Ken Heebner to Start Hedge Fund Wayfarer Capital

Ken Heebner, manager of the renowned CGM Focus Fund (CGMFX) and other mutual funds, is set to start a hedge fund. In a regulatory filing made in August, it was revealed that Heebner is starting a new firm, Wayfarer Capital LP. So far, the fund has raised around $73 million, with Heebner targeting $5 billion for his new fund. Heebner employs a macro investment strategy, trying to capitalize on economic trends. In his mutual funds, Heebner runs a smaller, more concentrated portfolio than most managers. He even short-sells a few names, a tactic normally reserved for hedge funds and the like. But, since he runs mutual funds, he is limited in what he can do on the short side. And, it seems as if Heebner wants more freedom to be able to short and employ some leverage.

Seeing as how mutual funds are typically long-only, you can't blame him. In this type of market, one definitely needs to be hedged as much as possible. His CGM Focus fund returned 80% last year, due to smart bets on energy and resource plays. One of his other funds was up 34%. But, this year, Heebner is faced with tougher times, as his fund sits down around 17% year to date. It has been a wild year for him, to say the least. Earlier in the year, he was up around 16%. Then, he lost nearly 30% over a few months time to land him at his current returns.

Fortune magazine has called him "America's hottest investor," and rightly so. He has returned nearly 27% a year over the past decade with his Focus Fund. I am curious, though, if Heebner's mutual fund will take a back seat to his newly formed hedge fund. Apparently, it has always been his dream to run a hedge fund, and you can bet he'll want to make sure it succeeds. The hedge fund structure will allow him to short much more than his mutual fund ever would, which should allow him to hedge and pursue his macro investment strategy more effectively. Either way, the guy knows what he's doing. And, it's interesting to note that Heebner is set to start his hedge fund during a time when many funds are closing up shop due to poor returns and investor redemptions. Contrarian, to say the least. I'll definitely be keeping my eye on this here at Market Folly.

Source: Bloomberg

Hedge Funds & Alternative Asset Management Industry Aren't What They Used to Be

Roger Ehrenberg is out with a thought provoking piece over on his site, Information Arbitrage. In it, he discusses the tough times facing hedge funds and the simple root of the cause. Here's an excerpt:

"Many recent mega-losses aren't the case of simply taking the long view and getting stung by short-term volatility; this is getting carried out because of either too much leverage (the most prevalent cause of failure) or too much concentration. I had always thought that hedge funds were supposed to hedge, and were designed to generate attractive absolute returns regardless of market conditions. Such thinking is clearly a remnant of bygone days for much of the industry, where managers want the best of all worlds: stable management fees, quarterly performance fees, and the ability to suspend redemptions. There just aren't that many Steinhardts and Robertsons any more. And this is too bad for the industry and its investors."

Definitely check out the rest of his thoughts here.

George Soros on Oil

If you missed it, George Soros talked about oil in his testimony before the US Senate Commerce Committee Oversight Hearing. Read his thoughts here.

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.

Apple (AAPL) at Make or Break Point

Chart says it all. Major bounce or major breakdown coming. Not to mention, they've got the "Let's Rock" event schedule for tomorrow, where everyone is expecting new iPods to be unveiled. Typically, Apple (AAPL) has been a "sell the news" type of stock. We'll see what happens tomorrow. Either way, an opportunity either long or short is setting up in this name. Watch the $155 level.

(click to enlarge)

www.marketfolly.com is LIVE!

Hey everyone, just wanted to announce that the site's new url is now live: http://www.marketfolly.com/

The old url (marketfolly.blogspot.com) will automatically forward you to the new address, www.marketfolly.com. So, you don't technically need to update your bookmarks or links. But, I would appreciate it if you did.

If there are any kinks or errors on the page in the next day or two, I apologize. Everything is in the midst of switching over and so there might be a glitch here or there. But, for the most part, everything else seems to be working just great. Rest assured that everything will be working perfectly fine in the next few days! Also, all of the feeds should still be working as well, so you don't need to do anything there either.

Exciting times here at Market Folly. Thanks for your support and make sure to spread the word!

http://www.marketfolly.com/

Fannie/Freddie Bailout & Unemployment Rate

Undoubtedly, you've heard this news already. But, I am simply re-posting it to stress the type of environment we are in. The Unemployment rate has now hit 6.1%, the highest in five years. While the Fannie/Freddie saga has ended, people seem to have already forgotten about the unemployment rate and the fact that we still have tough times ahead. But, the market likes to get all giddy on any glimmer of hope. The root of the "pooring of America" stems from the horrid housing market. And, until it corrects, we are in for tough times. So, while the indexes are up big and we should start off this week in positive territory, I'm still cautious in the near-term. I still believe this is merely a small rally within the context of a broad bear market. The credit crisis is a whole nother animal, which only complicates the situation.

(click to enlarge)

The descending channel (green lines) tells the story. Watch the tape. Barry Ritholtz has an excellent post up over on his blog where he talks about weekend bailouts and the subsequent reactions. He asks,

"How many Sunday press releases is it going to take to save the financial system from ruin? If you’re are keeping score at home, this is now the sixth Sunday night/Monday morning press release in 14 months aimed at saving the financial system. Consider the recent history of these weekend rescues:

• August 2007, when the credit crunch was officially recognized by the Fed, when they cut the discount rate.

• December 2007, with the announcement of the TAF and other credit facilities;

• January 2008 Soc Gen panic, and a 75 bps emergency cut;

• March 2008 with the Bear Stearns bailout.

• July 2008 the first Fannie/Freddie rescue attempt

• September 2008 the actual Bailout of Fannie/Freddie."

Head over to The Big Picture to check out his thoughts/takeaways from the situation. Lastly, I will leave you with an excellent quote from David Moenning, President of Heritage Capital Management:

"All rallies over the past year have been based on the idea that we had seen the worst in whatever was ailing the market at the time – I.E. the credit crisis or the oil spike or the economic slowdown in the U.S. But unfortunately, after the requisite rallies, the light at the end of the tunnel has more often than not turned out to be an oncoming train."

Unemployment Data: CNNMoney
Weekend Bailouts: The Big Picture
David Moenning's Thoughts: StreetInsider

Transocean (RIG) Added to Goldman Sachs Conviction Buy List

I forgot to post this up on Friday since there was so much going on. Amidst all that news, we saw that Transocean (RIG) was added to Goldman Sachs Conviction Buy List. They removed Halliburton (HAL) and swapped RIG in its place. Goldman's new price target on RIG is $178 due to its tie to oil, where they see strong long term fundamentals (obviously).

I definitely agree with them on this call as I believe oil will face big supply/demand issues as we go forward many years into the future. And, I believe Transocean (RIG) is an excellent proxy for this (besides just owning oil in the commodities markets or the etf USO for the long term). The reason I say that is because there is an increasing demand for deepwater rigs. As evidenced by Petrobras' desire to lock up nearly 80% of offshore rigs, the demand for RIG's services is very strong. As oil companies shift from shallow water searches to deep water finds, RIG becomes all the more attractively positioned.

The only problem I have with RIG right now is the technicals. The chart looks horrible right now and the name looks to be breaking down. I've drawn a line in the sand at $120. If RIG can hold onto this level (typically past support), then I think its safe to enter RIG here. But, if it begins to trade lower yet again, I think it would be safer to stay away as it will have broken down on the technicals. RIG trading lower is a real possibility simply due to the fact that it is tied to the price of crude. And, since crude has been selling off recently, it doesn't look good. As crude approaches the very important psychological level of $100 a barrel, things could get interesting. Add in the speculation regarding hedge fund liquidations and you've got a recipe for a wild ride. The point is that both crude oil and RIG are around pretty significant levels in terms of technicals. As you can see from the chart below, $120 has typically been an area of support for RIG. If it breaks through this support level, it looks to be heading lower.

(click to enlarge)

This is a simple case of "trade the perception, not the reality." In reality, Transocean (RIG) is poised to rake in major dollars as their new rigs come out of production down the road. And, they are constantly seeing rising day rates on their existing deepwater rigs. But, everyone seems to be concerned with the "here and now" and thus the technicals are on the verge of a major breakdown. So, you've got to respect the action and step aside if you get stopped out below $120. Long term, this should be an excellent name to own. So, if you're one of those Buffett-buy-and-hold investors, then go for it. I am simply painting a picture for those who like to take a more active role in their positions.

Fundamentally, RIG is one of the best buys out there. Their trailing PE of 7.8 and forward PE of 7.4 is very compelling, especially considering that they trade at some of the cheapest multiples in the drilling sector, despite being one of the largest companies. They have a PEG ratio of 0.55, indicating they are primed for earnings growth. Where the company really becomes attractive though, is in its operating margins and returns on equity. I like to call this the "bread and butter" of any given company. With operating margins of 46.17% and a return on equity of 38.54%, Transocean is cranking out some of the highest numbers out there. Their merger with Global Santa Fe has certainly paid off in terms of increasing their fleet and extending their dominant market share. The only real negative with Transocean fundamentally would be its massive debt. They currently have $976 million in cash and over $15.2 billion in debt. The majority of this debt is from financing the merger of Global Santa Fe and Transocean and a special dividend that the company paid shareholders upon completion of the merger. So, the massive debt load is a concern. But, when you think about how much money the company is making, it becomes less of a worry.

Fundamentally, RIG looks very strong. But, you've got to worry about oil too since this name is tied to the price fluctuations of the underlying commodity. If we are indeed seeing a global slowdown, then the price of oil will obviously suffer, affecting RIG's shares in a negative manner. Still though, RIG remains attractive due to their dominant market share and positioning, their rising day rates, the rising demand for their deepwater rigs, and the fact that they have many new rigs scheduled to be completed in the coming years. This is a great long term buy (3-5 years +). But, if you want to potentially save yourself some money in the near term, watch the $120 level as the technicals have really dictated this volatile and whacky market as of late. As long as you've got a stop just below $120, call it good. Or, you can take the Buffett-buy-and-hold approach with this name, as they stand to benefit over the long haul.

Source: StreetInsider

Half the Globe in Recession? Goldman Sachs Thinks So

A few weeks old, but still relevant. Some nice weekend reading here.

Clarium Capital (Peter Thiel) Down in August: Another Hedge Fund Update

Getting tons of news today so will get right to the point:

"Clarium Capital Management LLC, the $7 billion hedge-fund firm founded by Peter Thiel, fell about 13 percent in August, its biggest monthly loss, as it bet against the U.S. dollar."

"Before August, Clarium's biggest monthly loss was in March 2004 when it fell 11.4 percent, according to an investor letter."

You'll recall I covered Clarium in my hedge fund 13F analysis series here. And, this isn't the first tough month for Clarium. As I posted here, Clarium also was down 6.8% for the month of July. So, year to date, a rough estimate would now put them at +32% year to date. I'm also hearing they're almost completely out of commodities now. So, yet another macro fund gets its ass handed to them, what else is new? Will be interesting to see if Clarium shifts from commodities to equities, as the equity portion of their portfolio is typically minimal at best (and by minimal, I mean ridiculously tiny: 1% or less of total assets under management).

Source: Bloomberg

Former Federal Reserve Chairman Paul Volcker Sends Ominous Message

The former Chairman of the Federal Reserve, Paul Volcker, is out with some decisively negative commentary. And no, I'm not just talking about some off hand comments about how the economy sucks. He is straight up ominous. A quote from Mr. Volcker:

"Growth in the economy in this decade will be the slowest of any decade since the Great Depression, right in the middle of all this financial innovation.''

A powerful statement that could very well end up being true. The entire Bloomberg article summarizing Volcker's thoughts is definitely worth checking out.

Hedge Fund Year to Date Returns (Paulson, D.E. Shaw, SAC, & More)

Well, we recently got an update as to just how poorly hedge funds are performing year to date. Don't get me wrong, there are of course some standout performers. But, for the most part, they are taking it on the chin. So, if you are an individual investor getting your ass handed to you in this market.... you're not alone. Even some of the best and brightest in the game are right there with you. Hell, you're probably even outperforming some of these funds. Courtesy of the Wall Street Journal, we get a look at many notable hedge fund's performance year to date.

The Standout Performers

• $35 billion Paulson & Co: +18% ytd
• $26.3 billion Brevan Howard: +16% ytd
• $37.1 billion D.E. Shaw: +8% ytd
• $30.9 billion Bridgewater Associates: +6% ytd
• $33.3 billion Och-Ziff Capital: +0.5% ytd
• $16 billion Winston Capital: +10% ytd
• $10 billion Caxton Associates: +5% ytd
• $17 billion Tudor Investment Corp: +3% ytd
• $16 billion SAC Capital: +1.5% ytd
  

The Not-so Standout Performers

• $49.3 billion Highbridge/JP Morgan (Multistrat fund): -2% ytd
• $33 billion Farallon Capital: -6% ytd
• $23.7 billion GLG Partners: -14% ytd
• $13 billion Eton Park Capital: -1% ytd
• $19 billion Citadel Investment Group: -6% ytd
• $18 billion Lone Pine Capital: -8.5% ytd
• $12.5 billion TPG-Axon: -11% ytd
• $8 billion Cantillon Capital: -12% ytd
• $15 billion Atticus Capital: -25% ytd

The Slightly Mixed Bag

• $29.5 billion Renaissance Technologies: One of their funds is -1% ytd, while their signature Medallion fund is +40% ytd
• $26.9 billion Goldman Sachs: One of their funds is -2% ytd, while their Global Alpha fund is +17% ytd

And, according to Hedge Fund Research, Inc., hedge funds are having their worst year since 1990 (when they started tracking). They show that the average hedge fund is -3.43% ytd compared to -12.65% in the S&P500 and +1.05% in the Lehman Bros Bond Index.

So, results all across the board. Interesting to note though, that Atticus Capital is down 25% year to date. Just yesterday, there were rumors circulating that they were liquidating as I wrote about here. Tim Barakett, the founder of Atticus, came out and denied those rumors. The reason for such a large decline is pretty easy to pinpoint. As I've written about before, their portfolio had very heavy exposure to the likes of Freeport McMoran (FCX), Mastercard (MA), and NYSE Euronext (NYX); all of which have really been beaten down badly as of late. So, the rumors of liquidation weren't completely illogical, seeing as how the fund is down big this year. But, I want to reiterate again that they have denied the rumors that they were liquidating.

On another note, the algorithm master Jim Simons and his Renaissance Technologies Medallion fund are up big this year; very big. That's all I can really say about that, seeing as his entire operation is one giant quant enigma. D.E. Shaw & Co, fellow quant masters, are doing decently, up 8% year to date in this horrid tape.

Lone Pine Capital, managed by Stephen Mandel, (whom I frequently cover here on the blog), isn't having the best of years, but isn't getting slaughtered like Atticus is. Lone Pine is down a little over 8% year to date. You can view their most recent portfolio holdings as I analyzed here.

The "Commodities Corp Offspring," Paul Tudor Jones and Bruce Kovner have been playing the commodities markets smartly with their macro funds it seems. Jones' Tudor Investment Corp is up 3% ytd, while Kovner's Caxton Associates is up 8% ytd. With the wild swings in the commodities markets claiming the life of the Ospraie fund, I'm sure Tudor Jones and Kovner are happy to turn a profit. This year has been one wild ride, to say the least.

And, lastly, John Paulson is still kicking ass and taking names; up 18% year to date. You'll remember that Paulson correctly pegged the subprime crisis last year and profited handsomely from it.

So, there you have it. See how you stack up against some of the most revered names in the game. Some are dominating, while others are getting dominated. Welcome to the bear market.

Source: WSJ

Citadel Aims to Start $1 Billion Macro Hedge Fund Managed By Kaveh Alamouti

Ahh, the endless cycle of hedge fund start-ups and failures. In contrast to my post earlier post about The Ospraie Fund blowing up here, I bring you news of a new fund emerging onto the scene. Ken Griffin's Citadel Investment Group is set to roll out their latest hedge fund, a $1 billion Global Macro Fund (pending funding, of course). Kaveh Alamouti, former employee of Macro giant Louis Bacon's Moore Capital Mangement, is set to run the fund.

We are slowly starting to see the next segway of "spinoffs" of apprentices from their masters. Years ago, Julian Robertson of Tiger Management helped mold some of the brightest minds on Wall Street, many of whom went on to start their own funds. The 'Tiger Cubs' as they are known, include greats such as John Griffin (Blue Ridge Capital), Stephen Mandel (Lone Pine Capital), Lee Ainslie (Maverick Capital), and Andreas Halvorsen (Viking Global Investors), all of whom I track here on the blog. The same can be said of the Commodities Corporation, which produced the likes of Bruce Kovner (Caxton Associates), Louis Bacon (Moore Capital Management), and Paul Tudor Jones (Tudor Investment Corp).

Now, we are starting to see these former proteges turned legends take on the role of their predecessors as they now watch their own employees/proteges emerge to manage their own funds. It's a beautifully endless cycle. Already, as I wrote about here, David Stemerman left Lone Pine Capital to start up Conatus Capital and Anand Parekh left Citadel to form Highliner Investment Group. And, as mentioned above, Kaveh Alamouti left Moore Capital Management to head up Citadel's new global macro fund. In this new spawning of "offspring," there will undoubtedly be picks of the litter, and then there will be runts. Only time will reveal who of them could possibly become the next Paul Tudor Jones or Julian Robertson. I will be watching with interest as I try to find the rising stars of tomorrow.

Source: Bloomberg

Qualcomm (QCOM): Adding on Major Dips for Long Term Portfolio

I just wanted to highlight the weakness we've been seeing in technology recently. In mid-August, the Nasdaq was easily outperforming the S&P500. But, as we've slid into September, technology has given back its gains. I've been waiting patiently to add to some tech positions that are typically high-flyers. And, it looks as if that patience is finally going to pay off, as I can finally start to get back into some names I've been looking to add to my core long term positions. As I wrote about here, you've got to be prepared for inflationary or deflationary investment scenarios. While it's still unclear whether we're heading straight towards a deflationary environment, it never hurts to be prepared. At any rate, in that post, I highlighted how in both an inflationary or deflationary scenario, it usually pays off to be long technology. So, with that in mind, my longer term portfolio is looking to add to tech names to hold for the long term.

I bought Qualcomm (QCOM) back in June as I detailed here, and it has paid off nicely. I took some profits, decreasing my position size on the most recent gap-up in July (see chart below). And, I've been waiting forever for QCOM to start dipping back down to fill the gap to re-add what I sold. So, we're finally getting that dip and I'll be looking to buy QCOM for the long term at around $48 and then again at $44 if it trades that low. I like it at $48 because it offers a decent level of support. And, not to mention, I initially bought QCOM back in June at around those levels. So, you can bet I'm more than happy to add back at that level. I've got a secondary limit order around $44, which is right around both the 200 day moving average and a nice level of recent support. Then, for safety, my stop will be placed a point or two below that last limit order, below the 200 day moving average. Because, if that area is taken out, the stock is headed much lower as it will have violated its solid uptrend.

(click to enlarge)

It's not quite to my first limit order yet, but it's getting there. There have been a few negative catalysts recently which have started to send the stock lower, and I'm happy to see it happen! Seriously, I've been waiting to re-add to this position forever it seems. Yesterday, as StreetInsider detailed, Goldman Sachs removed QCOM from its Conviction Buy List. And, the day prior, QCOM's CEO was on CNBC saying, "We're seeing some evidence there's a lengthening of replacement cycles." Which, to put it plainly, means that people are putting off buying new cell phones. This near-term weakness was fully expected, seeing as how the US and other parts of the world have slowed recently. So, I will use this near-term weakness as an opportunity to start building up my position for the long term. Because, as I said before, going long technology fits both my inflationary and deflationary investment scenario models. I've picked Qualcomm simply because they're dominant in their industry and continue to perform. And, not to mention, QCOM is definitely a 'hedge fund favorite,' meaning that tons of funds have a large position in the name. As I wrote about here, Maverick Capital has a large position in the name; as does Lone Pine Capital, which I wrote about here. It's always reassuring to see respected funds with large positions in a name you follow, because undoubtedly their teams have done more research on the name combined than I most likely could ever do alone.

So, that sums it up. I will exit the name if my pre-determined stop gets taken out, or if I see a material shift in their business, which would affect their long term ability to meet estimates. But, I will definitely be looking at the tech sell-off as a place to try and establish longer term positions

More Hedge Fund Liquidation Rumors

Well, it certainly feels like funds are liquidating, doesn't it? After hearing news that the Ospraie Fund was closing its doors yesterday, concern mounted that they wouldn't be the last to do so. And, today rumors were swirling that $14 billion hedge fund Atticus Capital (whom we've covered here on the blog) was liquidating. Not so, claims Tim Barakett, Atticus' founder. Barakett says, "We're certainly not liquidating. In fact we have a large net cash position and are looking for opportunities to invest capital." So, Atticus denies the rumors. And, while they personally might be safe, some other funds most certainly are not. Its hard to believe that Ospraie would be the only fund to blow up in this big mess. The only reason I bring this up is because more liquidations = the market heading even lower.

Source: WSJ

Hedge Fund Tracking: BP Capital's 13F (T. Boone Pickens)

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

Time to continue the Hedge Fund tracking series! If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners here, Bret Barakett's Tremblant Capital here, Peter Thiel's Clarium Capital here, Stephen Mandel's Lone Pine Capital here, Lee Ainslie's Maverick Capital here, and John Griffin's Blue Ridge Capital here. Next up, we have BP Capital. With all the commotion surrounding energy these days, it never hurts to track an energy focused hedge fund ran by none other than Boone Pickens. If you are unfamiliar with Pickens, he is an energy maverick and his fund returned 300% in 2005. He is a big advocate of Peak Oil Theory and runs an energy-centric hedge fund based in Dallas, Texas. Although he typically holds numerous positions in oil, he is also big on alternative energy (except ethanol) and has numerous holdings there as well. He most recently advocated a large natural gas position and has additionally made a big bet on wind energy. Some of his thoughts can be seen here from one of my posts. And, if you didn't know, he's pushing for energy independence with his Pickens Plan.

So, now that we've got a little background on Boone and BP Capital, let's see what they were up to. The following are BP Capital's current holdings as of June 30th 2008, as released in their most recent 13F filing with the SEC. The positions in this most recent 13F were compared to last quarter's 13F and here are the changes made to their portfolio:

New Positions:
BPZ Resources (BZP): 350,000 shares. This position is 0.48% of BP's portfolio.
EOG Resources (EOG): 322,266 shares. This position is 1.9% of BP's portfolio.
Tenaris (TS): 1,106,394 shares. This position is 3.88% of BP's portfolio.
Devon Energy (DVN): 845,946 shares. This position is 4.79% of BP's portfolio.
Chesapeake Energy (CHK): 1,838,129 shares. This position is 5.7% of BP's portfolio.


Added to:
Occidental Petroleum (OXY): Increased position by 2.88%. Now 8.7% of their portfolio.
Transocean (RIG): Increased position by 2.88%. Now 8% of their portfolio.
Suncor (SU): Increased position by 105.7% (due to 2:1 stock split). Now 7% of their portfolio.
Schlumberger (SLB): Increased position by 11.6%. Now 6.5% of their portfolio.
Halliburton (HAL): Increased position by 65.7%. Now 6.1% of their portfolio.
Denbury Resources (DNR): Increased position by 2.88%. Now 5.4% of their portfolio.
Weatherford (WFT): Increased position by 250%. Now 4.5% of their portfolio.
XTO Energy (XTO): Increased position by 66.66%. Now 3.85% of their portfolio.
Talisman Energy (TLM): Increased position by 19.8%. Now 3.78% of their portfolio.
ABB (ABB): Increased position by 2.88%. Now 3.65% of their portfolio.
Jacobs Engineering (JEC): Increased position by 2.88%. Now 3.55% of their portfolio.
Sandridge Energy (SD): Increased position by 2.88%. Now 3.2% of their portfolio.
Fluor (FLR): Increased position by 2.88%. Now 2.75% of their portfolio.
Foster Wheeler (FWLT): Increased position by 2.88%. Now 2.57% of their portfolio.
Shaw Group (SGR): Increased position by 17.6%. Now 2.34% of their portfolio.
Chevron (CVX): Increased position by 2.8%. Now 2.11% of their portfolio.
Dresser Rand (DRC): Increased position by 2.88%. Now 1.79% of their portfolio.
McMoran Exploration (MMR): Increased position by 2.88%. Now 1.35% of their portfolio.
KBR (KBR): Increased position by 2.88%. Now 1.05% of their portfolio.
Greenbrier Companies (GBX): Increased position by 2.88%. Now 0.56% of their portfolio.


Reduced Positions:
none


Removed Positions (Positions BP sold out of completely):
Titanium Metals (TIE)


Positions with no change:
InterOil Corp (IOC): 1.3% of the portfolio
Clean Energy Fuels (CLNE): 0.2% of the portfolio


Top 10 holdings by % of portfolio:
1. Occidental Petroleum (OXY): 8.7% of the portfolio
2. Transocean (RIG): 8% of the portfolio
3. Suncor (SU): 7% of the portfolio
4. Schlumberger (SLB): 6.5% of the portfolio
5. Halliburton (HAL): 6.1% of the portfolio
6. Chesapeake Energy (CHK): 5.7% of the portfolio
7. Denbury Resources (DNR): 5.4% of the portfolio
8. Devon Energy (DVN): 4.79% of the portfolio
9. Weatherford Intl (WFT): 4.5% of the portfolio
10. Tenaris (TS): 3.88% of the portfolio

-------------------------------------------------------

Breakdown: T. Boone Pickens didn't do a whole lot of selling. In fact, he only made one sale: Titanium Metals (TIE), which he completely sold out of. But, in terms of selling... that's it. He didn't reduce any of his other positions at all. Whether he was hoarding cash or funding other purchases with his sale of TIE, who knows. But, what we do know, is that he was out adding various new positions and boosting stakes in current holdings. In terms of new holdings, Boone started some big positions in Tenaris (TS), Devon (DVN), and Chesapeake (CHK). All three positions were large enough to land in the top 10 of portfolio holdings after just being added last quarter. In terms of adding to existing holdings, Boone was adding heavily to XTO Energy (XTO), and Weatherford (WFT). He boosted his positions in XTO by 66% and in WFT by 250%. His top three holdings are Transocean (RIG), Occidental (OXY), and Suncor (SU).

The rest of additions T. Boone made are really minor. For instance, he added to a myriad of positions, increasing practically every other remaining position by around 2.8%. Don't try to make sense of this, because he did the exact same thing last quarter as I showed in the previous 13F update I wrote about BP here. Basically, it looks as if Boone has some spare cash laying around and he's slowly but surely easing into positions by adding to them by 2.8% each quarter. So, I think it makes sense to put more emphasis on the positions he has massively added to like the ones I highlighted in the paragraph above. But, at the same time, I think it's worth mentioning the various other names he seems to be slowly building a core position in over time.

That's really it concerning BP Capital's portfolio. Remember that this is an energy centric hedge fund and they undoubtedly have positions in the actual commodities markets themselves. And, we can't see these positions. Since the 13F filings we track are done through the SEC, they only track equities traded on the stock exchanges. The funds are not required to report holdings in the currency, commodity, or futures markets. So, keep in mind this is only the equity portion of BP's portfolio.

Eric Bolling Says Buy Dips in U.S. Dollar, Wait on Energy

Eric Bolling, notable commodities trader and formerly "The Admiral" on CNBC's Fast Money is out today with some very simple advice: Trade smaller. When markets get crazy and people start taking losses, they tend to want to increase their position sizes, attempting to re-coup losses. Often times that decision turns out for the worse. So, keep things small. Cash is always a big ally in this kind of market.

Also, he mentioned he was still bullish on the U.S. Dollar and will be buying any dips, as he notes it has broken out on a multiyear basis (play it by getting long UUP). And, consequently, he feels there is still more room to the downside in energy, as various funds and traders continue to unwind positions.

You can read his thoughts here.

Hedge Fund Losses Continue: Ospraie Fund Closes

As I've detailed here and here, July was a rough month for hedge funds... or anyone for that matter. Just as commodities were responsible for handsome gains in the first half of the year, they came back to bite many a fund in the collective ass. Yesterday, we got word after market close that the Ospraie Fund was set to close after posting a 13% loss in the month of July. And, August was even worse, where they lost 26.7%. Year to date, they were down 38%. Needless to say, it's easy to see why they had to close up shop.

The Ospraie Fund, overseen by Dwight Anderson, was seeing 18% annual returns from 1999 to 2006. And, it only took a few major mis-steps in commodities to make it all come crashing down. This just goes to show that everyone is vulnerable to the volatility and crazyness we've seen in the markets this year. All it takes is one big mistake and your established track record goes flying out the window (even if it was only 5 years worth). Anderson is notable because he spent time at both Julian Robertson's Tiger Management and Paul Tudor Jones' Tudor Investment Corp before starting Ospraie. As I wrote about here, his old employer Tudor Investment Corp has steered clear of disaster thus far. Scoreboard: Master 1, Apprentice 0. This just goes to show that despite working for and learning from some of the best in the business, everyone is human and everyone makes mistakes. And, in this case, big mistakes. These days, it seems as if hedge funds are so obsessed with short-term outperformance that they will do anything to succeed. "Jack up leverage, throw risk management out the window, do whatever it takes." Maybe after it's all said and done, funds will have learned their lesson and will stop placing massive bets in hopes of home runs. Probably not. Greed and fear dominate markets.

Yesterday, we saw commodities get hammered all across the board. Now you know what a possible hedge fund liquidation feels like. Most likely, Ospraie was liquidating their positions in order to return money (what's left of it anyways) to investors. I have a feeling this won't be the last big fund to close its doors as volatility in the markets (and specifically the commodity markets) continues.

For more on the story, head on over to Trader Mark's FundMyMutualFund.com. He's summed up the saga in satirical fashion here. Or, if you just want the plain-jane news stories, head here.

Todd Harrison Talks Dollar and Oil

Great brief interview by Aaron Task over at Yahoo Tech Ticker from last week. Todd Harrison (Minyanville.com) thinks the Dollar has begun a sustainable rally. And, he also believes $110 is major support for oil while $130 is major resistance. And, that becomes all the more important seeing as how Oil is down $7 today and is now below that $110 threshold. Hear all his thoughts here.

New Month, New Site Design

Hey, just wanted to say that the site update is complete and the new template is up and running. Thanks for your patience over the weekend as I sorted through everything. I think it gives the site a 'fresher' look. The response thus far has been positive and I'd love any and all feedback. (Especially if you really hate it). After all, you're the ones reading it!

The updated Market Folly

Under Construction

Just wanted to give a heads up that the blog is under construction. I'm sampling numerous custom templates and as a result things will look screwed up until I get everything finalized in the next few days. Thanks for your patience.

Delinquencies Still Rising

(click to enlarge)

I'll let the picture do the talking here. Taken from Calculated Risk, we see continued rising delinquencies across the board in Residential Real Estate, Commercial Real Estate, and Consumer Credit cards.

How to play it:
- Short Commercial Real Estate (short CBG, short GGP, long SRS)
- Short Credit Card Companies (short COF, short DFS)
- Short banks with lots of leverage, lots of derivative exposure, and lots of residential/commercial real estate exposure (short HBC, WM)

One caveat with all those picks: You've got to monitor your positions like a hawk. The slightest bit of positive news can send these things skyrocketing due to short covering. Use stops, use your brain, and be swift.

Full disclosure: At the time of publication, MarketFolly was short COF, CBG, WM, GGP, HBC via puts

Bankers Versus Consultants

Great Stuff.

Credit Crisis Explained in Plain English

I posted here about a great article that explains the credit crisis in layman's terms. Well, last week, I came across yet another piece that articulates our economic situation in plain English. The way I see it, the more people who understand our situation, the better. That's why I keep posting these links. Please share these reads with anyone and everyone who either is disillusioned or doesn't quite understand what is going on. Here is the piece in the New York Times, written by Tyler Cowen, a professor of Economics at George Mason University.

Merrill Lynch is a Trainwreck

Found some interesting information today. Taken from the Financial Times:

"Merrill Lynch's losses in the past 18 months amount to about a quarter of the profits it has made in its 36 years as a listed company, according to Financial Times research that highlights the extent of the global banking crisis.

Since the onset of the credit crunch last year, Merrill has suffered after-tax losses of more than $14bn as its balance sheet has been savaged by almost $52bn in writedowns and credit-related losses.

Merrill’s total inflation-adjusted profits between its 1971 listing and 2006 were about $56bn, according to figures from Thomson Reuters Fundamentals and an FT analysis of reported earnings.

The $14bn in losses for 2007 and the first two quarters of 2008 equal half of Merrill’s profits since the beginning of the ­decade."

Just goes to show how bad all of this really is.

Source: FT

Investing in Wine (Even Wine Funds Are Popping Up Now?!)

I always have my eye out for interesting investment opportunities. And, this idea would definitely diversify your portfolio. Invest in wine. That's right, wine. I'm not really sure if this is just a temporary phenomenom or a secular trend building. But, I've certainly noticed a lot of hype and interest surrounding wine these days. Do note that I'm not necessarily recommending investing in wine, but I'm certainly paying attention to the trend. Are palettes around the world swapping beer for wine? It looks that way to me (albeit slowly but surely). And, I'm sure the consumer slump/recession in the U.S. will have something to say about that. But, over the past few months, I've seen more and more information popping up regarding investing in some choice wines. And, as I noticed recently in a WSJ Deal Journal article, a former UBS banker has even started up a $50 million 'wine fund' named The Bottled Asset Fund.

And, this next video is slightly older but I wanted to include it because it plays right into the investing in wine theme. If you missed it, Jim Cramer and Gary Vaynerchuk (wine guru) got together to discuss investing in wine, as seen on Vaynerchuk's Wine Library TV Show.


Lots of media attention around wine investing lately! We'll check back in a year to see if this was just a fad or if this actually has staying power.

Mutual Funds Getting Killed

The Stock Market is kicking ass and taking names (of fund managers everywhere).

"Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc."

Source: MarketWatch

The Economy Sucks, the Housing Market Sucks, and the Consumer Sucks Too

Okay, I know the title seems pretty morbid. But, it's more realistic than you might want to believe. I want to point readers to a well-written piece that assembles some great data regarding the state of the American Economy. The article is aptly titled The Great Consumer Crash of 2009. It is written by James Quinn, a senior director of strategic planning at the Wharton School, University of Pennsylvania (one of the most respected business schools in the country). I originally tried to pick out select parts of the article to present to you here. But, after re-reading his work, I've decided that you simply have to read the entire article. Check it out: The Great Consumer Crash of 2009.

And, if you find the article remotely intriguing, I highly suggest checking out some of Quinn's other articles found on his author's page on the same site.

Checking In On Daniel Loeb's Third Point LLC

As I mentioned earlier, I like to track a variety of hedge funds with different strategies just to see what everyone is up to each quarter. And, while I don't necessarily go in-depth on each fund, I do like to monitor major changes to their portfolios. In addition to tracking activist fund Greenlight Capital managed by David Einhorn (which I wrote about here), I also like to track the activist exploits of Daniel Loeb. Loeb runs Third Point LLC, a $4.5 billion activist hedge fund. While Third Point is technically an activist fund, Loeb often has numerous passive investments as well.

So, after comparing his most recent 13F filing with the one from last quarter, we can see a few major moves that Loeb has made with Third Point's portfolio. Please note that this is by no means a complete summary of changes. I am simply pointing out a few changes of interest.

New Positions:
American Superconductor (AMSC)
Chesapeak Energy (CHK)
Petrohawk Energy (HK)
Petroleo Brasileiro (PBR)
Sandridge Energy (SD)
Starwood Hotels (HOT)
Teradata (TDC)
XTO Energy (XTO)

Added to:
AK Steel (AKS)
American Eagle Outfitters (AEO)
Leap Wireless (LEAP)
Plains Exploration (PXP)

Reduced Positions:
GLG Partners (GLG)
Mastercard (MA)
Safeway (SWY)

Removed Positions (positions Loeb sold out of completely):
Applied Biosystems (ABI)
Chipotle (CMG)
Cypress Semiconductor (CY)
Mylan (MYL)


Some of Third Point's top holdings (in no particular order) include: Plains Exporation (PXP), Questar (STR), Mastercard (MA), Clear Channel (CCU), and Microsoft (MSFT).

Again, please note that this is merely some highlights of their portfolio and does not detail all of the changes made. If you're interested in more in-depth analysis of some hedge fund portfolios, check out some of the write-ups I've done on the blog (Blue Ridge Capital, Lone Pine Capital, & many more). And, if you're interested in every position Loeb held as of June 30th, you can view Third Point's entire recent 13F as filed with the SEC here.

Hedge Fund Tracking: Maverick Capital's 13F (Lee Ainslie)

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

Here we are with another week of the Hedge Fund tracking series. If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners here, Bret Barakett's Tremblant Capital here, Peter Thiel's Clarium Capital here, Stephen Mandel's Lone Pine Capital here, and John Griffin's Blue Ridge Capital here. Next up, we have Lee Ainslie's Maverick Capital. Lee Ainslie started Maverick Capital back in 1993 with $38 million. Nowadays, the fund is worth $10 billion. Ainslie, like many of the other fund managers I've profiled, has a background rooted in learning from legendary great Julian Robertson at Tiger Management. So, due to the fact that these proteges learned from the best and have had great success running their own funds, I continually try to find a reason not to follow these funds. And, needless to say I'm never successful. Some contacts over at Maverick have explained that their strategy is straight up stock picking, both long and short. They made it clear though, that they do not employ pairs trades. Although, some of their long/short setups might be in the same sector. They try to hedge their positions like a true hedge fund by picking out the shining stars in certain sectors, as well as identifying the pieces of garbage. Now, of course, this presents us with a problem in that the 13F filings only show long positions (unless they're holding puts on a name, we can see those). So, a good amount of Maverick's portfolio (the entire short side) is unbeknownst to us, because they have reported zero put positions. But, let's look on the bright side in that we can see all their long positions. Maverick uses a value approach (obviously learned from Julian) and one of their most popular metrics is finding companies and comparing their enterprise value to sustainable free cash flow.

So, now that we've got a little background on Maverick, let's see what they were up to. Once again, I'd like to give thanks to Alex Prywes for helping me gather and sort through the data of numerous hedge funds (including the one below). Thanks to Alex's help, we can now cover even more funds. And, on that note.... onto the 13F! The following are Maverick Capital's current holdings as of June 30th 2008, as released in their most recent 13F filing with the SEC. The positions in this most recent 13F were compared to last quarter's 13F and here are the changes made to their portfolio:

New Positions:
First Solar (FSLR): 1,202,118 shares. This position is 2.93% of Maverick's portfolio.
Lorillard (LO): 3,820,856 shares. This position is 2.36% of Maverick's portfolio.
CVS Caremark (CVS): 5,912,073 shares. This position is 2.09% of Maverick's portfolio.
Netapp (NTAP): 9,331,862 shares. This position is 1.81% of Maverick's portfolio.
ITT Educational Services (ESI): 2,422,090 shares. This position is 1.79% of Maverick's portfolio.
Macy's (M): 9,008,174 shares. This position is 1.56% of Maverick's portfolio.
Hansen Natural (HANS): 5,712,952 shares. This position is 1.47% of Maverick's portfolio.
Polo Ralph Lauren (RL): 2,431,244 shares. This position is 1.36% of Maverick's portfolio.
Dicks Sporting Goods (DKS): 7,589,473 shares. This position is 1.20% of Maverick's portfolio.
Cigna Corp (CI): 2,931,045 shares. This position is 0.93% of Maverick's portfolio.
Digital River Inc (DRIV): 1,974,144 shares. This position is 0.68% of Maverick's portfolio.
Viacom Inc (VIA): 2,442,500 shares. This position is 0.67% of Maverick's portfolio.
Forest Labs (FRX): 1,789,900 shares. This position is 0.56% of Maverick's portfolio.
Lamar Advertising (LAMR): 1,542,918 shares. This position is 0.50% of Maverick's portfolio.
Visa (V): 565,005 shares. This position is 0.41% of Maverick's portfolio.
South Financial Group (TSFG): 50,000 shares. This position is 0.38% of Maverick's portfolio.
Athena Health (ATHN): 1,245,819 shares. This position is 0.34% of Maverick's portfolio.
National City Corp (NCC): 6,625,176 shares. This position is 0.28% of Maverick's portfolio.
Sohu.com Inc (SOHU): 170,485 shares. This position is 0.11% of Maverick's portfolio.
MSCI Inc (MXB): 287,186 shares. This position is 0.09% of Maverick's portfolio.
Universal American (UAM): 1,004,391 shares. This position is 0.09% of Maverick's portfolio.
Comscore (SCOR): 436,640 shares. This position is 0.09% of Maverick's portfolio.
Citizens Republic Bancorp (CRBC): 937,500 shares. This position is 0.02% of Maverick's portfolio.


Added to:
Berkshire Hathaway (BRK.B): Increased position by 1412%. Position is now 0.45% of their portfolio.
Gmarket (GMKT): Increased position by 317%. Position is now 0.19% of their portfolio.
Infinera (INFN): Increased position by 171%. Position is now 0.54% of their portfolio.
American Capital (ACAS): Increased position by 141%. Position is now 0.30% of their portfolio.
Nordstrom (JWN): Increased position by 136.61%. Position is now 2.79% of their portfolio.
America Movil (AMX): Increased position by 129.88%. Position is now 3.91% of their portfolio.
Lexmark (LXK): Increased position by 109.39%. Position is now 1.42% of their portfolio.
Citrix (CTXS): Increased position by 109.36%. Position is now 2.20% of their portfolio.
Bank of New York Mellon (BK): Increased position by 55.42%. Position is now 3.15% of their portfolio.
Baxter Intl (BAX): Increased position by 51.69%. Position is now 2.90% of their portfolio.
Advanced Micro Devices (AMD): Increased position by 45.89%. Position is now 2.87% of their portfolio.
Raytheon (RTN): Increased position by 41.72%. Position is now 2.58% of their portfolio.
Fidelity National Info (FIS): Increased position by 40.56%. Position is now 2.05% of their portfolio.
Covidien (COV): Increased position by 32.99%. Position is now 2.32% of their portfolio.
Liberty Media Corp (LMDIA): Increased position by 28.09%. Position is now 1.59% of their portfolio.
Resmed (RMD): Increased position by 26.46%. Position is now 0.74% of their portfolio.
Burlington Northern (BNI): Increased position by 22.73%. Position is now 1.83% of their portfolio.
Google (GOOG): Increased position by 22.27%. Position is now 1.72% of their portfolio.
Genentech (DNA): Increased position by 21.38%. Position is now 1.40% of their portfolio.
Zimmer Holdings (ZMH): Increased position by 20.28%. Position is now 1.73% of their portfolio.
Cypress Bioscience (CYPB): Increased position by 19.98%. Position is now 0.20% of their portfolio.
Apple (AAPL): Increased position by 19.45%. Position is now 4.09% of their portfolio.
Research in Motion (RIMM): Increased position by 15.41%. Position is now 4.08% of their portfolio.
MetroPCS Comm (PCS): Increased position by 13.6%. Position is now 0.77% of their portfolio.
Home Inns & Hotels (HMIN): Increased position by 7.72%. Position is now 0.54% of their portfolio.
Gilead Sciences (GILD): Increased position by 6.66%. Position is now 2.37% of their portfolio.
Marvell Technology (MRVL): Increased position by 5.24%. Position is now 3.08% of their portfolio.
Newstar Financial (NEWS): Increased position by 5.21%. Position is now 0.14% of their portfolio.
Cardinal Health (CAH): Increased position by 3.33%. Position is now 1.56% of their portfolio.
Amylin Pharma (AMLN): Increased position by 2.84%. Position is now 0.58% of their portfolio.
Discovery Holding (DISCA): Increased position by 1.74%. Position is now 1.21% of their portfolio.
Palm (PALM): Increased position by 1.40%. Position is now 0.51% of their portfolio.
Lumber Liquidators (LL): Increased position by 1.14%. Position is now 0.26% of their portfolio.
China Nepstar (NPD): Increased position by 0.75%. Position is now 0.18% of their portfolio.
First Advantage (FADV): Increased position by 0.65%. Position is now 0.15% of their portfolio.
Under Armour (UA): Increased position by 0.17%. Position is now 0.83% of their portfolio.
Mylan Inc (MYL): Increased position by 0.06%. Position is now 1.09% of their portfolio.
Monsanto (MON): Increased position by 0.04%. Position is now 1.68% of their portfolio.
Potash (POT): Increased position by 0.03%. Position is now 2% of their portfolio.


Reduced positions:
Thermo Fisher (TMO): Reduced their position by 4.91%. Position is now 1.68% of their portfolio.
Western Union (WU): Reduced their position by 10.2%. Position is now 2.08% of their portfolio.
Marsh & Mclennan (MMC): Reduced their position by 12%. Position is now 1.55% of their portfolio.
Textron Inc (TXT): Reduced their position by 18.93%. Position is now 1.44% of their portfolio.
Wyeth (WYE): Reduced their position by 20.6%. Position is now 1.46% of their portfolio.
Leap Wireless (LEAP): Reduced their position by 23.40%. Position is now 0.39% of their portfolio.
Trubion Pharma (TRBN): Reduced their position by 24.38%. Position is now 0.04% of their portfolio.
Dish Network (DISH): Reduced their position by 27.75%. Position is now 1.13% of their portfolio.
Avon Products (AVP): Reduced their position by 33.23%. Position is now 1.36% of their portfolio.
JP Morgan Chase (JPM): Reduced their position by 38.68%. Position is now 0.89% of their portfolio.
Cognizant (CTSH): Reduced their position by 42.97%. Position is now 0.85% of their portfolio.
DirecTV (DTV): Reduced their position by 49.69%. Position is now 0.83% of their portfolio.
Suntrust Banks (STI): Reduced their position by 50%. Position is now 0.16% of their portfolio.
Gamestop (GME): Reduced their position by 51.64%. Position is now 0.81% of their portfolio.
Corcept (CORT): Reduced their position by 57.49%. Position is now 0.01% of their portfolio.
Bluefly (BFLY): Reduced their position by 90%. Position is now 0.11% of their portfolio.
Berkshire Hathaway (BRK.A): Reduced their position by 95%. Position is now 0.66% of their portfolio.


Removed Positions (Positions Maverick sold out of completely):
Hanesbrands (HBI)
Autozone (AZO)
Bankrate (RATE)
CNET (CNET)
Crocs (CROX)
Cumulus Media (CMLS)
Harmonic (HLIT)
Loews (L)
Move Inc (MOVE)
Nucor (NUE)
OfficeMax (OMX)
Qualcomm (QCOM)
Salesforce (CRM)
Sandisk (SNDK)
Sears (SHLD)
Starbucks (SBUX)
UnitedHealth (UNH)


Positions with no change:
VMWare (VMW). Position is 0.59% of their portfolio.
BPW Acquisition (BPW). Position is 0.18% of their portfolio.
FIrst Marblehead (FMD). Position is 0.05% of their portfolio.
Ultra Clean Holdings (UCTT). Position is 0.01% of their portfolio.
Vivus (VVUS). Position is 0.01% of their portfolio.


Top 20 holdings by % of portfolio:
1. Apple (AAPL): 4.09% of the portfolio
2. Research in Motion (RIMM): 4.08% of the portfolio
3. America Movil (AMX): 3.91% of the portfolio
4. Bank of New York Mellon (BK): 3.15% of the portfolio
5. Marvell Tech (MRVL): 3.08% of the portfolio
6. First Solar (FSLR): 2.93% of the portfolio
7. Baxter Intl (BAX): 2.90% of the portfolio
8. Advanced Micro (AMD): 2.87% of the portfolio
9. Nordstrom (JWN): 2.79% of the portfolio
10. Raytheon (RTN): 2.58% of the portfolio
11. Gilead (GILD): 2.37% of the portfolio
12. Lorillard (LO): 2.36% of the portfolio
13. Covidien (COV): 2.32% of the portfolio
14. Citrix (CTXS): 2.20% of the portfolio
15. CVS Caremark (CVS): 2.09% of the portfolio
16. Western Union (WU): 2.08% of the portfolio
17. Fidelity National Info (FIS): 2.05% of the portfolio
18. Potash (POT): 2.00% of the portfolio
19. Burlington Northern (BNI): 1.83% of the portfolio
20. Netapp (NTAP): 1.81% of the portfolio

----------------------------------------------------

Breakdown: Maverick changed up their portfolio a decent amount over the past quarter. Most notable are their changes within their top 10 holdings. Hedge fund favorite Qualcomm (QCOM) was Maverick's 3rd largest holding last filing. This filing, they no longer even hold a position. Additionally, they were selling off chunks of other top 10 holdings from last quarter. They sold off 33% of their position in Avon Products (AVP), which was their 4th largest holding just one quarter ago. They also sold over 51% of their Gamestop (GME) position, which last quarter was their 7th largest holding. With those positions vacating their place in the top 10 holdings of Maverick's portfolio, new holdings obviously took their place. America Movil (AMX), another hedge fund favorite, was Maverick's 9th largest holding last time. This time, they increased their position by 129% and it is now their 3rd largest holding. They obviously used the weakness in this name to add to their position, just like fellow 'Tiger Cub' fund Lone Pine Capital, as I wrote about here. Maverick also added heavily to Nordstrom (JWN), increasing their position by 136% and making it now their 9th largest holding.

Maverick was out adding to tech across the board. Apple (AAPL) and Research in Motion (RIMM) are their top 2 largest holdings respectively, as they boosted their positions in both by over 14% each. Additionally, they added to their Marvell (MRVL) position, bringing it up to the fund's 5th largest position now. Maverick also continues to build a position in Advanced Micro Devices (AMD), as it now is their 8th largest holding.

Among their new positions this quarter are First Solar (FSLR), Lorillard (LO), and CVS Caremark (CVS). I highlight these three in particular because Maverick started large, new positions in all three names. First Solar (FSLR) was brought up all the way to the fund's 6th largest holding after not even owning shares last quarter. They started a new position in CVS Caremark (CVS) and brought it up to the fund's 15th largest holding. Also, they added heavily to Lorillard (LO) as well, making this new position their 12th largest holding. This position is interesting because we also saw Lone Pine Capital (ran by Stephen Mandel Jr.) start a new position in this exact same name, as I wrote about here. And, actually, this is not the only position that both Maverick and Lone Pine both started together. In this 13F filing, we see that Maverick started a position in Hansen Natural (HANS). And, as I wrote about here, Lone Pine recently disclosed that they have a 7.8% stake in HANS. It's definitely common to see many similar positions within the portfolios of various 'Tiger Cub' managers who now run their own funds because they all undoubtedly keep in touch and come from the same school of thought.

One last thing I would like to point out is Maverick selling completely out of various consumer related names. They sold completely out of their positions in Autozone (AZO), Hanesbrands (HBI), Sears (SHLD), Starbucks (SBUX), Crocs (CROX), and OfficeMax (OMX).

You can view their most recent 13F as filed with the SEC here.

Check back each day this week as my 13F tracking series continues. Funds I will be covering this week include: Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management, Boone Pickens' BP Capital, and Timothy Barakett's Atticus Capital.

Checking In On David Einhorn's Greenlight Capital

I like to track a variety of hedge funds with different strategies just to see what everyone is up to each quarter. And, while I don't necessarily go in-depth on each fund, I do like to monitor major changes to their portfolios. One main activist fund I follow is Greenlight Capital. Greenlight is a $6 billion fund ran by David Einhorn and has had an annual return of over 25%. Greenlight specializes in spin-offs and value investing. Einhorn's name has been popping up in the media a lot in recent months as he talked about his well documented short position in Lehman Brothers (LEH).

So, after comparing his most recent 13F filing with the one from last quarter, we can see a few major moves that Einhorn has made with Greenlight's portfolio. Please note that this is by no means a complete summary of changes. I am simply pointing out a few changes of interest.

New Positions:
UnitedHealth Group (UNH)
Dr. Pepper Snapple (DPS) - a spinoff from Cadbury
Teradata (TDC)

Added to:
Helix Energy (HLX) - increased position by 12%

Reduced Positions:
Microsoft (MSFT) - reduced position by 33.1%
Target (TGT) - reduced position by 16.6%

Removed Positions (positions Greenlight sold completely out of):
Discover Financial (DFS)

Some of Greenlight's Top Holdings (in no particular order) include: Ameriprise Financial (AMP), Helix Energy (HLX), Microsoft (MSFT), Target (TGT), Health Management Associates (HMA), and M.D.C. Holdings (MDC).

Again, please note that this is merely the highlights of their portfolio and does not detail all of the changes made. If you're interested in more in-depth analysis of some hedge fund portfolios, check out some of the write-ups I've done on the blog (Blue Ridge Capital, Lone Pine Capital, & many more). And, you can view their Greenlight's recent 13F as filed with the SEC here.

Also, I wanted to point out that David Einhorn has a recent book out, Fooling Some of the People All of the Time: A Long Short Story. In it, he details the saga between his hedge fund (Greenlight Capital) and a company he shorted (private financer Allied Capital). I'm currently reading the book and will be posting a review of it on this blog once I finish. So far, it's a good read. It gives you an inside perspective as to how Greenlight goes about constructing and researching their investment theses. Check it out if you're interested.

Paul Tudor Jones & Tudor Investment Corp Update

Just came across some information regarding our macro pal Paul Tudor Jones. According to the NY Post, Tudor has gone quantitative, opening a new fund with nearly $1 billion called the Tensor fund, run by Steve Evans. This, of course, in addition to their macro and equity funds. And, apparently, their quant fund is kicking ass and taking names. Currently returning 18.9% year to date, their Tensor fund is besting the likes of quant legends Goldman Sachs' Global Equities Opportunities fund (up less than 1% year to date) and Jim Simons' Renaissance Institutional Equities Fund (down 4% year to date).

Also, as reported earlier this month, Paul Tudor Jones and his sidekick James Pallotta will be parting company come the end of the year, with Pallotta off to start his own equities fund (which I will be keeping my eye on when he spins off).

Lastly, we now know that Tudor Investment Corp's main fund, the $11 billion B.V.I. Fund, is up 2.3% year to date. Check back later this week, as I will be detailing the changes to Tudor's portfolio as I analyze their quarterly 13F filing.

Source: NY Post

Running a Hedge Fund is Tough in This Environment

If any of you have ever watched CNBC, you've undoubtedly seen Ron Insana on there at some point. He was one of their big anchors and had been with the channel for a long time. What you might not know, though, is that he eventually left CNBC to start a Hedge Fund of Funds. And, as we see from this article, running a hedge fund, or a fund of funds for that matter, is tough in this environment (duh).

"So, tell me about this credit crisis..."

Over the past few months, I have been receiving numerous inquiries from friends regarding the economy. And, unsurprisingly, numerous questions I receive relate to the credit crisis and its origins. Thankfully, an article over on Fortune has emerged which outlines the situation in plain English. So, for those of you wanting some more background on the situation, or if you have friends you're tired of explaining things to, point them to the aptly named article, "Credit crisis, explained."

Technical Analysis Roundup

Circling through some of my favorite blogs, I found some charts worth posting up here in what I like to call the 'Technical Analysis Round-up.' Longer term readers will know I like to reference charts simply because its a great tool to have in your investing arsenal. While I like to make investment decisions based on fundamentals, the technicals (a.k.a. the tape) can often provide additional insight to aid you in your quest. The fundamentals determine the 'why,' while the technicals determine the 'when' and 'how.' Glancing at a few charts can more often than not give you a great view of the price action surrounding some macro occurrences. Paying attention to volume, divergences, price patterns, and especially trend lines can provide you with great risk/reward setups. I'm not here to start a debate on fundamentals versus technicals because those arguments go in circles. I simply use both tools because they both offer unique information. If you're looking for reasons as to why you should pay attention to both the fundamentals and the technicals, then I will simply point you to interviews with some well known hedge fund managers that I've posted here and here.

Now, on to the Technical Analysis Roundup. First, over on Stewie's blog, he has a chart up of the Oil Services Index that shows a test of a long term trendline. This trendline can serve as a great entry into an easy risk/reward play. Buy the dips in oil service names as it approaches the trendline. Place your stop just below the trendline in case it is broken to the downside. Very simple risk/reward play that takes emotion out of the game. Oil will probably need to see some strength for the oil service names to take off here.

(click to enlarge)

And, unsurprisingly, the chart of oil has a similar setup, as detailed on Steve Puri's blog. As you can see, oil has a very similar setup in terms of risk/reward. You have an easy entry and a crystal clear area to place your stop. If the selloff in oil continues, your stop gets taken out and you move on to the next idea. Oil has traded very well on a technical basis and I would expect that trend to continue. Given the volatility in all markets recently, everyone is looking to the technicals as a guidling light. Although the action in the underlying commodity is driven by fundamentals, it has traded very technically sound. Just like the oil services, we see an opportunity for a very defined risk/reward setup with clear entry and exit points.

(click to enlarge)

Lastly, I want to highlight a chart posted over on Kevin's Market Blog. There, Kevin examines a major long-term trendline being violated in the British Pound. The British Pound has declined in value for fundamental reasons. Among them, a stronger U.S. Dollar, and an overall weakening environment in England and Europe in general. This fundamental decline in the currency is illustrated by the latest major drop on the chart. And, at the same time, technicians will tell you that since the trendline is broken, a short position in the Pound might be advisable. And, at the very least, technicians would have exited any long positions in the Pound once that long term trendline was broken.

(click to enlarge)

Hedge Fund Tracking: Lone Pine Capital's 13F (Stephen Mandel Jr.)

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

The Hedge Fund 13F Tracking series continues. If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners here, Bret Barakett's Tremblant Capital here, Peter Thiel's Clarium Capital here, and John Griffin's Blue Ridge Capital here. Next up, we have Lone Pine Capital, managed by Stephen Mandel Jr. Lone Pine is an $8 Billion fund that has returned over 25% annually ever since its inception in 1997. Why is Mandel worth following you might ask? Well, he served as a consumer/retail analyst for Tiger Management back in the day for legendary investor Julian Robertson. Robertson's proteges/right-hand men have been nicknamed the "Tiger Cubs" and many have started their own funds. So, not only has Mandel learned from one of the best, but he has put up some very solid returns himself. Mandel is well versed in the ways of finding undervalued companies and his funds typically like to sniff out solid companies with good management that are trading below their intrinsic value. Just this past year 1 of his funds was up 34% before fees while another was up 32% before fees. His track record speaks for itself. And, not to mention, he learned from one of the greats in Julian Robertson. However, as I wrote about here, Lone Pine has had a rough 2008, where their Lone Cedar Fund was -5.38% year to date (as of the middle of July '08). By analyzing their 13F, maybe we'll be able to see where they are slipping up.

Once again, I'd like to give thanks to Alex Prywes for helping me gather and sort through the data of numerous hedge funds (including the one below). Thanks to Alex's help, we can now cover even more funds. And, on that note.... onto the 13F! The following are Lone Pine Capital's current holdings as of June 30th 2008, as released in their most recent 13F filing with the SEC. The positions in this most recent 13F were compared to last quarter's 13F and here are the changes made to their portfolio:

New Positions:
Entergy Corp (ETR): 3,518,632 shares. This position is 6.06% of Lone Pine's portfolio.
Weatherford Intl (WFT): 4,820,337 shares. This position is 3.42% of Lone Pine's portfolio.
Lorillard Inc (LO): 3,328,911 shares. This position is 3.29% of Lone Pine's portfolio.
Amazon (AMZN): 2,527,634 shares. This position is 2.65% of Lone Pine's portfolio.
Sears Holdings Corp (SHLD) Puts: 1,336,800. This position is 1.41% of Lone Pine's portfolio.


Added to:
America Movil (AMX): Increased position by 39.5%. Position is now 10.74% of their portfolio.
Sandridge Energy (SD): Increased position by 22.24%. Position is now 11.35% of their portfolio.
SAIC (SAI): Increased position by 16.38%. Position is now 2.45% of their portfolio.
Dicks Sporting Goods (DKS): Increased position by 15.8%. Position is now 1.48% of their portfolio.
XTO Energy (XTO): Increased position by 5.41%. Position is now 8.33% of their portfolio.


Reduced Positions:
CB Richard Ellis (CBG): Reduced their position by 9.62%. Position is now 2.94% of their portfolio.
Illumina (ILMN): Reduced their position by 9.97%. Position is now 2.69% of their portfolio.
Fastenal (FAST): Reduced their position by 12.5%. Position is now 3.78% of their portfolio.
Qualcomm (QCOM): Reduced their position by 13.88%. Position is now 7.26% of their portfolio.
Brookfield Asset Mgmt (BAM): Reduced their position by 16.4%. Position is now 3.26% of their portfolio.
Monsanto (MON): Reduced their position by 25.82%. Position is now 3.27% of their portfolio.
Mastercard (MA): Reduced their position by 29%. Position is now 2.48% of their portfolio.
Priceline (PCLN): Reduced their position by 30.75%. Position is now 2.34% of their portfolio.
Google (GOOG): Reduced their position by 39.30%. Position is now 7.39% of their portfolio.
Infosys (INFY): Reduced their position by 49.1%. Position is now 2.19% of their portfolio.
Visa (V): Reduced their position by 57.38%. Position is now 1.93% of their portfolio.
Sears Holdings (SHLD) Puts (2nd put position): Reduced their position by 79.73%. Position is now 0.21% of their portfolio.


Removed Positions (Positions Lone Pine sold out of completely):
Apple (AAPL)
Brookfield Asset Management (BAM) - 2nd listed position
CME Group (CME)
EMC Corp (EMC)
Nutrisystem (NTRI)
Southwestern Energy (SWN)
SRA International (SRX)


Positions with no change:
MSC Industrial Direct (MSM). Position is 3.26% of their portfolio.
Teradata (TDC). Position is 3.06% of their portfolio.
Eagle Materials Inc (EXP). Position is 1.66% of their portfolio.
Bunge (BG) Puts. Position is 0.85% of their portfolio.
Deltek (PROJ). Position is 0.24% of their portfolio.
New York Times (NYT) Puts. Position is 0.02% of their portfolio.


Top 10 holdings by % of portfolio:
1. Sandridge Energy (SD): 11.35% of the portfolio
2. America Movil (AMX): 10.74% of the portfolio
3. XTO Energy (XTO): 8.33% of the portfolio
4. Google (GOOG): 7.39% of the portfolio
5. Qualcomm (QCOM): 7.26% of the portfolio
6. Entergy (ETR): 6.06% of the portfolio (new position)
7. Fastenal (FAST): 3.78% of the portfolio
8. Weatherford Intl (WFT): 3.42% of the portfolio (new position)
9. Lorillard Inc (LO): 3.29% of the portfolio (new position)
10. Monsanto (MON): 3.27% of the portfolio

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Breakdown: Well, it's very evident where Mandel & Lone Pine's poor performance is coming from. As of June 30th, they had massive holdings in natural gas and oil players Sandridge Energy (SD) and XTO Energy (XTO). SD was their top holding by % value and XTO was not far behind as their 3rd largest holding. The selloff in natural gas, oil, and all related stocks has undoubtedly affected Lone Pine in a negative way. The selloff in those names started around July, leaving Mandel a very limited window of opportunity to sell. Unfortunately, we'll have to wait until the next round of 13F's in the coming quarter to find out what Mandel has done with his large natural gas positions. Considering that the filing reports holdings as of June 30th, and the major selloff began in July, we have no idea whether Lone Pine was massively hurt by the selloff, or whether they were one of the parties responsible for the selloff. But, no matter how savvy Mandel may be, there is no way he got through July unscathed. So, that looks to be one of the main areas contributing to the lackluster performance of his Lone Cedar Fund so far in 2008.

Next, I want to highlight that Lone Pine added to their America Movil (AMX) position by 39%, nearly doubling down on their shares. Obviously, Mandel still likes the company and was using the weakness to add to his position. His addition is interesting, considering numerous hedge funds completely removed their AMX position over the past quarter, including his 'Tiger cub' buddy John Griffin over at Blue Ridge Capital. AMX has long been a hedge fund favorite and has been a top 10 holding in many prominent hedge fund portfolios over the past year. But, with the recent developments in AMX over the last few months, many hedge funds have taken action. And, unlike his colleagues, Mandel was buying the shares that other fund managers were selling off. It will be interesting to see how this continues to play out, as the once hedge fund favorite AMX may be falling out of favor with numerous managers. Lone Pine, however, was adding with conviction, making it their portfolio's 2nd largest position.

I would also like to highlight a couple of new positions started by Lone Pine this past quarter. They added Entergy (ETR) in mass, making it their 6th largest holding at 6.06% of their overall portfolio. In the past, I've talked about ETR on the blog as a way to play both the rising demand in electricity as well as the nuclear space in alternative energy. In addition to starting ETR, they started Weatherford (WFT), an equipment and service provider in the oil and natural gas spaces. They brought this position up to the fund's 8th largest holding at 3.42% of their portfolio. Additionally, they started a position in Lorillard (LO), a cigarette manufacturer. They brought this name up to the 9th largest fund holding, at 3.29% of the portfolio. Mandel added ETR, WFT, and LO all with conviction over the past quarter, landing all three as top 10 holdings.

Turning to tech, we see that Lone Pine has sizable positions in hedge fund favorites like Google (GOOG) and Qualcomm (QCOM). However, Lone Pine was selling off some of their tech holdings during the past quarter. They sold 13% of their QCOM position, leaving it as the fund's 5th largest holding. Mandel got aggressive with Google (GOOG) though, selling nearly 40% of his position. Despite the selling, it still remains their 4th largest holding. That just goes to show how large of a position he had in GOOG. Additionally, he sold completely out of Apple (AAPL). Just last quarter, it was his fund's 5th largest holding. Now, he no longer even holds a position.

Lone Pine was also busy selling the payment processors Mastercard (MA) and Visa (V). They sold 30% of their position in MA and 57% of their position in V. You can't really blame them though, as they were sitting on some handsome profits from those positions. We'll keep an eye out to see if they add back to their positions now that MA and V trade at cheaper prices than they did 2 months ago. After all, the payment processors are big hedge fund favorites, having appeared in numerous funds' portfolios.

Overall, its easy to see where Lone Pine might be struggling this year. They've been rewarded with nice gains in some of their tech and payment processing holdings. But, those gains could have been easily nullified by the likely beating their natural gas and oil holdings took. If you are interested in further comparing Lone Pine's holdings, you can check out the analysis I did of their previous 13F here. Lastly, in a recent development, Lone Pine recently filed a 13G with the SEC, disclosing their minority stake in Hansen Natural (HANS), which I wrote about here.

And, you can view their most recent 13F as filed with the SEC here.

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Check back tomorrow for the 13F breakdown of Lee Ainslie's Maverick Capital. And, tune in next week as my 13F tracking series continues. Funds I will be covering next week include: Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management, Boone Pickens' BP Capital, and Timothy Barakett's Atticus Capital.