previous investor letter that detailed Xerion's 2011 investment strategy & outlook.

Corsair Capital Management's Letter: Q4 2010

Jay Petschek's Corsair Capital Management is out with its fourth quarter letter. In it, we see that Corsair finished 2010 up 15.4% which ironically is the exact same number as their compound net annual return since inception.

Highlighting their overall market view, Petschek writes, "as we believe post-recession equity markets are generally driven by the direction of earnings, which in turn is driven by economic growth, the markets seem to have room to move higher."

Portfolio Positions

Corsair singles out their position in LyondellBasell (LYB) in the letter as they believe the stock still trades at a discount to its peers. You'll recall that Dan Loeb's Third Point owns LYB in size as well. The company announced a dividend policy and plans to optimize its capital structure.

Petschek also highlights their stake in CapitalSource (CSE) as the company continues its transition from an over-leveraged REIT into a bank. Corsair believes shares are still undervalued and likes the company's debt repurchases and share repurchase plan.

Their letter also focuses on their position in Aon (AON). The hedge fund notes that the integration of Hewitt will create shareholder value and further entrench the company's dominant position in human capital solutions. We penned an in-depth analysis of AON in our last issue of our Hedge Fund Wisdom newsletter as many hedge funds had accumulated shares in past quarters. Click here for a free sample issue.

Corsair Capital Management's full letter and their investment write-up on Neo Material Technologies (NEM) is embedded below:



You can download a .pdf copy here

If you missed them, we've posted up a plethora of hedge fund letters recently, including:

- Maverick Capital's letter
- John Paulson's year-end letter
- Dan Loeb & Third Point's Q4 letter
- JANA Partners' letter
- Greenlight Capital's commentary
- Summary of Perry Capital's letter
- Xerion Fund's 2011 strategy
- Summary of Kleinheinz Capital's letter

Dan Loeb Concerned About Consensus Bullish View: Third Point's Year-End Letter

Dan Loeb's hedge fund Third Point is out with its 2010 year-end letter to investors and the most notable aspect of it is that Dan Loeb will no longer be authoring the letter going forward. He is doing so "in order to keep our views proprietary and maximize time spent on investing."

2011 Outlook

Third Point expects a continued global recovery, high commodity prices, and an increase in mergers and acquisitions activity (M&A). However, Loeb is cautious about one thing, writing, "Our greatest concern is the growing consensus around the bullish view we have held since April 2009. Therefore, we welcome sharp corrections like the two we had last month."

Focus on Paper Companies

We've highlighted how Third Point likes post-reorganization equities. While they own chemical company Lyondell Basel (LYB), the hedge fund also has exposure to various paper industry plays. Third Point's letter reveals that they initiated a new position in NewPage in the fourth quarter ("a performing credit under distressed pressure").

Loeb also reveals that he owns a position in Bowater, otherwise known as AbitibiBowater (ABH), a company that just emerged from bankruptcy and will soon also be classified as a post-reorganization equity.

Third Point also details their position in Smurfit-Stone Container (SSCC) and we've highlighted how hedge funds are active in SSCC and oppose the proposed takeover. Further rationale behind Third Point's interest in the paper industry is outlined in their 2010 year-end letter to investors, embedded below:



You can download a .pdf copy here.

For more on Loeb's hedge fund, we also just detailed Third Point's latest positioning & exposure levels.

Dan Loeb & Third Point's Latest Positioning & Exposure

Dan Loeb's Third Point Offshore Fund recently released its January performance and the fund was up 3.9% for the month compared to a 2.4% return in the S&P 500. To date, Third Point has seen 18.9% annualized returns with a low correlation to the market (0.42).

Equity Exposure

In equities, Loeb's hedge fund has its highest net long exposure in basic materials at 16.4% net long. Their second highest exposure comes with a 12.9% net long position in the consumer sector. In total, Third Point is 68.9% long and -7.9% short, leaving the fund 61% net long.

Credit Exposure

Loeb is 31.1% net long credit with his largest exposure in mortgage backed securities (MBS) at 19.3% net long. He is also 12.3% net long distressed and -10.1% short Government bonds.


Top Positions

As of the end of January, Third Point's top positions remain unchanged from previous months:

1. Gold (physical)
2. Delphi (multiple securities held)
3. Chrysler (multiple securities held)
4. Potash (POT)
5. Lyondell Basell (LYB)


Top Winners & Losers

Third Point's portfolio attributed positive performance in the month to shares of Potash (POT), Smurfit-Stone Container (SSCC), Massey Energy (MEE), NXP Semiconductor (NXPI), and Aveta. We recently highlighted how Third Point opposes SSCC's takeover and other hedge funds have been active in the name as well. SSCC is one of the many post-reorganization equities found in Loeb's portfolio. Last year we cited how Third Point likes post-reorg equities and just recently we noted that John Paulson likes them too.

Regarding his position in NXP Semiconductor, Loeb highlighted NXPI in a recent letter. The company is involved in near field communications and is seen as a prime play on mobile payments. Third Point also saw solid performance from its position in Massey Energy as the company received a takeover offer from Alpha Natural Resources (ANR).

Positions that negatively affected Third Point's portfolio last month include Gold, Brenntag AG (ETR:BNR), Mead Johnson Nutrition (MJN), African Barrick Gold (LON: ABG), and Accuride (ACW).

To learn to invest like this hedge fund manager, check out Dan Loeb's recommended reading list.

Dan Loeb & Third Point's Latest Exposure Levels

Dan Loeb's Third Point Offshore Fund finished 2010 up 33.5%, compared to an S&P 500 return of 15.1%. Since inception in December of 1996, Third Point has returned an impressive 18.6% annualized. The hedge fund manager recently released its latest December exposure levels so we wanted to provide readers with an update.

Here are Third Point's top holdings as of year end:

1. Gold
2. Delphi Corp (multiple securities held)
3. Chrysler (multiple securities held)
4. Potash (POT)
5. Lyondell (LYB)

You can learn about more of Third Point's investments in our newsletter. Physical gold continues to be a massive position for Loeb and he potentially could be using the precious metal as some sort of tail risk hedge. Interestingly enough, Third Point continues to own Potash (POT) even after BHP Billiton's bid for the company failed. It appeared as though the hedge fund originally purchased POT as a arbitrage trade but maybe they like the natural resource exposure as an inflation play. Or maybe they still see the company as a viable takeover target, who knows.

Lastly, Lyondell finally shows up as a top holding for Third Point as the company exited bankruptcy. The chemical maker's equity now trades under ticker symbol LYB. Back in the second quarter we noted Loeb's fondness for post re-organization equities, and that portfolio theme continues.

Exposure Levels

Third Point has its highest net long equity exposure in basic materials and financials. In total, they are 60.1% long, -8.4% short, leaving them 51.7% net long equities. One geographic note is that Third Point had previously been net short the Asia region, but are now net long ever so slightly.

In terms of credit exposure, Third Point has its highest net long exposure in mortgage backed securities (MBS) at 19.4%, followed by distressed at 14.2% net long. Third Point is also net short government securities at -10.9%. Overall in credit the hedge fund is 32% net long.

Top Winners

In Loeb's portfolio, big winners include Delphi (multiple securities held), NXP Semiconductor (NXPI), Lyondell (LYB), Chrysler (multiple securities held), and Accuride (ACW). He highlighted NXPI in his recent letter to investors as Third Point participated in the IPO and sees upside in the name. Shares of Accuride also recently started trading in late December after re-listing on the New York Stock Exchange.

Top Losers

Third Point's portfolio saw weak performance from the following plays: three undisclosed short positions (undoubtedly due to the market's large rally), Fortis (multiple securities held), as well as State Bank of India (BOM:500112), a name we have previously not seen disclosed.

That wraps up our summary of Third Point's end of year exposure levels. You can check out more of Third Point's portfolio in our newsletter. And to learn to invest like Dan Loeb, check out his recommended reading list here.

Dan Loeb's Third Point Q3 Letter to Investors

Dan Loeb's hedge fund firm Third Point is finally out with its third quarter letter to investors. The first half of Loeb's letter focuses on Ben Bernanke and the second half focuses on Third Point's portfolio. The latter portion is what we'll highlight below.

Third Point recently received AR Magazine's award for event driven fund of the year. Third Point now manages $3.6 billion and at the end of the third quarter its Offshore Fund was up 19.2% for the year. The fund now has seen 18.2% annualized returns since inception, an obvious reason to track them. Recall that we've provided commentary and analysis of Loeb's investments in our newsletter. And if you desire to be a successful investor like Loeb, head to his recommended reading list.


Anadarko Petroleum (APC)

Turning to Loeb's recent commentary, he touches on his firm's position in Anadarko Petroleum. We originally revealed this position back in August and he purchased debt securities in June and July due to the opportunity presented as a result of the Gulf oil spill.

Of the investment he writes, "Our analysis was correct and in hindsight, investors could have generated similar returns by investing in anything 'Macondo-related (e.g. RIG, BP and Anadarko equities). However, Anadarko bonds offered similar upside to the aforementioned securities but with effectively zero downside in the event that either our thesis on the severity of the spill was incorrect or there was a material decline in oil and.or natural gas prices, and so we delivered excellent risk-adjusted returns."

In his commentary, Loeb mentions that all oil spill related securities have rallied furiously since the event. He doesn't mention whether or not Third Point still owns these securities and almost makes it sound like he has since exited the position (but that's speculation on our part).


NXP Semiconductor (NXPI)

Loeb also reveals a new position in his letter as Third Point participated in NXPI's IPO. He notes that, "the company is in the final stages of completing a substantial operational and capital structure restructuring, which is driving free cash flow, rapid deleveraging and attractive new opportunities like a leadership position (>50% market share) in Near Field Communications, a fast emerging mobile payment technology being adopted by Google Android, Nokia and Blackberry." The most interesting thing here is that despite the rally in shares, Loeb sees "substantial upside" in this stock.

Top Positions

While not specifically listed in the letter below, we have since seen Third Point's November portfolio update where they list the following as their top positions:

- Gold
- Delphi (multiple securities held)
- Potash (POT)
- Chrysler (multiple securities held)
- Lyondell (LYB)

Of note are the fact that Loeb owns physical gold, not the exchange traded fund. Fellow hedge fund manager David Einhorn of Greenlight Capital stores physical gold and John Burbank of Passport Capital also prefers the physical metal.

Embedded below is Third Point's third quarter letter to investors:



You can download a .pdf copy here.

To see what else Dan Loeb has invested in, be sure to check out our Hedge Fund Wisdom newsletter. And to learn to invest like this hedge fund manager, head to Loeb's recommended reading list.