What We're Reading ~ 9/8/16

In-depth pitch on Liberty Global Latin America (LILA/K) [Find Me Value]

A second look at Amerco (UHAL) [Punch Card Research]

WD-40 (WDFC): a case study of the bubble in 'safe' stocks [Intrinsic Investing]

Analysis of Dell Technologies new VMWare tracking stock [Clark Street Value]

Morris Mark on four stocks he likes [Barrons]

Uber: from zero to seventy billion [Economist]

Google, Uber and the evolution of transportation [Stratechery]

Why electric cars will be here sooner than you think [WSJ]

How Apple's car could crack the automotive industry [Autocar]

Old article on capital allocator Henry Singleton [BrianLangis]

A look at the online travel industry [Phocuswright]

Why walking helps us think [New Yorker]

Inside Dyson's reinvention factory [Forbes]

Will Amazon kill FedEx and UPS? [Bloomberg]

On subscription retail [The Robin Report]

Theranos: how Elizabeth Holmes's house of cards fell [Vanity Fair]

Greenlight Capital Q2 Letter: New Positions in Applied Materials, Bank of New York Mellon

David Einhorn's hedge fund Greenlight Capital is out with its second quarter letter.  Greenlight returned (1.5)% in Q2 and year-to-date is (3.3)%.  Their average exposure was 103% long and 86% short, leaving them net long only 17%.  The letter details numerous recent portfolio moves:

New long positions: Applied Materials (AMAT), Bank of New York Mellon (BK), CNX Coal Resources (CNXC)

Sold long positions: Altice (AMS:ATC), Conn's (CONN), EMC (EMC), Marvell Technology (MRVL), Nokia (NOK), Playtech (LON:PTEC)

Covered shorts: Intuitive Surgical (ISRG), Vale (VALE)

Einhorn talks about all of the positions in the letter and also gives commentary on Micron (MU), one of his biggest positions that has sold-off recently.

At the end of Q2, Greenlight's largest positions in alphabetical order were: Apple (AAPL), CONSOL Energy (CNX), General Motors (GM), gold, Micron Technology (MU), and SunEdison (SUNE).

Embedded below is Greenlight's Q2 letter:

   Greenlight Q2 15

ValueWalk first posted the letter.

Zack Buckley Shorts Splunk: Value Investing Congress

Continuing coverage, we're posting up notes from the Value Investing Congress.  Below are notes from the presentation of Zack Buckley of Buckley Capital Partners.  His talk was entitled 'Is it 1999 Again?' alluding to the year when tech company valuations were sky high with bad business models

Buckley made a head-turning statement when he said he was long China frauds and visited 50 Chinese companies.  "When I went to China, I was long, when I came back, I was short."  He argued that shorting all the various Chinese frauds is "played out."


Short Splunk (SPLK)

The company monitors web traffic.  Revenue model: one-time fee for use of the software with a maintenance contract. Annual term fees to license the software, based on indexing capacity. IPO at $17, up 90% first day.  Now $36.72, $4.23B market cap, easy to short, P/TTM sales 27x, Trades at 271x street 2015 EBITDA.

Not just a valuation short, it has a business model problem: switching costs are very low for customers, very little patent protection. Not really a Software-as-a-Service (SaaS) business, since they sell a package.

Only 35% of revenue is recurring, still Salesforce.com (CRM) trades at 8x sales, SPLK at 20x.  Lots of competition: SAP, EMC, ORCL. Squeezed by both huge listed competition, and small new VC-backed firms.

Potential price war, competition charges $34k for what they charge $120k for. 90% gross margin business with negative 10% operating margins. Also insiders are selling aggressively, filing a secondary right after they went public. 65 employees, directors, VC funds, CEO, CFO, CTO.  Lock-up ends in 2 weeks, 31M shares, Oct 15th.

Look at what happened at Groupon (GRPN), Zynga (ZNGA). Trades at 27x TTM, unprofitable.  Buyout unlikely, as comps were around 7-8x price/sales.  68% over-valued, could be a $12 stock.

Assumptions for bull case to work: 40% 5 year growth, 29% FCF margins, and 45x multiple.  FCF margins are 1/6 that level now.

Question & Answer

But revenue is doubling every year?  Yes, but the rate of growth is slowing. shorts have been wrong on CRM for a long time, is it the same?  He says if it does grow like that, maybe, but it has very little recurring revenue, whereas CRM has 90% recurring revenue with high switching costs.


Embedded below is Buckley's slideshow presentation from the Value Investing Congress:





Be sure to check out the rest of the hedge fund presentations from the Value Investing Congress.

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's Greenlight Capital Betting On Boston Scientific (BSX): 13F Analysis

(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 value investor David Einhorn and his hedge fund Greenlight Capital. As we learned in Einhorn's recent investor letter, Greenlight Capital has returned 22% annualized since inception, a truly solid track record. Their emphasis is typically on spin-offs, mergers, and other value unlocking events. For 2009, Greenlight's various hedge funds were up 36.9%, 33.7%, and 30.6% as mentioned in our 2009 hedge fund performance numbers post.

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


Brand New Positions
Boston Scientific (BSX ~ we already knew about this position from Einhorn's letter)
CIT Group (CIT)
Ralcorp Holdings (RAH)
Becton Dickinson (BDX)
Energy Partners (EPL ~ this one was a very small position)


Increased Positions
Foster Wheeler (FWLT): Increased by 92.9%
Pfizer (PFE): Increased by 23.5%
URS Corp (URS): Increased by 4.81%
Automatic Data Processing (ADP): Increased by 3.2%


Reduced Positions
Barrick Gold (ABX): Reduced by 94.7%
Huntsman (HUN): Reduced by 89.66%
Sinclair Broadcast (SBGI): Reduced by 80.7%
Teradata (TDC): Reduced by 66.2%
Patterson UTI (PTEN): Reduced by 62.3%
MEMC Electronics (WFR): Reduced by 60%
Nike (NKE): Reduced by 53.9%
Endurance Specialty Holdings (ENH): Reduced by 29%
BJ Services (BJS): Reduced by 26.7%
Ticketmaster (TKTM): Reduced by 25.9%


Removed Positions (Sold out completely):
EchoStar (SATS)
Danaos (DAC)
Teekay (TK)
Anixter (AXE)
Belden (BDC)
Crosstex Energy (XTXI)
Novatel Wireless (NVTL)
Duke Realty (DRE)
Smithfield Foods (SFD)
Aircastle (AYR)
Colonial Propeerties (CLP)
General Cable (BGC)
Liberty Media (LINTA)
Oshkosh (OSK)
Amkor (AMKR)
AerCap (AER)
Wyeth (WYE)


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

1. Boston Scientific (BSX): 10.54%
2. Pfizer (PFE): 9.65%
3. Carefusion (CFN): 7.81%
4. Cardinal Health (CAH): 7.57%
   
5. CIT Group (CIT): 6.25%
6. URS (URS): 5.76%
7. EMC (EMC): 4.48%
8. Travelers Companies (TRV): 3.81%
9. Aspen Insurance (AHL): 3.78%
10. Einstein Noah Restaurants (BAGL): 3.78%
11. Microsoft (MSFT): 3.71%
12. Everest Re (RE): 3.01%
13. HealthNet (HNT): 2.92%
14. McDermott (MDR): 2.81%
15. MI Developments (MIM): 2.49%
    

As you can see, the theme of health plays prominently in Greenlight Capital's long US equity portfolio. By far the largest activity out of Einhorn's fund in the fourth quarter was their brand new position in Boston Scientific (BSX). They also show a new stake in CIT Group (CIT), but keep in mind that this is most likely a result of the debt to equity conversion. Not to mention, we already knew of these positions since Einhorn disclosed them in his recent investor letter. However, we did not quite know the size of their BSX stake as it is now their top US equity long holding. Pfizer comes in a close second, a position which they again added to in the fourth quarter.

Another notable increase was that they almost doubled their stake in Foster Wheeler, though the position is still sized smaller relative to their overall portfolio. On the selling side, Greenlight was out in full force as they unloaded a ton of names and heavily reduced others such as Huntsman, Teradata, and Barrick Gold. Don't forget that Einhorn also has a large physical gold position that obviously doesn't show up in these filings, so that could partially explain the sale of that last position.

Keep in mind also that Greenlight also has numerous European equity positions that don't show up in a 13F filing and we know they have a large position in Vodafone Group and we also detailed their new position in F&C Asset Management. Assessing their entire portfolio, Greenlight's six largest disclosed long positions are Arkema, Boston Scientific, CIT Group, Ford Motor Company debt, gold, and Vodafone Group.

If you wanted to better understand how Greenlight hypothesizes and researches their investment themes, we highly recommend checking out Einhorn's book Fooling Some of the People All of the Time: A Long Short Story. Typically, Greenlight approaches things by identifying mispricings in the markets and then proceeding from there. Their performance track record speaks volumes as to their success.

Assets from the holdings reported to the SEC via 13F filing were $2.79 billion this quarter compared to $2.66 billion last quarter. Remember that these filings are not representative of the hedge fund's entire base of assets under management. Therefore, the figures above represent the percentage of their reported 13F assets, not their entire portfolio.

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 and Carl Icahn's hedge fund Icahn Partners so check back daily for our 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.

Bill Ackman's Pershing Square Boosts McDonald's Stake (MCD)

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.

Yesterday we kicked off our coverage with the most requested hedge fund by readers: Seth Klarman's Baupost Group. Today, we're continuing our coverage with another highly requested fund: Bill Ackman's Pershing Square Capital Management. Ackman is a well known value oriented and activist hedge fund manager who often takes large stakes in companies. For a more in-depth look at Bill Ackman, head to our profile of Pershing Square here.

Ackman's fund is good to track via SEC filings because he runs a very concentrated equities portfolio and typically holds the names for a longer timeframe. This way, the timelag associated with SEC filings is not detrimental to our coverage. Not to mention, Ackman typically takes larger stakes in companies which often require 13G or 13D forms to be filed so we are always on top of his portfolio maneuvers. And, our coverage of his portfolio via his latest 13F highlights just why it is prudent to monitor all SEC filings by any given manager.

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):
Corrections Corp of America (CXW) - See Ackman's presentation on this play


Some Increased Positions (Positions they already owned but added shares to)
McDonald's (MCD): Increased by 243.6%
Target (TGT): Increased by 4.6%


Flat Positions (No change since Q2)
Greenlight Capital Re (GLRE)
EMC (EMC)
Borders (BGP)


Some Reduced Positions (Some positions they sold shares in)
Automatic Data Processing (ADP): Reduced by 15.7%


Removed Positions (Positions they sold out of completely)
n/a


Pershing's Entire Portfolio (by percentage of assets reported on 13F filing)

1. Target (TGT): 38.80%
2. EMC (EMC): 31.95%
3. McDonalds (MCD): 15.04%
4. Automatic Data Processing (ADP): 7.68%
5. Corrections Corp of America (CXW): 5.32%
6. Borders Group (BGP): 1.05%
7. Greenlight Capital Re (GLRE): 0.15%
   

As we mentioned earlier, Pershing Square runs a very concentrated portfolio. Target makes up the bulk of their holdings but keep in mind that much of that is due to their Pershing Square IV hedge fund that holds Target as its only position. The only new addition to Pershing Square's portfolio is that of Corrections Corp of America (CXW). We had already detailed his thesis behind this investment from his presentation at the Value Investing Congress. The other notable change to their portfolio was the boost in their MCD position and Ackman detailed some of his thoughts on this investment in his Q2 investor letter.

While SEC filings do not require funds to disclose short positions, we do know that one of Ackman's shorts is real estate play Realty Income (O). Previously, we posted up Pershing's presentation on O which laid out why he thinks it will have to cut its dividend, sending its retail investor base fleeing.

The fact that we know one of Ackman's shorts in addition to almost all of his longs has made readers wonder why investors are willing to pay management and performance fees for his hedge fund when the majority of his positions are readily disclosed. The counterpoint to that question would be the fact that you don't know *all* of his shorts, nor can you put on his positions that are institutional in nature. Typical investors usually don't have access to credit default swaps (CDS), a tool Ackman likes to use for putting on his short plays. And, in addition to his equity plays, Ackman also has various positions in the debt markets (General Growth Properties being a prime example). So, while you can create a semi-Pershing portfolio simply through their equity plays, you can't entirely replicate their portfolio solely through SEC filings.

Those of you avidly tracking the General Growth Properties (GGWPQ) situation will note that it is not present in this 13F filing. This is *not* because he has sold out. Pershing still holds GGWPQ debt and equity. It is simply not listed because the SEC has deemed GGWPQ to no longer be a reportable security for 13F filings. This is most likely due to the fact that they are no longer listed on the exchange (GGWPQ is traded in OTC markets). The main thing to take away from this is the fact that we will still see Ackman's moves in GGWPQ through Form 4 filings since he is now on the board of directors. For more info on their position, Ackman's Q2 investor letter briefly touches on GGWPQ here.

Post-13F, Pershing Square has also recently revealed a position in Landry's Restaurants (LNY) but due to the complex nature of that situation we will be penning a separate post on the details shortly.

Assets from the collective holdings reported to the SEC via 13F filing were $3.1 billion this quarter compared to $2.26 billion last quarter, a notable increase in assets invested in long equities. 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. Realistically, the position percentages are more watered down in their actual hedge fund portfolio since their actual AUM is a figure much larger than what is reported on a 13F.

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 so check back daily as we'll be posting up a new hedge fund each day.