Dan Loeb's Third Point Outperforming, Reduces Exposure Yet Again

In early August, we noted how Dan Loeb's Third Point reduced equity exposure for the third consecutive month. That decision has certainly paid off as Loeb's fund was only down 2.8% in August compared to the S&P 500 which was down 5.4%. Year-to-date as of the end of August, Third Point is up 3.9% while the S&P is down 1.8%.


Reduced Exposure for Fourth Straight Month

At the end of August, Third Point was only 17.7% net long equities, down even further from their 23.3% net long exposure back in July. Their largest net long exposure comes in technology at 6.5% and basic materials at 3.5%. Third Point is net short industrials (-1.5%) and utilities (-0.6%).

In credit, Loeb's Offshore Fund is 18.5% net long, a slight decrease from last month. They continue to be net short government securities (-10.3%) and have their largest net long exposure in asset backed securities (+17.3%).

Geographically, Third Point is net long the Americas at 50%, net short EMEA at -4% and net short Asia at -2%.


Third Point's Outperformance

So while decreased exposure to risk certainly has helped Loeb outperform in this volatile market, his winners the past month include gold, short A, CVR Energy (CVI), Barrick Gold (ABX), and short B.

It should come as no surprise that their gold related investments have helped them outperform as the precious metal rocketed higher as market volatility increased. Not to mention, gold has been one of Third Point's largest positions for some time now.


Top Positions

- gold
- Delphi
- CIT Group (multiple securities held)
- Technicolor (multiple securities held)
- El Paso (EP)

The most notable change in Third Point's top positions since last month is the absence of Mosaic (MOS). There's no way to know exactly why because they could have reduced their position size, other positions could have appreciated more, or they could have bought more of some of their top holdings.

Third Point originally bought MOS on the secondary when the Cargill family unloaded shares at $65 per share. The hedge fund subsequently 'bought the dip' in MOS when it traded down to around $60. During August, MOS traded as low as $55.70, and currently trades around $69.50.

Either way, Third Point's top holdings have largely been what you see above as they wait for Delphi to go public and El Paso to split up.

Hedge Fund Third Point Reduces Equity Exposure For Third Consecutive Month

For the month of July, Dan Loeb's hedge fund firm Third Point offshore fund was up 0.3%. Year to date, they are up 6.9% versus 3.9% for the S&P 500. Seeing 18.4% annualized returns, it's no wonder that Third Point is closed to new investors.

Net Exposures Down Yet Again

Loeb's hedge fund is only 23.3% net long equities (39.7% long and -16.4% short). In June, we detailed how Third Point reduced equity exposure again. July marks the third consecutive month in which Loeb's firm has reduced risk.

In July they ratcheted down exposure from 30.7% net long down to only 23.3% net long. Caution is the name of the game for Loeb's firm and he outlines the rationale in his quarterly letter.

Their largest net long equity exposure comes in the energy sector at 6.1%, as well as consumer and basic materials each at 5.7%. They are net short technology and utilities.

In credit, Third Point is 20.9% net long (32.2% long and -11.3% short). They continue to be net short government issues and their largest net long exposure comes in asset backed securities (ABS).


Third Point's Top Positions

1. Gold
2. Delphi Corp
3. El Paso (EP)
4. CIT Group (CIT ~ multiple securities held)
5. Mosaic (MOS)

Loeb's stake in MOS is brand new and the thesis on Mosaic is detailed in Third Point's Q2 letter. They also continue to hold Delphi, a position numerous hedgies like.

In the past month, Third Point's top winners include gold, Peregrine Metals (PGM), CVR Energy (CVI), Delphi, and an interest rate hedge. Their top losers included NXP Semiconductor (NXPI), CIT Group (CIT), Pall Corp (PLL), Health Net (HNET), and Brenntag AG (BNR).

Shares of NXPI have traded down almost 43% in the past 3 months. Many see this company as a play on the future 'mobile wallet' due to its near field communications (NFC) chip that allows transactions between phones. Third Point has been able to offset the negative performance of this company with gains in other areas.

David Einhorn Buys Seagate Technology (STX), Sells Various Stocks

ZeroHedge posted up David Einhorn & Greenlight Capital's Q2 investor letter which reveals that the hedge fund was down 2.5% for the quarter and is now down 5% for the year.

Greenlight noted that the US economy has continued to soften as energy and food prices eroded consumer purchasing power. At the same time, Greenlight points to strong corporate earnings as a positive.

Bought Seagate Technology (STX)

During the quarter, Einhorn's hedge fund saw notable portfolio turnover. Greenlight built a "medium sized long position" in Seagate Technology (STX) with an average purchase price of $16.06 a share (STX currently trades around $16.90). The current issue of our Hedge Fund Wisdom newsletter features an analysis of STX for those interested.

Sold Positions

Greenlight also sold completely out of its position in Cardinal Health (CAH). At the same time, they continue to hold a large position in CAH's spin-off, CareFusion (CFN). You can also see the investment thesis on CFN in a free sample of our newsletter.

Einhorn's fund also sold out of CIT Group (CIT), Yahoo! (YHOO), Vicat SA (France: VCT), MI Developments (MIM), MDC Holdings (MDC), and Xerox (XRX). They also covered their short position in LED-maker Cree (CREE).

While Einhorn sold out of CIT Group, we noted last week that Dan Loeb's Third Point continues to hold CIT as one of their largest positions.

Given that Greenlight sold so many positions, it will be interested to see if they've put that capital to work elsewhere or have merely raised cash levels as a form of protection. We've highlighted one buy as Greenlight purchased Playtech (LON:PTEC) shares. Embedded below is Greenlight's Q2 letter:



If the embedded doc doesn't work, you can view/download it here.

For more from Einhorn, be sure to check out his presentation from the Ira Sohn Conference.

Third Point Reduces Equity Exposure Further in June

For the month of June, Dan Loeb's Third Point Offshore Fund returned -2.6% but is still up 6.8% for the year and has seen 18.5% annualized returns. The Offshore fund manages just under $4 billion and Third Point recently closed to new investors.

Equity Exposure

At the end of June, Third Point's total equity exposure was 56.3% long and -25.6% short, resulting in 30.7% net long exposure. Their largest net long exposure comes in the consumer sector at 7.1% net long and the energy sector at 6.5% net long. The only sector they were net short was technology.

This marks a reduction in Third Point's equity exposure for the second consecutive month. At the end of May, they were 42.6% net long equities and so they've decreased exposure by almost 12% month over month.

Credit Exposure

Dan Loeb's firm also reduced credit exposure during the quarter down to 21.7% net long (down from 34.4% net long at the end of May). Their largest exposure this time around was 18.1% net long asset backed securities and 10.2% net long distressed debt. On the other side of things, they continue to be -10.1% net short government securities.

Top Positions

1. Delphi
2. El Paso (EP)
3. Gold
4. CIT Group (multiple securities held)
5. Technicolor (multiple securities held)

While at the end of May gold was Third Point's largest position, the slide in the precious metal caused it to slip to their third largest position a month later. CIT Group moves into their top 5 holdings this month, replacing CVR Energy (CVI).

Delphi is Loeb's largest holding and David Einhorn's Greenlight Capital also recently took a stake. In fact, Third Point and Greenlight share a few other common positions such as gold and CIT Group.

Top Winners & Losers

In the month of June, Third Point's positions in CVR Energy, Volkswagen, and various asset backed securities were their top winners. Their top losers in the month included Delphi, LyondellBasell (LYB), El Paso (EP), gold, and Technicolor.

Ira Sohn Conference Notes: Hedge Fund Manager Presentations

The Ira Sohn Conference is taking place today in New York and features an all-star line-up of hedge fund managers. This post features part 1 of our notes from their presentations. ***Update: We've also posted up part 2 of our notes from Ira Sohn as well.

Part 1:


Erez Kalir / Sabretooth Capital: His pick was a long of MBIA (MBI) as a 'favorably asymmetric' play. His presentation was entitled, "Economic Death as a Special Situation." He feels that MBIA has 100%-200% upside with only 30% downside at worst, so the risk/reward skew is favorable.

He also likes Argentina as a compelling investment arena since its default in the early 2000's. In particular, he's looking at energy exploration & production names. He points to stocks like YPF SA (YPF) and Crown Point Ventures (CWV).

On the topic of inflation hedging, Kalir doesn't like gold. In fact, he warned against owning it. He also dislikes shorting treasuries. Instead, he prefers to buy farmland. This stance no doubt echoes the sentiment of Jim Rogers, the ex-Quantum fund manager who has also been a staunch advocate of owning farmland. Additionally, we've detailed how subprime profiteer Michael Burry also bought farmland.


Dinakar Singh / TPG-Axon Capital: Singh thinks the current market is a great environment for stockpicking and fancies shares of wireless provider Sprint (S), which David Einhorn's Greenlight Capital also likes (see Einhorn's thoughts here). Singh cites the company's low valuation and it's his favorite turnaround story.

He says S needs to consolidate its two networks starting now with the next generation phones. Singh actually feels like the T-Mobile / AT&T (T) merger is good for Sprint because it removes their largest competitor. Singh notes that the US wireless market could offer defensiveness like utility stocks, but with the added benefit of growth. He thinks S could have 40-70% upside, saying its worth $8-14 per share (currently trading around $6).

TPG-Axon's leading man cited Zhongpin (HOGS) as a compelling investment due to its top line growth and the fact that it's trading at 7x earnings.

Singh also mentioned he thinks that Orkla (OSL: ORK) has a fair value of $65 to $80 as the company was mismanaged and restructuring could unlock value.


Jeff Aronson / Centerbridge Partners: His pick was to go long shares of CIT Group (CIT). This has been a hedge-fund-favorite as some of the largest owners also include Bruce Berkowitz's Fairholme Capital, Howard Marks' Oaktree Capital, David Einhorn's Greenlight Capital, Marc Lasry's Avenue Capital, and Dan Loeb's Third Point. Before Chapter 11, Centerbridge was buying CIT debt. Since then, they've been buying the equity.

Aronson says that the company's intrinsic book value is $59 per share and notes that they have $12 billion in cash on their balance sheet. He highlights that CIT has publicly stated it could buy a retail bank (whose deposits would boost earnings). As a takeout candidate, Centerbridge thinks CIT could be worth as much as $65 (shares trade around $41 currently.)


Robert Howard / KKR: Howard (representing KKR's new equity team) pitched shares of Wabco (WBC), a company that produces anti-lock braking systems among other things. He cites three major trends that WBC can benefit from: cyclical recovery (US & Europe trucking recovery), emerging market growth, as well as tighter safety rules. Howard mentions the company is often overlooked by investors too.

KKR's man also pitched HSN, Inc (HSNI), otherwise known as the Home Shopping Network. He likes their demographic of 30-55 year old women with solid annual income to spend. Howard thinks that John Malone's Liberty Media could make a play for the company too, as he points out that Liberty owns 30% of HSNI and all of QVC, the other major player in the shopping-via-television arena.


Phil Falcone / Harbinger Capital Partners: Falcone talked about his wireless venture, LightSquared. We've covered this play numerous times and while it's not publicly traded yet, Falcone says that it will be some day. Essentially, this is Harbinger's concentrated bet on a 4G network.

Numerous hedge funds have invested in the 'more mobile data usage' theme via various plays. Some have elected to buy the wireless tower operators like American Tower, (AMT), Crown Castle (CCI), and SBA Communications (SBAC). Falcone, on the other hand, has elected to straight up build out his own network as his hedge fund has morphed into a semi-private equity-like fund. He noted that they've accumulated spectrum and are looking at a 4G terrestrial network.

Falcone also likes Crosstex Energy (XTXI). We covered his investment in XTXI back in December and the Harbinger manager likes it due to its complex financial structure. A master limited partnership owns the assets and then XTXI owns that partnership. He drew attention to the fact that this isn't a company that pulls gas out of the ground, but rather a play on gas processing and transmission. Falcone thinks XTXI is worth double what it's trading at now or more (around $9.50 currently).


Jim Chanos / Kynikos Associates: The well-known short-seller attacked alternative energy 'green' plays with a presentation entitled, "Does Solar and Wind = Hot Air?" Chanos said that, "wind is 50% more expensive than natural gas, and solar is 4 times more expensive" and that natural gas prices have essentially shot an "economic arrow" into alternative energy.

In particular, Chanos mentioned Denmark-based Vestas (CPH:VWS or PINK: VWDRY), a company focused on wind power that might be worth looking at for a short.

However, he is most excited about shorting solar power via First Solar (FSLR), a company he believes has outdated technology. Chanos was recently on television talking negatively about this name as well. He points out that Spain and Italy utilize solar power the most. But, the problem there is that the demand is highly subsidized. Also, he points to the management exodus at FSLR as a warning sign for investors to exit shares.


Sunjay Gorawara / Investment Idea Contest Winner: This year's Ira Sohn featured an investment idea contest where the winner was able to present their idea to all attendees. Michael Price introduced the contest winner but while he was talking, he mentioned that Goldman Sachs (GS) could be a buy as it should be worth $100 more than where it currently trades. And in general, he was bullish on financials.

Judges Bill Ackman, David Einhorn, Michael Price, and Joel Greenblatt selected the winning entry of Bridgepoint Education (BPI) from an undergraduate student at Indiana University who will be interning at JP Morgan this summer.

For more hedge fund coverage: Be sure to receive our free updates via email or free updates via RSS reader.


This concludes part 1. Please head to part 2 of our notes from Ira Sohn for coverage of presentations from David Einhorn, Bill Ackman, Carl Icahn and more.

Bruce Berkowitz & Bill Ackman: Summary of Their Harbor Investment Conference Talk

We're continuing our focus on the recent Harbor Investment Conference that took place late last week and wanted to point out a discussion between Fairholme Capital's Bruce Berkowitz and Pershing Square Capital Management's Bill Ackman. The two interviewed each other on their respective investments.

Below courtesy of our friends at Benzinga.com is a guest post summarizing the managers' talk at the Harbor Investment Conference:

"Berkowitz of Fairholme Capital, was interviewed by Bill Ackman, the conference's Co-Chair, and he discussed why he's been long Berkshire Hathaway (NYSE: BRK-A) and Leucadia National Corp. (NYSE: LUK) for a long time. He bought both of them around 1985, for similar reasons. He liked the company's management, and he specifically liked Berkshire because he said that Warren Buffett was a "smart guy" who ran other people's money. He paid about $2,700 per share for each A share he owns.

Ackman of Pershing Square Capital, asked what Berkowitz's biggest investment error was of his career. Berkowitz responded by saying that his biggest mistake was trusting management, and not verifying them. He said that in order to verify management, you have to try to prove them wrong, and kill their thesis.

He also discussed some of his better investments, like Imperial Metals, which Berkowitz said he has no idea why it's doing well, it just is. He discussed his position in Wells Fargo (NYSE: WFC) in the late 1980's and early 1990's, and said that he really likes the banks now. He believes we are rebuilding now, and a lot of banks are trading below book value, with low valuations, and said that the worse the bank was perceived, the better it will probably wind up being. He owns positions in Goldman Sachs (NYSE: GS), Regions Financial (NYSE: RF), AIG (NYSE: AIG), CIT Group (NYSE: CIT), Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS) in the financial sector. Berkowitz said there is a black box risk to owning banks, but after three years, you can get an idea of who's going to do well. Berkowitz said he would own more of Goldman Sachs if he could, but as a mutual fund, he's forbidden by law.

Regarding AIG, he said that AIG is more respected in Asia than it is here, and he sees tremendous value in the company's remaining assets, which it has so many of. Berkowitz said that former AIG CEO Hank Greenberg was a serial acquirer of assets, and there is tremendous value still there. He said that the current AIG is trading below book value, and it's trading at a single digit P/E. A major reason why he likes AIG is the company won't have to pay taxes for quite some time, as the company lost over $100 billion in market cap."

To read about the rest of Ackman and Berkowitz's talk, we highly recommend heading to the full summary at Benzinga here.

T2 Partners Year-End Letter: Discussing Longs & Shorts

Whitney Tilson and Glenn Tongue's hedge fund firm T2 Partners released their year-end letter to investors. The letter is one of the most thorough we've seen as it is 27 pages long and includes assessment of both their long and short positions. If you want transparency in the hedge fund industry, here's your barometer.

For 2010, T2 finished up 10.3% net compared to an S&P 500 return of 15.1%. So while they trailed the indices last year, T2 has outperformed since inception, returning 9.1% annualized net versus 2.0% for the S&P. This past year, their pain came from various short positions and essentially 'missing' the quantitative easing round 2 rally.

T2 Partners' top 12 long positions at the end of 2010 were:

1. Grupo Prisa (PRIS & PRIS.B)
2. Microsoft (MSFT) ~ see their thoughts on MSFT here
3. Berkshire Hathaway (BRK.A/B)
4. BP (BP) ~ their thoughts on BP here
5. General Growth Properties (GGP)
6. CIT Group (CIT)
7. Kraft (KFT) and warrants
8. Seagate Technology (STX)
9. Iridium (IRDM) and warrants
10. Automatic Data Processing (ADP) ~ see their presentation on ADP
11. Resource America (REXI)
12. Anheuser Busch InBev (BUD)

While we've presented analysis on T2's longs before, we want to single out Seagate Technology (STX) and CIT Group (CIT) as we haven't seen Tilson talk about these before. He likes STX mainly because it is trading at an absurdly cheap valuation and he thinks fears over the hard drive (HDD) market (versus the solid state drive market) are overblown.

Tilson and Tongue fancy CIT due to the company's potential to capture financing-cost savings. Additionally Tilson writes, "Even more intriguing is the possibility that a healthy bank might acquire CIT, attracted by the enormous earnings leverage available in applying the acquiring bank's much lower borrowing costs to CIT's business model."


T2's top 10 short positions (in alphabetical order):

1. AIG (AIG)
2. Homebuilders (various individual companies plus XHB the ETF)
3. InterOil (IOC) ~ analysis of their short position here
4. ITT Educational (ESI), as well as other for-profit education plays
5. Lender Processing Services (LPS)
6. Lululemon Athletica (LULU)
7. MBIA (MBI)
8. Netflix (NFLX)
9. Salesforce.com (CRM)
10. St. Joe (JOE)

Tilson and Tongue highlight that their short book caused them much pain last year. Accordingly, they set aside a portion of their letter to address how they manage short positions that move against them. In short (no pun intended), they re-evaluate their analysis to determine whether to add to the position, do nothing, or trim/exit.

Specifically, they trimmed their position in Netflix (NFLX) and replaced part of it with put positions. (We posted why Tilson is short Netflix here). They've also done this with other short positions in order to better manage risk. After all, remember that these stakes are merely hedges to their long book as T2 is always net long (they are currently 40% net long).

Embedded below is T2 Partners annual letter to investors for 2010:



You can download a .pdf copy here.

It's great to see a manager with such transparency in an otherwise secretive and guarded industry. T2's portfolio overlaps with positions many other hedge fund managers own that we've highlighted as well.

T2 is short JOE and so is Greenlight Capital (see David Einhorn's short thesis on JOE). While T2 is short ESI, hedge fund Blum Capital is long ESI. And while Tilson and Tongue are short AIG, Bruce Berkowitz's Fairholme Capital is long AIG. It's fun to see hedge funds take different stances on various stocks because that's what makes a market.

David Einhorn & Greenlight Capital's Q3 Investor Letter

Dealbreaker has posted up the latest investor letter from David Einhorn's Greenlight Capital and in it we see that Greenlight is 98% long, 63% short and their largest disclosed long positions in alphabetical order are:

1. Arkema (AKE on foreign exchange, ARKAY on the pink sheets)
2. CIT Group (CIT)
3. Ensco (ESV)
4. Gold (physical)
5. Pfizer (PFE)
6. Vodafone (VOD)

Overall, Einhorn's top positions are largely unchanged and we've detailed the respective thesis on each investment in the past. In particular, we highlighted the case for Ensco (ESV) in our newsletter Hedge Fund Wisdom. Additionally, we've outlined Einhorn's Vodafone thesis as well.

Possibly the most notable change in Greenlight's portfolio in the third quarter was the sale of their Ford debt position as it had been a top holding in the past. They also sold longs in ATP Oil & Gas (ATPG), EMC (EMC), Lockheed Martin (LMT), and Nestle (NSRGY).

On the short side of the portfolio, we see that Greenlight had been short Corinthian Colleges (COCO) in the for-profit education space. Many hedge funds have been short this sector and Einhorn admits they covered this position too early (but still saw a 91% return). The hedge fund also covered shorts in Office Depot (ODP) and Royal Caribbean (RCL). Einhorn also recently detailed the short thesis on St. Joe (JOE) at the Value Investing Congress, a position he defends with his latest commentary.

Embedded below is David Einhorn & Greenlight Capital's third quarter investor letter:



You can download a .pdf copy here.

Last, but certainly not least, Einhorn makes a point to focus on the shift in the Federal Reserve's policy and that they've been expecting the Fed would be forced to monetize the debt. He highlights this as one of the main reasons he owns physical gold. To see Greenlight's upcoming Q3 portfolio changes detailed in full, be sure to subscribe to Hedge Fund Wisdom as our next issue will be released sometime next week.

Dan Loeb Discloses Gold Bullion and Potash (POT) Positions

For September, Dan Loeb's hedge fund Third Point was up 3.9%. Year to date for 2010, their offshore fund is up 19.1%. Third Point's annualized return now sits at 18% with a correlation to the S&P 500 of 0.41 and a Sharpe Ratio of 1.27. To follow in his successful footsteps, check out Dan Loeb's recommended reading.

In a monthly disclosure to investors, Loeb's portfolio reveals some interesting new plays. At the end of September, Third Point's top positions were:

1. Chrysler (multiple securities)
2. Gold Bullion
3. Delphi Corp (multiple securities)
4. Potash (POT)
5. CIT Group (multiple securities)

The most notable change right off the bat is the listing of gold bullion as Third Point's 2nd largest position. As far as we're aware, Loeb has not owned gold since around the beginning of 2009 when he utilized it as an uncertainty hedge. This position was not present in the previous monthly disclosures from the hedge fund so its fresh appearance is duly noted.

Many investors will be curious as to his rationale for the position. In Third Point's latest letter, Loeb outlined how the firm had put on numerous "asymmetrical trades using derivatives, options and debt securities to hedge against extraordinary global events." They are allocating 1% of fund assets per annum to this protection. In late 2008 and into the first quarter of 2009, Third Point utilized gold (among other things) as 'doomsday and fat tail risk' trades. Gold bullion could again be a part of that basket, but they might have purchased for other reasons too, there's no clear answer.

The second notable portfolio change is Third Point's addition of Potash (POT) to the portfolio in size. As their fourth largest holding, this stock is an arbitrage play. Potash received an unsolicited buyout offer of $130 per share from BHP Billiton (BHP). Shares currently trade above the offer at $141 as speculation grows a bidding war will emerge or BHP will raise their offer.

Third Point's recent winning positions include: Lyondell (LALLF), a post-reorganization equity that many hedge funds have been fond of, including Jamie Dinan's York Capital. In Loeb's second quarter letter to investor, he asserted his fondness for post-reorganization equities and mortgage exposure. Loeb's fund also saw positive performance from their Anadarko Petroleum (APC) stake, a position we revealed after the unfortunate Gulf oil spill. Other winning stakes for Third Point include NewPage Corp and Liberty Media Corp Interactive (LINTA). Losing positions for the firm consist of four undisclosed short positions.

Back in the second quarter, we noted that Third Point reduced equity exposure. That theme is largely still prevalent as the hedge fund is only 26.3% net long equities. They are net short energy at -0.3% and their largest net longs are consumer at 7.9% and financials at 5.9%. In credit, we see a new position as Third Point is net short Government at -14.4%. They are net long mortgage backed securities (MBS) at 19.5% and distressed at 15.8%. In terms of other portfolio positions, we noted how both Loeb's Third Point and David Einhorn's Greenlight Capital recently provided a bridge loan to BioFuel Energy (BIOF).

Dan Loeb Discloses Anadarko Petroleum (APC) Position: Third Point Portfolio Update

Dan Loeb's hedge fund firm Third Point LLC is out with its July Offshore fund portfolio disclosure. For the month of July, the fund was up 3.2%. Year to date for 2010, the fund is up 13.7%. Third Point currently has an impressive 17.9% annualized return with a Sharpe Ratio of 1.25 and a correlation to the S&P 500 of 0.40. To learn to become a successful investor like this hedge fund manager, we'd obviously point you to Dan Loeb's recommended reading list.

In their latest portfolio breakdown, we see some changes worth highlighting. Here's a look at Third Point's top five positions:

1. Chrysler (multiple securities)
2. Delphi Corp (multiple securities)
3. CIT Group (multiple securities)
4. Dana Holding Corp (multiple securities)
5. Anadarko Petroleum (APC)

Keep in mind that 'multiple securities' simply means that they own numerous positions across the capital structure in that specific company and this list takes into account their collective position. Right away there are two major portfolio changes to notify you about. Firstly, Dan Loeb has started a brand new position in Anadarko Petroleum (APC) because it did not appear when we examined Third Point's Q1 portfolio. They've started this position presumably as shares have tumbled due to APC's partial operating stake in the deepwater rig responsible for the oil spill in the Gulf of Mexico. While BP (BP) has taken the majority of the blame for the spill, Anadarko owned a 25% interest and thus bears some liability.

This means that Loeb has joined the ranks of other prominent investors who have identified opportunity as a result of the Gulf oil spill. Just yesterday we highlighted Grey Owl Capital's purchase of Transocean (RIG). Prior to that, Whitney Tilson's T2 Partners bought BP (BP) as they feel the company will have no problem surviving. And although this next company was not directly involved in the spill, David Einhorn's Greenlight Capital purchased Ensco (ESV) as a result of the sector trading down.

The second portfolio change to highlight is in Third Point's PHH Corp (PHH) position. In previous portfolio disclosures, Loeb's hedge fund has listed PHH as one of their top 5 holdings (they owned multiple PHH securities). This time around, however, PHH is not listed in their top 5 positions. This leaves a few scenarios in play: Third Point could have sold part or all of their stake in PHH, or they could have raised their stake in other positions ahead of PHH (for instance their new stake in Anadarko). There's no way to know which scenario is the case and this could only be a minor change, but we'll have to wait to verify. PHH shares traded up 11% yesterday as the company reiterated its full year earnings outlook. In terms of other recent portfolio activity, we've highlighted Third Point's stake in Emmis Communications (EMMSP).

Let's next move to the top winners in their portfolio for July. These included their longs of Delphi (multiple securities), Atlas Pipeline (APL), Chrysler (multiple securities), Lyondell (LALLF), and an undisclosed short position. Of these stakes, you'll recall that Jamie Dinan of York Capital is bullish on Lyondell as well. Third Point's top losing positions for the month consisted of Gala Casino (multiple securities), SemCrude LP (multiple securities), Peregrine Metals (multiple securities) and two undisclosed short positions.

Next, let's focus on their latest exposure levels. In equities, Third Point is long 43.8%, short -12.1%, leaving them net long to the tune of 31.7%. Their largest sector net longs are in Consumer at 8%, Financials at 8%, and Basic Materials at 6%. In credit, Third Point is 50.6% net long with their largest exposure coming from MBS at 19.1%. Their distressed exposure comes in at 16.4% and their Performing exposure at 15.1%. Third Point has significantly reduced their distressed exposure as they were previously 25.1% net long and now are only 16.4% net long. Lastly, in terms of geographic exposure, Dan Loeb's hedge fund is net long the Americas at 84%, net long Europe at 13% and net short Asia at -1%.

Be sure to check out hedge fund manager Dan Loeb's recommended reading list, as well as Third Point's recent portfolio activity.

David Einhorn & Greenlight Capital: Long Apple, Ensco, NCR (Q2 Letter)

Dealbreaker posted up hedge fund Greenlight Capital's second quarter 2010 letter and we wanted to highlight the latest portfolio moves from David Einhorn's camp. Year to date for 2010, Greenlight's funds are up 1.6%, 2.2% and 0.8% respectively. Some of their portfolio gains as of late can be attributed to their long position in physical gold as well as their short of Moody's (MCO). It sounds as though Greenlight will maintain this short position as well, writing "we believe that an eventual, but likely, legal loss will have a significant impact on MCO shares."

While David Einhorn will be presenting investment ideas in October at the upcoming Value Investing Congress (special discount here), we still get an intermediate update on his current portfolio. The main talking point in the hedge fund's letter is their revelation of various new positions. Firstly, they revealed they are long Apple (AAPL) at an average purchase price of $248.09 per share. Greenlight highlights the company's more than $40 per share in cash and thinks that while growth in the next few years will be slower than recent times, the company still has not fully penetrated its various markets. We've highlighted numerous times how AAPL is one of the most popular hedge fund holdings.

Secondly, Greenlight took a new position in African Barrick Gold (LON: ABG). They like that it trades "at less than 6x 2010 EBITDA, a 10% free cash flow yield and $200 per ounce of reserves." Einhorn previously talked about this new stake in his Ira Sohn Investment Conference presentation.

Thirdly, Einhorn touches on their new stake in Ensco plc (ESV). While we revealed Greenlight's ESV stake last week, we now get some color on their thesis. They point out the company's $7 per share in net cash and tangible book value of $37.50. They feel shares of ESV were unjustly sold off as it was not involved in the oil spill and the drilling moratorium should not affect the company's long-term potential. Greenlight's average purchase price of Ensco was $39.41.

Lastly, Greenlight Capital purchased a stake in NCR (NCR) in the second quarter as the stock sold off due to accounting losses on pension obligations, among other reasons. Einhorn points to NCR's strong cash flow generating business and strong net cash balance sheet position. Greenlight purchased NCR at $13.58 per share and MarketFolly actually revealed this stake back in May when Greenlight acquired it.

In terms of positions the hedge fund sold completely out of, we see that they have finally exited their short of Allied Capital (AFC). Their commentary next to this position jokingly says, "So much to say we could write a book about it." If you're unfamiliar, David Einhorn did write a book on this very short-selling battle entitled, Fooling Some of the People All of the Time.

Embedded below is the entire second quarter letter from hedge fund Greenlight Capital:



You can download a .pdf copy here.

Greenlight's top five largest disclosed long positions are: CIT Group (CIT), Ensco (ESV), gold, Pfizer (PFE), and Vodafone Group (VOD). While shares of Pfizer (PFE) continue to trade lower and lower, Greenlight still owns their stake as they feel the company deserves to be trading at a higher earnings multiple than current levels. Remember that you can hear David Einhorn's newest investment ideas at the upcoming Value Investing Congress (special discount here) where he and other top hedge fund managers will be presenting in October.

Latest Exposure Levels From Dan Loeb's Hedge Fund Third Point LLC

Dan Loeb's Offshore Fund at Third Point LLC recently released its latest performance and exposure breakdown. Loeb's hedge fund is worth following simply for this fact: it's generated an annualized return of 17.7% versus 4.1% for the S&P 500 since December 1996. Not to mention, they've done so with a correlation to the S&P of 0.40. Needless to say, those are impressive figures. Those of you desiring to follow in his footsteps can check out Dan Loeb's recommended reading list for wisdom.

For the month of June 2010, Third Point was down 2.0% largely due to their long equity positions in financials. Yet, despite the rough month, they are still up 10.2% for 2010. As of last tally, their Offshore Fund managed $1.793 billion. So while hedge funds had a brutal May, it looks like June was also a losing month for many big players.

Now, to the good stuff: the portfolio breakdown. We've covered countless times how Loeb's fund has been net long distressed debt. This trend remains unchanged. Third Point is 25.1% net long distressed credit and 19.8% net long MBS. While their distressed exposure contributed to negative performance in June, their MBS exposure contributed positively.

Here are Third Point's top positions (keep in mind they own multiple securities in each of these names):

- Chrysler
- Delphi Corp
- CIT Group
- Dana Holding
- PHH Corp

As you'll notice from previous times we've covered Loeb's portfolio, his top holdings remain pretty much unchanged. In equities, Loeb's hedge fund has their largest net long exposure in financials (at 7.8% net long) followed by consumer names (at 4.7% net long). In terms of total long/short exposure, Third Point is 37.9% net long equities and -12.2% short, leaving them 25.7% net long. This is slightly below the average hedge fund exposure levels of around 30% net long. Geographically speaking, Third Point continues to be net short Asia at -1%. They are net long the Americas to the tune of 87% and Europe to the tune of 13%.

In the equity realm, Loeb made note in a recent letter that Third Point still fancies post-bankruptcy equities, deeming them cheap. We'll have to see if any new positions pop in that regard when their next 13F filing is released in a month or so. Loeb's top winning positions last month included two shorts, Icelandic Bank debt, 'Asset Backed Security A', and Novartis/Alcon arbitrage. His top losers were PHH Corp (multiple securities), Liberty Media Interactive, Macy's, Lyondell, and CIT Group (multiple securities). Touching on some of those specific names, you'll recall that Jamie Dinan of York Capital recently stated he was bullish on Lyondell at the Ira Sohn Investment Conference (notes from the event here). Many hedge funds also own a position in Liberty Media and it appears on Goldman Sachs' VIP list. Lastly, you'll recall that David Einhorn's Greenlight Capital has a large CIT stake.

That wraps up notable information from Third Point's latest update. Be sure to savor these broad portfolio updates from Third Point as it's really all you'll get based on Loeb's new philosophy. Per his recent investor letter, his hedge fund won't be talking about their new positions until *after* they've been publicly disclosed via 13F filings. As such, these sector breakdowns are all we'll get in the mean time. As always though, we'll continue to monitor the SEC filings like a hawk. Recent disclosures made by Third Point in that regard include a stake in Xerium Technologies as well as a newly revealed position in Roomstore.

For more resources from Third Point, we of course point you to Dan Loeb's recommended reading list.

Dan Loeb's Hedge Fund Third Point Starts Multiple New Positions, Exits Citigroup: 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 Dan Loeb's hedge fund Third Point LLC. Loeb started his hedge fund with $3.3 million in 1995 and today manages billions with a focus on event-driven and value oriented investments. In the time elapsed since the 13F filing, keep in mind that Third Point has been selling Nabi Biopharma (NABI) and Loeb recently gave commentary on event-driven opportunities in Third Point's investor letter. Since inception, they've seen greater than 15% annual returns. For 2009, Third Point's Offshore fund was up 38.6% and their Ultra fund up 44.2% as noted in our list of hedge fund performance numbers.

Before we proceed, keep in mind that Loeb owns other asset classes that aren't required in these disclosures such as company debt, mortgage backed securities, etc. We recently detailed Loeb's exposure to these assets in our portfolio update on Third Point. To learn how to invest like this hedge fund manager, check out Dan Loeb's recommended reading.

The positions listed below were Third Point'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
Liberty Interactive (LINTA)
OSI Pharmaceutical (OSIP)
Airgas (AIRG)
Walgreen (WAG)
Coca Cola Enterprise (CCE)
Aspen Technology (AZPN)
Pall (PLL)
Alcon (ACL)
Toyota Motor (TM)
Phillips Van Heusen (PVH)
RF Micro (RFMD)
Lear (LEA)
Brocade Communications (BRCD)
Madison Square Garden (MSG) ~ resulting from the spin-off of Cablevision shares they previously owned
Macys (M)
Alkermes (ALKS)
Washington Post (WPO)
Vivus (VVUS)
Kraft (KFT)
Abraxas Petro (ABP)


Increased Positions
Xerox (XRX): Increased position size by 75%
Advanced Micro Devices (AMD): Increased by 50%
CIT Group (CIT): Increased by 34.3%
Popular (BPOP): Increased by 25%
Wellpoint (WLP): Increased by 18.2%


Reduced Positions
Phoenix Companies (PNX): Reduced position size by 76.3%
Dana Corp (DAN): Reduced by 68.8%
Nabi Biophamaceuticals (NABI): Reduced by 14.2% ~ Third Point has since sold more


Positions They Sold Out of Completely
Citigroup (C)
Cablevision (CVC)
Energy Partners (EPL)
Coinstar (CSTR)
Yahoo (YHOO)
Liberty Entertainment (LSTAV)
Hewlett Packard (HPQ)
Pepsi Bottling Group (PBG) ~ inactive due to merger
Pepsiamericas (PAS) ~ same
Capitalsource (CSE)
Greenlight Capital Re (GLRE)
American Water Works (AWK)
Pain Therapeutics (PTIE)
Life Partners (LPHI)
Barclays (BCS)
TCW Strategic (TSI)


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

1. PHH Corp (PHH): 7.6%
2. Transdigm (TDG): 6.8%
3. CIT Group (CIT): 6.5%
4. Wellpoint (WLP): 6%
5. Health Net (HNT): 5.3%
6. Liberty Interactive (LINTA): 5.2%
7. OSI Pharmaceutical (OSIP): 5.1%
8. Xerox (XRX): 4.9%
9. Airgas (ARG): 4.2%
10. Walgreen (WAG): 4.0%
11. Coca Cola Enterprises (CCE): 4%
12. Mead Johnson Nutrition (MJN): 3.7%
13. Aspen Technology (AZPN): 3.7%
14. Pall (PLL): 2.9%
15. Popular (BPOP): 2.6%

Before we analyze some of their moves we need to immediately point out that the 'top positions' above are merely their top equity positions and not Third Point's 'top positions' at the hedge fund overall. According to our Third Point portfolio breakdown, Loeb's largest positions are actually via multiple securities (debt, equity, etc) in Chrysler, Delphi, CIT Group, Dana Holding, and PHH. So, just keep in mind that some of his debt positions are actually the largest positions in Third Point's portfolio.

One of the main things that caught our eye was Loeb's sale of Capitalsource (CSE). Third Point had previously held a position and now joins a slew of other hedgies that sold out of CSE in the first quarter. Interestingly enough, Seth Klarman's Baupost Group still holds their CSE equity stake though. We also highlight Loeb's exit from Citigroup (C) because in the fourth quarter of 2009 it was their second largest US equity position.

In the first quarter, Loeb's hedge fund started sizable new stakes in Liberty Interactive and OSI Pharm, positions that were Third Point's sixth and seventh largest US equity holdings. In fact, the vast majority of Third Point's top equity holdings are new positions they started in Q1 including Airgas, Walgreen, Coca Cola Enterprise, Aspen Technology, and Pall.

Third Point's exit of PepsiAmericas and Pepsi Bottling Group is a result of a merger transaction with PepsiCo that closed. This is the perfect example of an event-driven play that Loeb typically seeks. We see that Third Point maintains a sizable position in Mead Johnson Nutrition (MJN) as well. We previously outlined Loeb's rationale behind MJN in a post: why hedge funds like Mead Johnson Nutrition. We're also starting to see numerous hedge funds that show new or increased positions in Xerox (XRX) as of the first quarter. Loeb's firm was one of them and so that might be something to keep an eye on as well.

David Einhorn must be pissed because Loeb sold out off Greenlight Capital Re, the reinsurance company Einhorn is chairman of. We're just kidding about the being pissed off part, but Third Point had previously owned GLRE for quite some time (although a very small position). On a serious note though, it seems as though Loeb and Einhorn agree on shares of CIT Group. As we saw earlier, Einhorn added to his CIT position. That about wraps up all the talking points from the first quarter so if you want more from Dan Loeb, make sure to check out his recommended reading list.

Assets reported on the 13F filing were $1.4 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, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, and Andreas Halvorsen's Viking Global. Be sure to check back daily for new hedge fund updates.

Bruce Berkowitz's Fairholme Buys Bank of America, Sells Pfizer: 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 in our series is Bruce Berkowitz's Fairholme Capital Management. While not a hedge fund, we track Berkowitz because despite managing over $10 billion, he runs quite a concentrated portfolio. Not to mention, he was named fund manager of the decade by Morningstar. In activity that was reported after this most recent 13F filing, we see that Berkowitz has actually boosted his AIG holdings. Additionally, he recently revealed a brand new stake in Goldman Sachs (GS) at the Value Investing Congress (see detailed notes from the event here). Also, you'll remember that Fairholme has a large debt position in General Growth Properties (GGP) as they've been an integral part of the winning bid (along with Bill Ackman's Pershing Square and Brookfield) that will help to restructure the company. Lastly, note that Berkowitz typically discloses his positions for his Fairholme Fund (mutual fund: FAIRX) on an individual basis, but we are examining the holdings of his entire firm, Fairholme Capital Management. With that in mind, let's take a look at the rest of Fairholme's portfolio.

The positions listed below were their 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
Bank of America (BAC)
American International Group (AIG)


Increased Positions
Berkshire Hathaway (BRK.B): Increased position by 1,458% ~ mainly due to Berkshire's 50/1 stock split
Regions Financial (RF): Increased by 74.8%
Comcast (CMCSK): Increased by 46.1%
Citigroup (C): Increased by 5.94%


Reduced Positions
Daily Journal (DJCO): Reduced position by 26.6%
Spirit AeroSystems (SPR): Reduced by 15.9%
CIT Group (CIT): Reduced by 14.5%
Americredit (ACF): Reduced by 13.2%


Positions They Sold Out of Completely
Pfizer (PFE)
WellPoint (WLP)
Burlington Northern Santa Fe (BNI) ~ bought out by Warren Buffett's Berkshire Hathaway
United Rentals (URI)
White Mountains Insurance (WTM)
Penn West Energy (PWE)
Forest Laboratories (FRX)
Coca Cola (KO)
Bristol Myers Squibb (BMY)
Marshall & Ilsley


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

1. Sears Holdings (SHLD): 14.91%
2. Citigroup (C): 8.61%
3. St. Joe (JOE): 8.1%
4. Humana (HUM): 6.9%
5. Americredit (ACF): 6.81%
6. Bank of America (BAC): 6.56%
7. Regions Financial (RF): 5.57%
8. Hertz Global (HTZ): 5.24%
9. Spirit AeroSystems (SPR): 5.04%
10. American International Group (AIG): 4.8%
11. Leucadia (LUK): 4.71%
12. CIT Group (CIT): 4.46%
13. Berkshire Hathaway (BRK.A): 4.21%
14. Comcast (CMCSK): 3.56%
15. Berkshire Hathaway (BRK.B): 2.86%


Overall, it appears as though Berkowitz is sticking with his 'recovery' play on financials. He added new stakes in Bank of America and AIG (the latter of which we already knew about) and increased holdings in Regions Financial. Additionally, as we mentioned at the very beginning of this article, Berkowitz has just started a new stake in Goldman Sachs and he has been since adding to his AIG position as well.

In the past we detailed how Berkowitz liked health plays but it appears he is now less fond of some of them. After previously holding a massive stake in Pfizer (PFE), he has now completely sold out. This is the exact opposite of what we've seen David Einhorn do, as he's been building a Pfizer stake. Sticking with the Berkowitz/Einhorn dichotomy, we see that Berkowitz was selling some shares of CIT Group while Einhorn was buying. That said, they both own sizable positions.

We also highlight Berkowitz's sale of WellPoint (WLP) as Warren Buffett's Berkshire Hathaway also completely sold out of this position. While these two notable investors have sold out, we've seen various other hedge funds still owning this name. And speaking of Warren Buffett, you'll note that Fairholme Fund drastically increased their position in the B shares of Berkshire Hathaway (BRK.B).

Lastly, we want to bring to your attention that Fairholme also recently filed an amended 13D on shares of TAL International (TAL) due to activity on May 17th. Per the filing, Fairholme now shows a 6.2% ownership stake in the company with 1,890,453 shares. This is a decrease in their position as they've been selling shares throughout the month of May. Those interested in the specifics of the sales can view the SEC filing here. So, keep in mind that the data posted up in the 13F analysis article above is already stale.

Assets reported on Fairholme Fund's 13F filing were $10.7 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, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, and Lee Ainslie's Maverick Capital. Be sure to check back daily for new hedge fund updates.

David Einhorn's Greenlight Capital Bets on CIT Group & Pfizer: 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 David Einhorn's hedge fund Greenlight Capital. Greenlight is a value oriented investment firm with a focus on spin-offs, mergers and other catalytic situations. Einhorn graduated Summa cum laude from Cornell and launched his long/short hedge fund with $1 million back in 1996 and nowadays is a multi-billion dollar fund. For 2009, Greenlight's various hedge funds were up between 30.6% and 36.9% as noted in our hedge fund performances list.

Greenlight has also returned an impressive 22% annualized since inception if you needed another reason to track them. In terms of recent portfolio activity, we posted up two of Greenlight's position changes. To learn more about Einhorn's investment process, we highly recommend reading his book: Fooling Some of the People All of the Time.

The positions listed below were Greenlight'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
Xerox (XRX)
NVR (NVR)
Flagstar Bancorp (FBC)
Symetra Financial (SYA)
Coinstar (CSTR)
Iconix Brand Group (ICON)


Increased Positions
Energy Partners (EPL): Increased position by 2,226.7%
Foster Wheeler (FWLT): Increased by 401%
CIT Group (CIT): Increased by 67.55%
Ralcorp (RAH): Increased by 50%
EMC (EMC): Increased by 24.5%
Pfizer (PFE): Increased by 22.63%


Reduced Positions
URS (URS): Reduced position by 50%
Health Management (HMA): Reduced by 28.5%


Positions They Sold Out of Completely
Boston Scientific (BSX)
McDermott (MDR)
BJ Services (BJS)
Patterson UTI-Energy (PTEN)
Ticketmaster (TKTM - merged with LiveNation (LYV), a position Einhorn sold)
Endurance Specialty Holdings (ENH)
MEMC Electronics (WFR)
Barrick Gold (ABX)
Huntsman (HUN)
Nike (NKE)
Sinclair Broadcast (SBGI)


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

1. CIT Group (CIT): 14.07%
   
2. Pfizer (PFE): 10.62%
   
3. Cardinal Health (CAH): 8.05%
   
4. CareFusion (CFN): 7.86%
   
5. EMC (EMC): 5.48%
   
6. Einstein Noah Restaurant Group (BAGL): 4.45%
   
7. Aspen Insurance (AHL): 4.07%
   
8. Travelers (TRV): 3.92%
   
9. Microsoft (MSFT): 3.40%
   
10. Foster Wheeler (FWLT): 3.36%
    
11. Ralcorp (RAH): 3.12%
    
12. URS (URS): 3.05%
    
13. Health Net (HNT): 2.97%
    
14. Everest Re (RE): 2.71%
15. MI Developments (MIM)
    

We already knew from Greenlight Capital's investor letter that their portfolio activity was pretty muted for the first quarter and the 13F filing confirms that. That said, there are a few transactions we wanted to highlight. They added significantly to their position in CIT Group (CIT) which is intriguing because it is their top US equity long. We just noted yesterday that Seth Klarman's Baupost Group sold completely out of CIT so the divergence here is intriguing. Greenlight's exit from shares of Boston Scientific was also notable, but we already knew about that from their letter.

If you hadn't noticed, there are clearly two portfolio themes at play here: health and insurance. Einhorn has owned many of these positions for multiple quarters now and it's clear he thinks the market is undervaluing these companies' prospects. While Einhorn specifically holds a decent sized stake in Travelers (TRV), we learned yesterday that Warren Buffett sold out of TRV. So yet again, we have a divergence of opinion from two great investors.

Other notable activity out of Einhorn's hedge fund includes adding to their position in Pfizer (PFE), which is now their second largest holding. Additionally, they added heftily to their position in infrastructure play Foster Wheeler (FWLT). While Greenlight increased their position in Energy Partners (EPL) substantially on a percentage basis, the position is still relatively small in the context of their overall portfolio.

In the past, we'd also detailed Einhorn's thesis on Vodafone (VOD) but prudent observers will notice this position is not listed in the 13F filing. This is most likely because Greenlight has invested in the VOD shares traded directly in London, a security that does not require disclosure here in the US with the SEC. As we saw in Greenlight's first quarter letter, Einhorn still owns Vodafone and as a matter of fact it's one of their top positions. Additionally, they also still hold a large position in physical gold which obviously does not appear in disclosures either. Einhorn has selected physical gold as it was cheaper to maintain than paying expense ratios on exchange traded funds like GLD. To learn more about Greenlight, head to Einhorn's book entitled, Fooling Some of the People All of the Time.

Assets reported on the 13F filing were $2.93 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for sorting through all the hedge fund portfolio maneuvers and backtesting the performance (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 Capital Management. Be sure to check back daily for new hedge fund updates.

David Einhorn Dumps Boston Scientific (BSX): Greenlight Capital's Investor Letter

David Einhorn recently sent out hedge fund Greenlight Capital's first quarter investor letter. In it, we learn that the fund has exited their position in Boston Scientific (BSX). Readers will remember that Einhorn had just started this position and mentioned it in his fourth quarter investor letter. They purchased shares of BSX for $8.42 and sold them for $7.57. So, Greenlight has cut their losses quickly on this one and moved on to the next investment.

The Greenlight team writes, "We had bought BSX based on the view that new management had been brought in to execute a significant turnaround plan, which after careful study, it would detail contemporaneously with fourth quarter results. Instead, management decided not to provide any meaningful targets, raised new operating issues, and seemed to say that turning the company around would be harder than they thought and would take a long time. We re-assessed our thesis and forecasts, and limited our loss by selling the position."

Overall, Greenlight notes that they didn't have much portfolio turnover to report. Greenlight's Offshore fund was down 1.3% for the year as of the end of March as noted in our hedge fund performances post. However, keep in mind that Greenlight has also returned 22% annualized since inception.

Einhorn's five largest positions as of the first quarter were:

1. CIT Group (CIT)
2. Gold
3. Lanxess (LXSG)
4. Pfizer (PFE)
5. Vodafone Group (VOD)

Remember that if you want a peak inside Greenlight's investment research process, we recommend reading David Einhorn's book: Fooling Some of the People All of the Time. In regards to his recent VOD position, we recently examined Einhorn's Vodafone thesis for those of you seeking their investment rationale. Keep in mind also that their gold position is in physical gold, as they were one of the first major hedge funds to use this rather than proxies for gold like exchange traded funds.

Possibly the most notable thing to take away from Greenlight's investor letter are their exposure levels. Excluding credit derivatives, gold and foreign currencies, Greenlight Capital had an average exposure to equities and fixed income of 100% long and 70% short. This 30% net long level coincides with what we've seen lately from various hedge fund research outlets that have indicated hedgies currently have below average net long exposure. Hedge funds have definitely become more cautious as of late.

Embedded below is Greenlight Capital's first quarter investor letter:



You can directly download a .pdf here.

In the letter we also learned that Greenlight closed out various longs in BJ Services (BJS), McDermott (MDR), LiveNation (LYV), MEMC Electronics (WFR), and Mercer (MERC). Additionally, we saw that they covered shorts in Abercrombie & Fitch (ANF), Federal Realty Investment Trust (FDR), and HSBC (HBC). While Einhorn and company exited Live Nation, we've made note recently that Jay Petschek's hedge fund Corsair Capital started a new position in LYV and Stephen Mandel's Lone Pine Capital started a stake as well, so it's intriguing to see the divergence of opinion here.

That about wraps things up on Greenlight's end. To learn how to invest like Einhorn, we highly recommend reading his book: Fooling Some of the People All of the Time. And for more insight, you can also read David Einhorn's previous investor letter here.

Dan Loeb's Third Point Still Sees Event-Driven Opportunity: Investor Letter

Thanks to DistressedDebtInvesting for posting this up as below is the latest investor letter from Dan Loeb's hedge fund Third Point. We've covered Loeb's fund in-depth for some time now and last week we posted up Third Point's recent performance and earlier we took a look at their equity portfolio as well.

In the letter, Loeb touched on some of their notable positions and mentioned that their CIT stake is one of their largest and they believe that the company will transition to a lending institution with a retail deposit base. By reducing its debt and extending maturities, CIT now has time on their side to make this segway. In terms of their mortgage backed securities (MBS) exposure, they mainly have invested in single name senior RMBS stakes. Turning to equities, their Health Net (HNT) stake was purchased when shares were hit due to the loss of the Tricare contract. Third point likes HNT due to quality management and expected increase in profitability. Their stake in Mead Johnson Nutrition (MJN) is described as their classic risk arbitrage play as they see it as a "best-in-class asset" that is solid as a standalone company but is a prime takeover target as well.

Turning to Third Point's investment outlook, Loeb is constructive despite the modest valuations we're currently seeing. Interestingly though, Loeb is worried about various risks that could "unravel quickly in a step function." To try and mitigate this, Third Point has put on various tail risk hedges. Lastly, it was interesting for Loeb to note that they have avoided certain 'consensus' hedgie trades such as long gold, commodity stocks, and emerging markets. While Third Point has taken their exposure down a bit since its peak in January, they still remain net long distressed debt and MBS as we noted in Third Point's recent performance.

Embedded below is Third Point's fourth quarter investor letter:



You can directly download a .pdf here.

For more of our coverage of this hedge fund, head to Dan Loeb's recommended reading list as well as our post on Third Point's portfolio.

Eddie Lampert's Hedge Fund RBS Partners: Portfolio Update (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 RBS Partners, the parent company of Eddie Lampert's hedge fund ESL Investments. Prior to forming ESL, Lampert worked with Robert Rubin at Goldman Sachs risk arbitrage department. Prior to that, Lampert graduated from Yale where he was a member of the skull and bones secret society, as well as Phi Beta Kappa. Lampert runs highly concentrated portfolios and his focus has long been on the retail sector. He has graced Forbes' billionaire list but was one of the top hedge fund losers in 2008.

Recently, we posted up some interesting activity out of Lampert's investment vehicles. And in the past, we've also covered Eddie's 2009 annual letter. Interestingly enough, Richard Rainwater has dubbed Lampert "the greatest investor of his generation."

The positions listed below were RBS Partners' 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
CIT Group (CIT)
Wells Fargo (WFC)
Bank of America (BAC)


Increased Positions
Sears Holdings (SHLD): Increased by 27.8%
Acxiom (ACXM): Increased by 22.1%
Citigroup (C): Increased by 14%
Autozone (AZO): Increased by 8.1%
Autonation (AN): Increased by 5.9%
Capital One (COF): Increased by 5.3%


Reduced Positions
SLM (SLM): Reduced by 12.1%
Genworth Financial (GNW): Reduced by 5%


Removed Positions (Sold out completely):
n/a


Top Holdings by percentage of assets reported on 13F filing

1. Sears Holdings (SHLD): 49.9%
   
2. Autozone (AZO): 28.9%
   
3. Autonation (AN): 13.8%
   
4. Capital One (COF): 3.3%
   
5. CIT Group (CIT): 1.1%
   
6. Citigroup (C): 0.9%
   
7. Genworth Financial (GNW): 0.9%
   
8. Wells Fargo (WFC): 0.4%
   
9. Acxiom (ACXM): 0.3%
   
10. SLM Corp (SLM): 0.3%
    
11. Bank of America (BAC): 0.1%
    

Eddie Lampert's hedge fund is the definition of a concentrated portfolio. But, that's what happens when you effectively takeover a company (in this case Sears). Many compared Lampert to Warren Buffett a few years ago, but those comparisons have gone by the wayside as Lampert has struggled to generate the returns many thought he was capable of. While he has definitely helped engineer Sears' recovery, the job is by no means done.

They sold a slight amount of SLM and added modestly to their Sears, Acxiom, and Citigroup stakes. Citigroup has made a lot of headlines as of late on our site, mainly due to the fact that lots of hedge funds have been adding C. Additionally, Eddie Lampert shows a new stake in CIT Group. But, just as we've noted with all the other hedge funds that now show this stake, it is most likely due to a debt to equity conversion. Lampert also shows new (small) stakes in Wells Fargo (WFC) and Bank of America (BAC).

That about wraps up his portfolio because as Sears goes, Lampert goes. All data used for this article comes from Alphaclone. It's by far the best hedge fund replicator we've ever used and they of course pull data directly from the SEC filings so that you can backtest tons of strategies. RBS Partners' assets reported on the 13F filing were $11 billion this quarter compared to $9.3 billion last quarter. As you can see, that's almost a $1.7 billion increase in assets invested long in US equities. 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, and Dan Loeb's Third Point. Check back daily for our new updates.