Matt Iorio's White Elm Capital Adds Heavily To SBA Communications (SBAC), Vistaprint (VPRT), & Dolby Labs (DLB): 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 Matt Iorio's hedge fund White Elm Capital. Before founding White Elm, Iorio spent six years at Stephen Mandel's Lone Pine Capital. And before his entrance into the investing world, Iorio received his MBA from Dartmouth's Tuck School of Business and his undergraduate degree from the University of Virginia. We started tracking Iorio once he started his own fund because he had helped contribute to Lone Pine's success and is well versed in the bottom-up stockpicking process. White Elm focuses on a long/short equity strategy with an emphasis on company specific research similar to many of the hedge funds we track.

Iorio launched his fund with $250 million and is targeting 'slow and steady growth' instead of ballooning assets under management. It seems he is aiming for fewer investors and desires to be a more nimble fund while slowly working his way up to 'juggernaut' status like many funds that hit the $1 billion AUM threshold. We applaud this approach as too many times we've seen funds quickly rocket up their assets under management only to find difficulty executing their same strategy.

The positions listed below were White Elm's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
Resolute Energy (REN)
Verisk Analytics (VRSK)
Orbitz (OWW)
CTrip (CTRP)
East West Bancorp (EWBC)
Schweitzer Mauduit (SWM)
Liberty Global (LBTYA)
Global Cash Access (GCA)
Resolute Energy (REN-WS)
New Oriental Education (EDU)
Popular (BPOP)


Increased Positions
Dolby Labs (DLB): Increased position by 377.6%
Longtop Financial (LFT): Increased by 149%
Martin Marietta (MLM): Increased by 128.6%
SBA Communications (SBAC): Increased by 95.2%
Vistaprint (VPRT): Increased by 84.2%
Denbury Resources (DNR): Increased by 35.4%
Transdigm Group (TDG): Increased by 32.5%
Umpqua (UMPQ): Increased by 31.9%
JPMorgan Chase (JPM): Increased by 10.9%
CNInsure (CISG): Increased by 8%


Reduced Positions
Collective Brands (PSS): Reduced position by 25.6%
Visa (V): Reduced by 20.6%
Crown Castle (CCI): Reduced by 16.4%
Apple (AAPL): Reduced by 11%
American Express (AXP): Reduced by 8.9%


Removed Positions (Sold out completely):
Pinnacle Entertainment (PNK)
Monsanto (MON)
RenaissanceRe (RNR)
Harley Davidson (HOG) Puts
Garmin (GRMN) Puts
Fastenal (FAST)
Green Mountain Coffee Roasters (GMCR)
XL Capital (XL)


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

1. CNInsure (CISG): 6.36%
2. Apple (AAPL): 6.00%
3. Crown Castle (CCI): 5.15%
4. SBA Communications (SBAC): 5.14%
5. Vistaprint (VPRT): 4.97%
6. JPMorgan Chase (JPM): 4.49%
7. American Express (AXP): 4.33%
8. Atwood Oceanics (ATW): 4.20%
9. Dolby Laboratories (DLB): 4.11%
10. Mastercard (MA): 3.76%
11. Visa (V): 3.45%
12. Transdigm (TDG): 3.35%
13. Collective Brands (PSS): 3.12%
14. Fifth Third Bancorp (FITB): 2.83%
15. Resolute Energy (REN): 2.82%
    

Probably the most notable changes in White Elm's portfolio were the massive additions to their positions in SBA Communications (SBAC) and Vistaprint (VPRT). Both of those positions are in their top five holdings. They also substantially added to Dolby Laboratories (DLB), over tripling their stake and bringing it up to their ninth largest US equity long. White Elm's portfolio similarities to Lone Pine's should come as no surprise given Iorio's previous ties to that hedge fund. As you can also see, we have yet another hedge fund heavily invested in tower stocks as Iorio has chosen to play the theme via both SBAC and CCI. The interesting dynamic here is he sold some CCI and almost doubled his SBA stake.

In terms of brand new positions, White Elm started a stake in Verisk Analytics (VRSK) which we take note of because a few hedgies have positions in this name. Intriguing to us was the addition of Orbitz (OWW). In the past we'd noted various hedge funds with bullish bets on online travel rival Priceline.com. Maybe Iorio's hedge fund has stumbled on another intriguing play in this theme as he owns about the same amount of PCLN and OWW. While both are smaller stakes in the overall portfolio equation, it was interesting to see Orbitz added into the mix as many hedgies had preferred to invest solely in PCLN.

Of the positions they sold out of, Pinnacle and Monsanto were notable as they had previously been decent sized stakes for them. This is an interesting divergence between White Elm and Lone Pine as White Elm dumped MON while Lone Pine held it as their second largest position. Overall, White Elm shows a decrease in financials exposure and an increase in services exposure.

Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $274 million this quarter compared to $227 million last quarter, a 20% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.

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

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

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

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

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

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


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


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


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


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


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

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

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

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

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

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

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

(click to enlarge)

(click to enlarge)

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

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