What We're Reading ~ 4/19/17

The Attention Merchants: The Epic Scramble To Get Inside Our Heads [Tim Wu]

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

Inside the hotel industry's plan to combat Airbnb [NYTimes]

Two law professors mimic activist hedge fund: a corporate raiding adventure [The Atlantic]

Vanguard is growing faster than everybody else combined [NYTimes]

Q&A with Blackrock's (BLK) Larry Fink [Bloomberg]

Why Facebook (FB) keeps beating every rival: it's the network of course [NYTimes]

A look at the first decade of augmented reality [Ben Evans]

Barry Ritholtz's rules of valuations [The Big Picture]

The making of a brand [Collaborative Fund]

Is American retail at a historic tipping point? [NYTimes]

E-commerce is a bear [Andy Dunn]

American Express, challenged by Chase, is losing the 'snob' war [NYTimes]

The potential of graphene to revolutionize the airline industry [Richard Branson]

A day in the life of a food vendor [NYTimes]

Goldman Sachs Very Important Short Positions For Hedge Funds: Q1 2012

Goldman Sachs is out with its Q1 2012 Hedge Fund Trend Monitor and we've already posted up Goldman's VIP list of most important stocks to top funds.  Now we're posting a new addition to their research: the very important short position list.

This tracks short exposure of hedge funds as an equal-weighted basket that "consists of 50 S&P 500 constituents with the highest total dollar value of short interest outstanding."  It can be accessed on Bloomberg via < GSTHVISP >.

Goldman emphasizes that this list is not based on 13F holdings (because hedge funds are not required to disclose shorts).  They also note that it's not a basket of stocks most held short.


Goldman Sachs Very Important Short Positions For Hedge Funds

Stock, value of short interest (in $ billions)

1. Johnson & Johnson (JNJ): $2.9
2. Exxon Mobil (XOM): 2.8
3. Intel (INTC): 2.6
4. International Business Machines (IBM): 2.4
5. Amazon.com (AMZN): 2.4
6. AT&T (T): 2.3
7. Chevron (CVX): 2.1
8. Verizon (VZ): 1.8
9. Duke Energy (DUK): 1.7
10. Walt Disney (DIS): 1.5
11. Abbott Laboratories (ABT): 1.4
12. Coca Cola (KO): 1.4
13. General Electric (GE): 1.4
14. Walmart Stores (WMT): 1.3
15. Caterpillar (CAT): 1.2
16. ConocoPhillips (COP): 1.2
17. Walgreen (WAG): 1.2
18. Time Warner (TWX): 1.1
19. Lockheed Martin (LMT): 1.1
20. Home Depot (HD): 1.1
21. Dell (DELL): 1.1
22. Bristol Myers Squibb (BMY): 1.1
23. Oracle (ORCL): 1.1
24. Schlumberger (SLB): 1.0
25. United Parcel Service (UPS): 1.0


Of the above. David Einhorn recently made comments about Amazon.com (AMZN) at the Ira Sohn conference.  While he seemed to be skeptical of the company during his talk, he did not say he was short.  He highlighted that the company has destroyed other businesses, taking market share, but criticized their weak profit growth.

Jim Chanos is short Dell (DELL) and he points to the decline of personal computing in favor of tablets and other mobile devices.  He's been correct in that regard as Dell recently reported declines in those segments in their latest earnings release.  But of course the bull case points to Dell's other business lines as they shift toward the enterprise. 


Here's the rest of Goldman's Very Important Short Positions List:

26. Amgen (AMGN): 1.0
27. AvalonBay (AVB): 1.0
28. Chipotle Mexican Grill (CMG): 1.0
29. Boston Properties (BXP): 1.0
30. Union Pacific (UNP): 0.9
31. Simon Property Group (SPG): 0.9
32. Procter & Gamble (PG): 0.9
33. Cerner (CERN): 0.9
34. Host Hotels & Resorts (HST): 0.8
35. Kohl's (KSS): 0.8
36. Waste Management (WM): 0.8
37. CenturyLink (CTL): 0.8
38. Carnival (CCL): 0.8
39. Philip Morris (PM): 0.8
40. American Express (AXP): 0.8
41. DuPont (DD): 0.8
42. McDonalds (MCD): 0.8
43. MetLife (MET): 0.8
44. Fastenal (FAST): 0.8
45. Merck (MRK): 0.7
46. Comcast (CMCSA): 0.7
47. Sysco (SYY): 0.7
48. Freeport McMoran (FCX): 0.7
49. Alcoa (AA): 0.7
50. Staples (SPLS): 0.7


Be sure to also check out Goldman Sachs VIP list of most important stocks to hedge funds for Q1 2012.

Stocks vs Bonds & Risk vs Reward: Value & Risk in the Eye of the Beholder

Herbert Abramson and Randall Abramson's Trapeze Asset Management is out with their second quarter market commentary and in it they touch on two choices that often confound investors: stocks versus bonds and risk versus reward. They argue that both stocks and bonds involve risk but given the current potential reward each offers, the choice is a no-brainer: stocks. Given the low rates associated with bonds these days, they believe these vehicles are more akin to cash than investments.

In particular, Trapeze (like many other value investors) have shifted their focus to undervalued large-cap stocks. The interesting dynamic here is that this is essentially the first time investors have been able to purchase such high quality companies at what many are deeming cheap prices. You'll recall that during the panic, cyclical and leveraged businesses declined the most and then subsequently rallied the most during 2009. High quality stocks were seemingly left behind and this theme has been highlighted by numerous managers and strategists including Jeremy Grantham, Legg Mason's Bill Miller, hedge fund manager Whitney Tilson, and many more.

Trapeze interestingly intertwines compelling valuations with contrarianism by highlighting the current investor distaste for equities. Just yesterday we highlighted how market strategist Jeff Saut viewed massive equity fund outflows as a possible contrarian indicator. Investors are fearful of numerous economic factors ranging from unemployment, to a double-dip recession, to deflation. This resulted in a stampede into bonds. Such positioning requires a dose of macro outlook and Trapeze's viewpoint appropriately falls in line with the "no double-dip" crowd.

Trapeze writes, "It has been argued that, if one takes a longer term horizon to smooth out the fluctuations, equities can be viewed as long-term bonds with an earnings yield in lieu of a bond yield and often with a fixed dividend yield, mostly reliable, mostly growing. In the current environment if one takes, say, a 5-year horizon to even allow for the possibility of an interim double-dip recession with a lower stock market from a poorer outlook for earnings, stocks should still be the preferred asset class in that extended period."

Many investors have often quoted Warren Buffett in saying, "Be greedy when others are fearful." Investors certainly seem more fearful of equities than they have been in quite some time. While equities haven't experienced extreme declines in absolute value, many investors have traded in their stocks for the supposed safety of bonds. And the problem with that, Trapeze argues, is that cash is desperately searching for return and yield; something that is currently better found in stocks than bonds. They feel that eventually all of the cash and fixed income parked on the sidelines will seek higher returns, eventually ending up back in equities.

In terms of specific stocks, Trapeze offers Clorox (CLX), Aflac (AFL), Kroger (KR), Aetna (AET), Hewlett Packard (HPQ) and Jack in the Box (JACK) as some of the large-cap stalwarts that they've been playing. Additionally, they also continue to hold positions in Oracle (ORCL), IBM (IBM), Walgreens (WAG), Wal-Mart (WMT), Mastercard (MA) and more.

For the bullish case on equities, we highly recommend reading Trapeze Asset Management's second quarter letter to investors in its entirety, embedded below:



You can download a .pdf copy here.

In the end, it's an epic and ongoing debate: stocks versus bonds, risk versus reward. Add in your stance on the macro environment and the decision is essentially made for you. However, what Trapeze is trying to illustrate is that such extreme pessimism (among other factors) can be interpreted as an opportunity for contrarian optimism. We'll end with another quote from Trapeze's letter: "Like beauty, value and risk too are often in the eye of the beholder."

To see what stocks prominent hedge funds have been investing in, head to our brand new quarterly newsletter, hedge fund wisdom by market folly (receive a free sample here). And if the above article is just too bullish on equities for you, last month we presented the opposite side of the coin with David Gerstenhaber's hedge fund Argonaut Capital who thinks that deflation is the greater risk.

Market Strategist Jeff Saut Thinks March 2009 Lows Will Hold

The Chief Investment Strategist at Raymond James is out with his latest market commentary and there are a few bold assertions in it. Jeff Saut is of the belief that the market will be in a very wide trading range akin to the period between 1966-1982; a period where swings of more than 20% occurred 13 times with an end result of hardly any progress. He also bluntly calls for the March 2009 lows to hold. In a past commentary, he also advocated buying on weakness. But if you think about it, he's not exactly taking a huge leap of faith here considering that the S&P is currently around 1,082 and the March lows are way down around 666 on the S&P. Even if those levels were to hold, that's still over a 38% drop to get there.

So, how has the market strategist positioned his portfolio? Saut remains ardent in his stance that buying high quality dividend paying stocks is the way to go. Numerous market participants agree. Jeremy Grantham favors high quality and hedge fund T2 Partners is bullish on undervalued large-caps, just to name a few.

Additionally, Saut notes that, "The earnings yield (E/P) on the S&P 500 is currently 6.6%, which is the highest in 15 years, while the spread beween the earnings yield and the 30-year Treasury Bond is the widest in 30 years." As such, he feels that risk adjusted stock selection is the key to portfolio success currently and he tosses out some stocks for your consideration.

The companies on his list have the following attributes: a market cap greater than $5 billion, a return on equity greater than 15%, a dividend yield greater than 2%, a debt-to-assets ratio of less than 35%, and a price-to-earnings ratio of less than 15. Here are the stocks that made the cut:

Exxon Mobil (XOM)
Walmart (WMT)
Johnson & Johnson (JNJ)
Intel (INTC)
Abbott Labs (ABT)
Aflac (AFL)
Chubb (CB)
Diamond Offshore (DO)
Darden (DRI)

Lastly, turning to the inflation versus deflation debate, Saut highlights that except for the 1930s, deflation has been a bad bet. In fact, Saut isn't buying into the current hype surrounding deflation and has actually planted himself in the inflationary camp. He feels that the economic recovery will surely be slow, but a double-dip won't come to fruition. Following this recovery, he believes inflation is the likely scenario given the government's policy of trying to stimulate an economic response. And since Saut has declared himself a staunch inflationista, be sure to check out the best investments for inflation. And if you disagree, conversely head to the best investments during deflation.

Embedded below is Jeff Saut's latest investment strategy from Raymond James:



You can download a .pdf copy here.

For more from the market strategist, you can check out Jeff Saut's businessman's risk portfolio as well as his assertion that it's time to re-balance portfolios.

Broyhill's Affinity Hedge Fund: Betting on Deflation (Q2 Letter)

Broyhill started as a family office to manage Paul H. Broyhill's assets and has since evolved into a multifaceted investment firm. Their Affinity hedge fund was up 4.6% for June and was up 6.6% for the year at that time. We've touched on how the majority of hedge funds had a very rough second quarter performance wise. That said, not every hedgie out there as been battered down and Broyhill is evidence of that. So, how did they sidestep the volatility, you ask? They called in an old fashioned contrarian prescription to combat the market's sickness.

Their hedge fund has put on a contrarian bet on long-term treasuries (outlined via their ten reasons to buy bonds). Yet with a lack of inflationary signals as of late, maybe their bet isn't so contrarian after all. While hedge funds in general have had below average net long exposure, it was still evident that many funds were taking on more risk than they realized when May and June came around. The fact that most asset classes seemed to move in lockstep didn't help things either as everything seemed correlated to the downside. Everything but treasuries, that is.

Believe it or not, Broyhill had actually been short treasuries up until about March of this year. They then went long essentially as a hedge against deflation. Broyhill isn't the only one worried about deflation either. We just detailed how David Gerstenhaber's global macro hedge fund Argonaut Capital thinks deflation is the greater risk.

In recent commentary, Broyhill has reminded us that legendary hedge fund manager Michael Steinhardt coined the term 'variant perception' in which he focused on contrarian analysis and wagers by taking positions opposite those of consensus opinion. East Coast Asset Management recently highlighted the consensus versus variant perceptions in today's market as well. Broyhill has done the same as their bet on treasuries represents their highest conviction variant perception.

Christopher Pavese, the fund's Chief Investment Officer writes,

"Quite simply, we believe investors are worrying about the wrong type of 'flation' here and now. In the near term, the ongoing contraction in private sector credit - estimated by the OECD to reach 7% of the developed world's GDP or $3 trillion - combined with the threat of fresh credit strains ahead, should more than offset the long-term inflationary impact of increased government spending. The major point here is that most strategists today remain adamant bond bears, and after missing the call at four percent, it is near impossible for them to recommend buying treasuries yielding three percent!! We welcome Wall Street's hatred of government bonds and expect to hold our position at least until the consensus capitulates .... which looks to be a ways off given today's sentiment."

Here are the Affinity hedge fund's top ten longs:

1. iShares Barclays 20+ Year Treasury (TLT): 11.1% of assets
2. Vodafone (VOD): 3.2%
3. Wal-Mart (WMT): 3.2%
4. Kraft Foods (KFT): 3.1%
5. Humana (HUM): 3.0%
6. Nintendo (NTDOY): 2.9%
7. Market Vector Gold Miners (GDX): 2.8%
8. iShares Silver Trust (SLV): 2.8%
9. PowerShares US Dollar Index (UUP): 2.7%
10. Republic Airways (RJET): 2.7%

Keep in mind that we've previously detailed Broyhill's write-up of the bullish case for St. Joe Company (JOE) as well. So in addition to their hefty treasury position, it's clear that Broyhill has two other portfolio themes in play: high quality large caps, as well as precious metals exposure. For the latter, they've chosen to play silver and a bundle of gold miners. For the former, they've picked Vodafone (VOD), one of David Einhorn and hedge fund Greenlight Capital's largest holdings. Additionally, we've seen many hedgies favor Kraft (KFT), including Bill Ackman's Pershing Square.

Although they do not disclose specific positions, Broyhill's Affinity hedge fund has revealed its top sector short positions, including:

Education (5.2%) of assets
Global Financials (2.9%)
Business Equipment (2.9%)
Euro (2.7%)
Automotive (2.5%)
Appliances (1.9%)
Employment Services (1.8%)
Credit Rating Agencies (1.7%)
Global Resources (1.7%)
Recreational Vehicles (1.2%)

We'll continue to keep an eye on this hedge fund's successful wager on treasuries and embedded below is Broyhill's second quarter letter:



You can download a .pdf copy here.

For more on this deflationary wager, head to Broyhill's ten reasons to buy bonds as well as the thesis behind their bet on long-term treasuries. Additionally, more research from the hedge fund can be found in their bullish case for St. Joe (JOE).

Jeff Saut: Buying on Weakness

Jeff Saut, Chief Investment Strategist over at Raymond James, is out with his latest commentary entitled 'Don't Worry, Be Happy.' In it, he opines that while money does not equate to happiness, the stock market was certainly happy last month as it increased 7.0% after being down 8.2% in May and losing an additional 5.4% in June. Last time around, Saut argued that it might be time to re-balance portfolios and laid out a theoretical businessman's risk portfolio.

Saut pats himself on the back for 'calling the rally' that he expected due to oversold conditions at the beginning of July. Recently, a Dow Theory Buy Signal was registered according to the market strategist as both the Dow Jones Industrial Average and Dow Jones Transportation Average closed above their previous June highs. However, this signal comes after an already powerful rally has taken place and numerous other theorists do not think a signal has been registered in the true sense of the definition. This would require a close above 11,204 on the Dow Jones and above 4,806 on the transports.

That said, Saut is now a buyer on weakness. He issues a caveat with that statement saying he will use fairly close stop loss triggers to manage the risk. As we've detailed recently, Saut has outlined his risk management principles and has also argued that risk adjusted stock selection is the key to success.

So, what stocks to buy on weakness? The Chief Investment Strategist feels that the following stocks are solid choices:

Value Picks:
Microsoft (MSFT)
Intel (INTC)
Wal-Mart (WMT)
Allstate (ALL)
Johnson & Johnson (JNJ)

Growth Plays:
McAfee (MFE)
Iridium (IRDM)
NII Holdings (NIHD)
Nuance (NUAN)
Parexel (PRXL)

As you can see, Saut favors many high quality blue chip names on the value side. This is exactly what we saw this morning as Jeremy Grantham favors high quality US stocks. Additionally, we've detailed hedge fund T2 Partners' bullish presentation on 3 large cap stocks.

Overall, Jeff Saut thinks that the 200-day moving average (overhead resistance) will be taken out. And as of this second, that's exactly what's happening. We'll have to see if the market can hold and close above that level. He ends by quoting Lowry's who writes,

"In summary, as the major price indexes have moved sideways since the May 25th low, market conditions have showed clear signs of strengthening, not weakening. While overbought readings on short-term indicators suggest the potential for a near-term pullback, any decline should act only as a temporary setback in the rally from the July 2nd low and is unlikely to represent the next leg of a more prolonged move lower."

Embedded below is Jeff Saut's latest investment strategy from Raymond James:



You can download a .pdf copy here.

Here's the rest of our 'market-strategist-Monday' pieces if you missed any of them:

- Oaktree Capital's Howard Marks on the greek tragedy
- PIMCO's Bill Gross: latest investment outlook
- GMO's Jeremy Grantham favors high quality US stocks

Market Strategist Jeff Saut on Risk Management Principles

Market strategist Jeff Saut is out with his latest investment commentary entitled, "Don't bet the farm." In it, he lays out some basic risk management principles. The first of which, obviously, is to not bet the proverbial farm on any one scenario, no matter how good it looks. Managing downside risk is the key to success in markets. Louis Bacon, famed hedge fund manager at Moore Capital, will be the first to tell you that. Saut also believes that portfolio rebalancing is one of the tenets of successful investing. This whole conversation is an extension of his commentary last week where proclaimed risk adjusted stock selection is a key to portfolio success.

You can read his entire investment strategy for the rest of his thoughts on risk management but we wanted to touch on his latest market thoughts as well. Saut highlights an excerpt from Lowry's Selling Pressure Index, who writes, "When selling pressure begins to consistently contract, despite new los in the major indexes, such a divergence usually indicates the desire to sell has been largely exhausted; and, the end of the decline may be near at hand." That would certainly prove to be the case (at least in the near-term), given that the market rallied 200 points on Thursday.

The Raymond James Chief Investment Strategist continues to watch the S&P 500's 200 day moving average with a watchful eye. Saut feels that until a breakout to the upside of this level occurs(around 1,112 on the S&P), he is quite happy to remain flat in trading accounts and to position favorable stocks in investment accounts. He continues to pound the table on large cap blue chips such as Walmart (WMT), Intel (INTC), Enterprise Products Partners (EPD), Allstate (ALL) and Microsoft (MSFT). One thing's for certain: many smart investment firms advocate buying high quality stocks as of late.

Embedded below is Jeff Saut's latest weekly market commentary:



You can download a .pdf copy here.

Be sure to also check out Saut's previous thoughts on risk management and keys to portfolio success in 2010.

Jeff Saut: Risk Adjusted Stock Selection & Risk Management Are Keys to Portfolio Success in 2010

Raymond James' Chief Investment Strategist Jeff Saut has penned his weekly market commentary and in it he examins the possibility of the dreaded double-dip recession. Many economists argue that the recession ended around this time last year. Saut proceeds to examine the possibility that these economists are wrong in an effort to gauge the possible worst case scenario. He outlines the fact that 3 out of 38 recessions have qualified as double-dips since 1880. In practically all of those cases, the first recession was 'mild' and then the double-dip was quite harsh. Saut argues that we aren't in for the dreaded DD because the recession we just experienced was anything but mild.

Pursuant to his take on the markets, Saut is not bearish, but he is quite cautious. Last week, he pointed out that there were so many negative indicators that he wouldn't be surprised to see a contrarian stock market bounce. And, that's exactly what happened. You have to hand it to the market strategist as he's correctly removed his market hedges into the turmoil and then correctly called the rally. So, where does he stand now? Since that transgression of events, he has reverted back to his cautious stance for the intermediate term. He thinks any pullback will be contained in the 1040-1050 zone on the S&P 500.

In order to find success in these cautionary times, Saut points to risk adjusted stock selection and risk management as the keys to portfolio success. This is interesting because Lee Ainslie of hedge fund Maverick Capital previously opined that 2010 would be a stockpicker's market. Yet, when you examine the performance of many long/short equity hedge funds, that doesn't seem to be the case at all. Maybe 2010 is truly setting apart the best stockpickers from the rest of the pack. While 2010 has been rough on many big name investors, Abnormal Returns has dubbed the next decade the forthcoming golden age of stockpicking. In the near-term, Saut agrees that stockpicking is key.

A few weeks ago, Saut advised investors to protect gains from the March 2009 rally and his stance remains unchanged there. To help investors with their stockpicking prowess, he has recommended a few names: Microsoft (MSFT), Intel (INTC), Enterprise Product Partners (EPD), Allstate (ALL) and Walmart (WMT).

Specifically on Microsoft, Saut highlights its $3.50 per share in cash, 2% dividend yield, and cheap valuation. Regarding Walmart, he thinks its valuation is low here and sees the company growing revenues in the high single digits and buying back a lot of shares. Lastly, Saut puts in a plug for Putnam's Diversified Income Fund (PDINX) as it has the possibility to generate equity-like returns without the same risk profile as equities. Embedded below is Jeff Saut's entire investment strategy piece for this week:



You can download a .pdf copy here.

Overall, Saut remains cautious longer term. He currently favors growth over value stocks and has highlighted numerous technology sector names in his missives. While he thinks the selling will be contained near-term in the market, he points out the S&P 500's 50 day moving average as a key level of resistance at around 1,100. For more on Saut's market rationale, head to his commentary where he outlined his decisively cautious stance.

Jeff Saut: Decisively Cautious, Cites Dow Theory Sell Signal

Market strategist Jeff Saut takes a decisively more cautious tone in his investment commentary this week compared to previous notes and understandably so. The markets have seen somewhat of a precipitous decline that has many participants worried. The Chief Investment Strategist at Raymond James is currently very focused on "keep(ing) the profits accrued since the March 2009 bottom." This is definitely a defensive posture. And rather than focusing on the investment opportunities at hand on both the long and short sides of the portfolio, Saut seems solely concerned about protecting profits.

This all becomes intriguing when you consider Saut's commentary over recent weeks. Last week, Saut noted he removed market hedges during the turmoil. He was letting his protection go when he needed it most and when it was hardest to let go. Normally, that would be the right play. However, the market's precipitous decline has continued. And prior to removing his hedges, Saut argued that the market was in a bottoming process.

Now that we've come full circle, Saut highlights a few reasons to be cautious. Firstly, the market recently registered a Dow Theory sell signal (something that speaks for itself). Secondly, he cites weakening economic reports, specifically the sharp decline in the Economic Cycle Research Institute's weekly leading index. Additionally, Saut says his own proprietary indicator has registered a sell signal as well. There is one last signal he is watching for and that is the impending 'death cross' when the 50-day moving average crosses the 200-day moving average to the downside. Not to mention, a technical analysis video we recently highlighted points out a bearish engulfing pattern in the markets.

In the near-term, Saut is cautious. In the long-term, he thinks equity markets will be okay. He writes, "the yield-curve is still relatively steep, credit spreads have not leaped, the Advance/Decline Line appears steady, and earnings comparisons should remain favorable; so unless it is different this time the recent correction in the equity markets should resolve itself with higher prices."

To be honest, we're not quite sure how Saut comes to that conclusion after the barrage of negative signals and indicators he referenced earlier. Maybe he thinks the negative sentiment is overstated, who knows. Saut honestly admits he is cautious in the near-term and he's certainly not alone there as global macro hedge fund Prologue Capital outlined cause for concern as well recently. That said, Saut is still on the prowl for solid risk/reward situations. Specific stocks Saut is intrigued by currently include Chevron (CVX), Wal-Mart (WMT), and Peabody Energy (BTU). Saut in particular likes Wal-Mart under $50 per share due to strong fundamentals and Peabody for the 'supercycle for coal.'

Embedded below is Jeff Saut's market commentary for Raymond James:



You can download a .pdf copy here.

As mentioned before, you can view Saut's previous commentary including his removal of hedges and his call that the market was in a bottoming process. Overall though, his message is still clear: selectively upgrade the stocks in your portfolio. This could turn out to be a big call as the market is undoubtedly at a potential turning point here with the technicals looking bearish.

Julian Robertson's Tiger Management Bets on Intel, Wal-Mart & Monsanto: 13F 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 investment guru and legend Julian Robertson who founded one of the lauded hedge funds of the era, Tiger Management. He grew the fund from $8 million at inception to over $22 billion at its peak. Between 1980 and 2000, Tiger compounded a gross rate of 31.5%, but after losses of 4% in 1998 and 19% in 1999, Tiger shut down. For more information on Julian, check out Daniel Strackman's book entitled, Julian Robertson: A Tiger in the Land Of Bulls And Bears.

Since Tiger's dissolution, Robertson's former employees have started successful funds of their own, deemed the 'Tiger Cubs'. Additionally, Robertson has himself seeded some other managers with vast potential, dubbed the 'Tiger Seeds'. This vast and expansive network of hedge fund managers is almost akin to a farm system for stockpickers and we track the majority of these funds. To learn more about Tiger Management, head to our in-depth profile of Julian Robertson.

While his hedge fund Tiger Management closed down years ago, Julian Robertson still makes investments via the Tiger Management LLC vehicle as evidenced by SEC filings. As such, we will continue to track Robertson's holdings via this vehicle's public disclosures. In the past, we've gotten a tiny glimpse at Robertson's portfolio when in late 2009 we saw he had placed a bet that interest rates would rise in the future via constant maturity swaps. We haven't heard too much from him as of late but we'll of course post anything of interest in the future. If you want to jump back in time, we've posted an interview with Robertson from back in 1998 around Tiger's peak.

The positions listed below were Tiger Management'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
Priceline.com (PCLN)
Apollo Group (APOL)
Hologic (HOLX)
LCA Vision (LCAV)
Madison Square Garden (MSG) ~ due to a spin-off from Cablevision
Sensata Technologies (ST)


Increased Positions
Verisk Analytics (VRSK): Increased position size by 30.3%
Intel (INTC): Increased by 20.6%
EMC (EMC): Increased by 17.5%


Reduced Positions
Solutia (SOA): Reduced position size by 31.9%
Mastercard (MA): Reduced by 24.5%
Lamar Advertising (LAMR): Reduced by 19.7%
Fidelity National Information (FIS): Reduced by 19.6%
DirecTV (DTV): Reduced by 18.6%
Talisman Energy (TLM): Reduced by 15.1%
Visa (V): Reduced by 14.8%
Skyworks Solutions (SWKS): Reduced by 13.6%


Positions They Sold Out of Completely
Google (GOOG)
Walmart (WMT)
Thermo Fisher Scientific (TMO)
SBA Communications (SBAC)
Teradata (TDC)
Maxim Integrated (MXIM)
Genoptix (GXDX)
IAC Interactive (IACI)


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

1. Wal-Mart Stores (WMT) Calls: 8.22%
2. Monsanto (MON) Calls: 5.96%
3. Intel (INTC): 4.58%
4. Wuxi Pharmatech (WX): 3.68%
5. Apple (AAPL): 3.48%
6. CVS Caremark (CVS): 3.47%
7. DigitalGlobe (DGI): 3.45%
8. Visa (V): 3.44%
9. Solutia (SOA): 3.35%
10. Mastercard (MA): 3.26%
11. Skyworks (SWKS): 3.15%
12. Dick Sporting Goods (DKS): 3.13%
13. Verisk Analytics (VRSK): 3.13%
14. DirecTV (DTV): 3.09%
15. EMC (EMC): 3.08%

It should come as no surprise that the Tiger Management founder himself has a portfolio reminiscent of other 'Tiger Cub' hedge funds. After all, since Robertson often gets to listen in on meetings and chat with these managers, he can cherry pick their best ideas as well as add his own into the mix. Julian has a large position in CVS Caremark, just like Lee Ainslie and Maverick Capital which is probably hurting performance after the recent plunge in shares. Additionally, Robertson owns DirecTV which we've seen Chase Coleman's Tiger Global is bullish on. Lastly, Tiger holds perennial favorites like Apple, Mastercard, Visa, and Verisk Analytics.

On a sector level, Robertson severely decreased technology exposure and ramped up positions in services. In terms of sales, Robertson liquidated his Google (GOOG) position which is intriguing because many other managers own this name as it's one of the most important stocks to hedge funds. Since Robertson exited in the first quarter, it seems to have been the right decision as GOOG shares have spiraled down. He also sold off Wal-Mart (WMT) common stock but maintains a very hefty position in WMT call options. Tiger Management's portfolio overall saw more selling than buying as assets reported decreased. The 13F filing shows Tiger had $574 million in reported assets this quarter, down from over $600 million in the quarter prior (remember that these filings are not representative of the hedge fund's entire base of AUM).

To see the latest hedge fund portfolios, we recommend using Alphaclone as Market Folly readers receive a special free 14 day trial. It's our source for hedge fund data, replication, backtesting and more. 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. We've covered investment gurus such as: Seth Klarman's Baupost Group and Warren Buffett's Berkshire Hathaway, and George Soros.

Additionally, value and activist funds such as: 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, Bruce Berkowitz's Fairholme Capital Management, Dan Loeb's Third Point.

'Tiger Cub' funds like: Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Andreas Halvorsen's Viking Global, Roberto Mignone's Bridger Management, and Shumway Capital Partners.

'Tiger Seed' funds that were seeded by Julian Robertson, including: Chase Coleman's Tiger Global.

Our latest addition, hedge funds started by former employees of various Tiger Cub/Tiger Seed funds: David Stemerman's Conatus Capital.

And lastly, other hedge funds employing various other strategies ranging from risk arbitrage to distressed to global macro: John Paulson's hedge fund Paulson & Co, Phil Falcone's Harbinger Capital Partners,

Be sure to check back daily for new hedge fund updates.

Broyhill's Affinity Hedge Fund: Contrarian Bet on Long-Term Treasuries (Investor Letter)

In a continued effort to expand our hedge fund coverage, we're always on the lookout for intriguing insight from 'under the radar' investment managers. As such, today we present you with market commentary and investment ideas from Broyhill Asset Management's Affinity hedge fund. Broyhill started as a family office managed by Paul H. Broyhill and has developed a long-term investment philosophy focused on capital preservation first and foremost. In their first quarter investor letter, we see they were right on the money recommending a cautious stance. As we all know, last week marked a precipitous drop in the market via the flash crash. To arrive at such a viewpoint, Broyhill used contrarian indicators such as the CBOE equity put/call ratio as well as extreme magazine covers & headlines. These are some of the same signals we pointed out in Jeff Saut's sell in May and go away missive.

To get a better idea as to Broyhill's investment exposure, let's take a look at their latest portfolio. Do you like going against the crowd? Well then you've certainly come to the right place. While numerous hedge funds (a.k.a. the crowd) have been shorting long-term treasuries, Broyhill is bullish on long-term treasuries and it marks their largest exposure today. Chief Investment Officer of their Affinity hedge fund, Christopher Pavese, wrote in a past commentary that, "It is important to note that in the near term, the contraction in private section credit combined with the threat of fresh credit concerns ahead, will likely keep a lid on inflation pressures. This view is perhaps where we differ most from today's consensus thinking, where many expect an immediate and permanent increase in inflation levels. We aim to capitalize on this departure from consensus later in the year, but importantly, the difference is simply one of timing."

Well for them, 'later in the year' quickly became 'now'. Investors flocked to safety in US treasuries during the flash crash last week and Broyhill expects the move out of risk assets and into government bonds to accelerate. Again this marks a contrarian stance as we recently saw global macro hedge fund Prologue Capital outline why macro factors are positive for risk assets. Broyhill has clearly taken a converse view. We like to present both sides to a compelling argument and Broyhill has certainly helped us in that regard. Interestingly enough, Chief Investment Officer Chris Pavese notes that they were previously short treasuries but covered in late march and then became buyers. Keep an eye out later today as we'll be posting up a separate piece from Broyhill outlining ten reasons to buy bonds.

Turning to equities, we also got a recent look at their top ten holdings, listed below:

1. St. Joe Company (JOE): 4.3% of assets
2. Wal-Mart Stores (WMT): 4.2%
3. Vodafone (VOD): 4.1%
4. Microsoft (MSFT): 4.0%
5. Kraft Foods (KFT): 3.9%
6. Nintendo (NTDOY): 3.8%
7. Humana (HUM): 3.6%
8. iShares Silver Trust (SLV): 3.3%
9. Market Vectors Gold Miners (GDX): 3.3%
10. ConocoPhillips (COP): 3.1%

As you can see, Broyhill favors high quality names which is in line with numerous other hedge funds. As we've detailed before, David Einhorn of hedge fund Greenlight Capital is bullish on Vodafone, Bill Ackman of Pershing Square had assembled a large Kraft position, and numerous hedge funds have added Microsoft shares, citing undervaluation. So while Broyhill has gone against the crowd with their treasuries play, they are certainly with the crowd in the equity arena.

We also got a recent look at some of Broyhill's short exposure. Like the majority of hedge fund land, they are keeping individual names close to the vest, but they have listed their top sector shorts:

Education (9.6)% of assets
Automotive (4.1)%
Recreational Vehicles (3.9)%
Business Equipment (3.9)%
Global Financials (3.9)%

This information is intriguing because they clearly have a large bet against education related stocks, a sector many Tiger Cub hedge funds have been quite bullish on. David Stemerman's hedge fund Conatus Capital had been long education plays but then sold out of them. We'll have to keep an eye on that as it has become a sector ripe with difference of opinion. Overall, Broyhill is 75.3% long and 44.7% short, leaving them 30.6% net long. This falls directly in line with what we've seen recently as hedge funds have reduced equity exposure.

In currencies, Broyhill has been long the Renminbi and short the Euro and the Yen. This again coincides with what we've seen in terms of hedge fund currency exposure. In commodities, Broyhill is long gold 9.6%, long oil 4.6%, and short copper -4.4%. Embedded below you will find their latest market commentary via Broyhill's first quarter 2010 letter:



You can download a .pdf here.

Intriguing stuff from Pavese and Broyhill and we'll certainly keep an eye on their contrarian wager. We've been covering a lot of excellent hedge fund commentary as of late and we posted up the following investor letters which we highly recommend reading:

- Louis Bacon's global macro fund Moore Capital Management
- Ricky Sandler's Eminence Capital
- David Einhorn's latest Greenlight Capital commentary
- Jay Petschek's Corsair Capital investor letter

Check back each day as we continue to chronicle what some of the most prominent hedge funds are up to.

Brett Barakett's Tremblant Capital: Large Research in Motion (RIMM) Exposure

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 Brett Barakett's hedge fund Tremblant Capital. The name Barakett might ring a bell because his brother Timothy used to run fellow hedge fund Atticus Capital (who recently announced they'd be shutting down). So while Timothy may have stepped away from the hedge fund game, Brett is still going at it. Before founding his own firm, Brett was previously a portfolio manager for Louis Bacon's hedge fund Moore Capital and in his spare time he enjoys ice hockey. Taken from their site, Tremblant Capital Group's objective is "to achieve superior risk adjust returns for our investors through our focused and disciplined investment process." The only major notable portfolio activity out of Tremblant has been their 13G filing on IMAX.

Keep in mind that the positions listed below were Tremblant's 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:
Qualcomm (QCOM) Calls
Procter and Gamble (PG) Calls
Wynn Resorts (WYNN) Puts
Union Pacific (UNP) Puts
Monsanto (MON)
DirecTV (DTV) Calls
Apollo Group (APOL)
Viacom (VIA-B) Puts


Some Increased Positions
Positions they already owned but added shares to:
Imax Corp (IMAX): Increased position by 187.7% (we previously detailed this)
Mastercard (MA) Puts: Increased by 115.2%
Melco Crown (MPEL) Calls: Increased by 45.9%
Green Mountain Coffee Roasters (GMCR): Increased by 42%
Walmart (WMT): Increased by 38.5%
Cheesecake Factory (CAKE): Increased by 36%
Intel (INTC) Puts: Increased by 34%
Liberty Media (LINTA): Increased by 27.3%
Charles Schwab (SCHW): Increased by 24.6%


Some Reduced Positions
Stakes they sold shares in but still own:
Red Hat (RHT) Calls: Reduced by 70.2%
Apple (AAPL) Puts: Reduced by 63.7%
RedHat (RHT): Reduced by 45.7%
Google (GOOG): Reduced by 43.5%
Melco Crown (MPEL): Reduced by 35.7%
Icon (ICLR): Reduced by 35.7%
Eclipsys (ECLP): Reduced by 31.7%
Hologic (HOLX): Reduced by 29.8%
Baidu (BIDU): Reduced by 26.8%
Costco (COST): Reduced by 24.8%
Apple (AAPL): Reduced by 24.4%
Qualcomm (QCOM): Reduced by 22.2%


Removed Positions
Positions they sold out of completely:
Apple (AAPL) Calls
Amazon (AMZN) Puts
Qualcomm (QCOM) Puts
Canadian Natural Resources (CNQ)
AU Optronics (AUO) Puts
Hologic (HOLX) Puts
Catalyst Health (CHSI)
Research in Motion (RIMM) Puts
Symantec (SYMC)
Bankrate (RATE)
Weingarten Realty (WRI)
MGM Mirage (MGM) Calls
Las Vegas Sands (LVS) Calls
MEMC Electronics (WFR)
Wynn Resorts (WYNN) Calls
Gannett (GCI) Calls
Harley Davidson (HOG) Calls
Commscope (CTV)
Sequenom (SQNM)


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

1. Research in Motion (RIMM) Calls: 8.7%
2. Qualcomm (QCOM) Calls: 5.43%
3. Procter and Gamble (PG): 5.08%
4. Procter and Gamble (PG) Calls: 4.94%
5. Visa (V): 3.21%
6. Walmart (WMT): 2.9%
7. Mastercard (MA): 2.87%
8. Research in Motion (RIMM): 2.7%
9. Apple (AAPL): 2.5%
10. Hologic (HOLX): 2.29%
11. Baidu (BIDU): 2.19%
12. Mastercard (MA) Puts: 2.12%
13. Melco Crown (MPEL): 2.08%
14. Visa (V) Calls: 1.97%
15. Green Mountain Coffee Roasters (GMCR): 1.95%
    

Tremblant was out reducing technology exposure across the board as it was previously almost 49% of their long US equity holdings. While they were moving out of that sector, they were moving into consumer goods as around 18% of their longs are in that sector now. The tough thing to decipher about their portfolio is their net position in a given name. As you can see above, they hold a bevy of puts and calls in addition to the underlying common in many stocks. As such, we do not have access to the strike prices or expirations of those options so it's hard to tell if they are net bullish or net bearish on some of their positions.

By far and away their largest position though is calls in Research in Motion (RIMM) and this carries over from the second quarter where it was their largest stake then as well. Their second largest holding is a brand new position in Qualcomm (QCOM) calls which is notable. So while they were reducing tech exposure, don't get us wrong... they definitely still have tech positions.

Below are some graphical illustrations of the changes made to Tremblant Capital's 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 $3 billion this quarter compared to $2.7 billion 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, and Chase Coleman's Tiger Global. Check back daily as we'll be covering new hedge fund portfolios.

Top Ten Stocks Held By Hedge Funds

Thanks to the fine folks at FINalternatives, we see the latest quarterly Hedge Fund Monitor Report out of Bank of America Merrill Lynch. These quarterly reports are along the same lines of what we do here at Market Folly in that they examine hedge fund portfolios. Rather than focus on a unique set of funds like we do, they survey the majority of the industry landscape to frame a 'top hedge fund holdings' list.

This data is very useful for those of you wondering which stocks are most widely held amongst hedge funds and we presented the hedge fund data from Q2 earlier on the blog. In the third quarter, hedge funds increased their long equity holdings as gross exposure was up 14% and net exposure was up a whopping 130%.

The ten most popular stocks held by hedge funds include:

1. Bank of America (BAC)
2. Pfizer (PFE)
3. JPMorgan Chase (JPM)
4. Microsoft (MSFT)
5. Citigroup (C)
6. Apple (AAPL)
7. Google (GOOG)
8. Qualcomm (QCOM)
9. Cisco Systems (CSCO)
10. Walmart (WMT)
    

Embedded below is Bank of America Merrill Lynch's Q3 Hedge Fund Monitor Report. RSS & Email readers you will have to come to the blog to view the report & as always we recommend using 'full screen' mode to read the document:






Additionally, you can view the hedge fund trend monitor report from last quarter here.

Lehman Brothers Liquidation Looks Likely

Undoubtedly, you already know this news. Lehman Brothers (LEH) will file for bankruptcy protection, as they couldn't seem to sell themselves this weekend. Additionally, Merill Lynch looks like it will be bought out by Bank of America for around $25-30 a share ($29 a share offer being voted on). Lastly, AIG will be restructuring. If you want more info on all this than you can handle, just head to any major financial publication, as the news is all over the place. I'm not here to regurgitate this news. Instead, I want to turn my focus to a way to possibly play this madness. In the event that LEH does liquidate, the following stocks will undoubtedly trade lower. Why, do you ask? Well, because they are some of LEH's top holdings.

The List

• General Electric (GE)

• Pfizer (PFE)

• Target (TGT)

• UBS (UBS)

• Linn Energy (LINE)
  

• GLG Partners (GLG)
  

• Merck (MRK)

• Microsoft (MSFT)

• Chicago Mercantile Exchange (CME)

• Bank of America (BAC)

• Apple (AAPL)

• Flagstone Reinsurance (FSR)

• Wellpoint (WLP)

• Walmart (WMT)

• Exxon Mobil (XOM)

• United Health Group (UNH)

• Google (GOOG)

• Johnson & Johnson (JNJ)

• Baidu (BIDU)

A few names from the list I want to highlight: Firstly, Bank of America (BAC) has been actively involved in all the talks this weekend and for all intensive purposes it looks as if they'll pick up Merrill Lynch (MER). I think the market sells off BAC simply because MER is not in the best of shape, and it looks like they'll be overpaying for the deal. If MER needs to be rescued, BAC could surely pick them up for much cheaper than where they're trading now. So, BAC could trade lower for this reason (along with the fact that oh yea, they've still got the whole Countrywide Mortgage mess to worry about). Then, if Lehman Brothers liquidates their BAC shares, you can guess where that name is headed: lower.

Secondly, as I wrote about here, Apple (AAPL) isn't looking too hot on the technicals right now. It looks about ready to really breakdown, since it hasn't responded well to support levels. If LEH needs to liquidate their large AAPL position, this only presents more headwinds for AAPL.

Thirdly, Walmart (WMT) appears on this list and I want to point this out for investors who have wanted to get in this name. If LEH liquidates its WMT position, this will present an opportunity for those who want to get long WMT on the thesis of the American consumer trading down for cheaper items, which WMT supplies. I've written about this thesis numerous times, notably here and here. So, watch that name for any major dips. Also, I'd throw Johnson & Johnson (JNJ) as a possible name to buy off of any LEH liquidation weakness. They are firing on all cylinders and their consumer staples line-up works well in this mess of an economy. Keep in mind though, that things undoubtedly will be crazy this week. So, don't rush out and do something stupid. And, if you feel the need, keep it small. There will undoubtedly be opportunities from this. But, this is a huge mess just waiting to unravel. Watch the Volatility Index (VIX), and watch for panic and capitulation. Special thanks to "The Fly" over at ibankcoin.com for posting up this list of LEH top holdings.

Deteriorating Consumer Environment: Abercrombie and Fitch (ANF) Evidence

This is just continuing evidence of a lackluster consumer environment. Abercrombie and Fitch (ANF) same store receipts were down in August, setting up what I predict will be a downward accelerating consumer environment. Both Citi and Merrill Lynch downgraded ANF on Friday, citing deteriorating sales and increased markdowns. In fact, Citi went as far as to say that they think ANF could trade at its lowest multiple in 5 years. Just something to keep an eye on as you try to balance your portfolios.

Specialty retail is getting hit hard (and will continue to get hit hard) as effects from the housing market, consumer credit crunch, and inflation take a toll on consumer's pocketbooks. Abercrombie is known for its upscale niche within the teen segment, often selling more expensive items than the likes of competitors Aeropostale (ARO), who seems to be doing alright in this environment. So, look for consumers to "trade down" in this environment.

In any given sector, I like to take a balanced approach and often times am market neutral. For instance in retail, being long the likes of Walmart (WMT) or various other discounters who sell essentials (food, gas, toiletries, medicine) is very appealing to me. Then, you take the other side by going short discretionary retailers, such as ANF. Long cheap and/or necessary items; Short expensive and/or discretionary items. The same logic can be applied to food by going long the likes of McDonald's (MCD) for the "cheap" factor (although they might see some slight headwinds due to their strong international presence and a rising US dollar). Then, shorting casual dining restaurants such as BJ Restaurants (BJRI) or Darden Restaurants (DRI), who are feeling the pinch of rising input costs and slower dining traffic.

The main point to take away here is that we all know the consumer is strapped for cash. However, I think too many people are counting on a recovery. With vast evidence of the housing market accelerating to the downside, I just don't see how that is possible. Add in the consumer credit crunch and the inflationary pressures consumers are seeing on everything they buy, and you've got a recipe for a very thrifty consumer.

Adding to Walmart (WMT)

I like the looks of Walmart (WMT) here on this pullback. I added my initial position on the pullback to around $55 on the 50 day moving average just a few weeks back. It's run up and then now its back down testing the 50day ma support again, so I'm adding. I cannot stress enough how this is literally the only consumer name I'm playing (could make an argument for MA & V though). When times get rough, people flock to the cheapest of the cheap, and that's WMT. In my first post regarding WMT i mentioned that their stores are PACKED even at 11pm on a friday night when my friends and I stopped in to pick up some drinks.

If you're going to be long the consumer in any way shape or form, this is the play. The chart is perfectly uptrending, using the 50 day moving average as support; it really speaks for itself, just have a look. Buy WMT on the dips as the tight consumer only gets tighter. This can give your portfolio some good diversification away from energy, tech, and commodities (ie: the things that have been working in this market).

Long WMT (have half my position now & will add more on future dips)