Bill Ackman's Pershing Square Buys More Fortune Brands (FO)

Bill Ackman's hedge fund firm Pershing Square Capital has taken advantage of the recent market sell-off to add to their position in Fortune Brands (FO).

Per a Form 4 filed with the SEC, Pershing acquired 3,648,512 additional shares at prices ranging from $52.67 to $54.47 on August 5th, 8th, and 9th.

After this series of buys, Pershing Square now owns 20,818,545 shares of Fortune Brands. The majority of their purchase came at $52.67 and $52.78 and FO now trades around $53.95. This is the second time Ackman has purchased FO in the past three months.

This is an activist investment for Pershing as they've pushed for Fortune to break-up its three distinct businesses: spirits/liquor, home finishes, and they've already sold their golf segment.

For more from Ackman, head to notes from the leaders in investing summit. Ackman will also be presenting his latest investment ideas at the upcoming Value Investing Congress in New York on October 17th & 18th along with many other hedge fund managers. Be sure to sign-up here.

Seth Klarman's Baupost Group Adds to PDL BioPharma Stake

Seth Klarman's hedge fund Baupost Group has acquired more shares of PDL BioPharma (PDLI) per a 13G just filed with the SEC.

Due to portfolio activity on July 31st, Baupost has disclosed a 10.53% ownership stake in PDLI with 14,718,814 shares. This marks a 40% increase in their position size as they only owned 10,495,225 shares at the end of the first quarter.

Notorious for holding large cash positions when he doesn't see opportunity, Klarman has used the recent market decline to deploy some of that cash into one of his very few equity positions. Last month, we detailed other activity from the fund as Baupost doubled its Syneron Medical stake.

To see the rest of Baupost's updated equity investments, we'll have a brand new issue of our Hedge Fund Wisdom newsletter out in a week and a half.

Per Google Finance, PDL BioPharma is "engaged in the management of its antibody humanization patents and royalty assets, which consist of its Queen et al. patents and license agreements with pharmaceutical and biotechnology companies. The Company receives royalties based on these license agreements on sales of a number of humanized antibody products marketed and also may receive royalty payments on additional humanized antibody products launched before final patent expiry in December 2014."

David Tepper's Appaloosa Sells Bank of America (BAC) and Wells Fargo (WFC)?

David Tepper's hedge fund Appaloosa Management filed their 13F early with the SEC and in it are some noteworthy moves. The filing reflects portfolio activity as of June 30th, but it does give us a glimpse as to what he was up to in the second quarter.

The big talking point here is that in the second quarter, Tepper sold 41% of his position in Bank of America (BAC), selling over 7.2 million shares. He also sold 5% of his position in Wells Fargo (WFC) and 6% of his position in Citigroup (C), his top equity holding at the end of Q2.

However, David Faber at CNBC is hearing that Tepper has since sold completely out of BAC and WFC in recent weeks. He also apparently sold a chunk of his stake in C too. Tepper has not confirmed this though.

Turning back to the factual information from the 13F we do have though, Tepper also sold 54% of his stake in Hewlett Packard (HPQ).

In terms of new positions, Appaloosa started new stakes in Mosaic (MOS), Western Refining (WNR) and Google (GOOG). It's likely that Appaloosa took advantage of the MOS secondary as Dan Loeb's Third Point also bought MOS. Tepper also bought more CVR Energy (CVI) which we already highlighted back in June.

On the long side, refining seems to be a big theme for Appaloosa as they ramped up their stake in Valero (VLO) by 202% in the second quarter in addition to starting their stake in WNR. To see what other top hedge funds have been buying & selling, subscribe to our Hedge Fund Wisdom newsletter as a new issue is due out in just a week and a half.

Jeff Saut A Buyer of Select Equities During Weakness

Back in July, market strategist Jeff Saut was worried about market action and rightfully so. This time around, he makes two major points in his latest commentary:

1. The Dow Theory sell signal that was registered last week is concerning.

2. Stocks are ridiculously oversold and surely a relief rally is in sight?

With those conflicting viewpoints, which side did he take? Well, he has concluded that buying *select* equities makes sense here. Why?

Saut backs up his decision by rattling off points such as: "there is no economic evidence the country is sliding into recession -- slow growth, yes; recession, no. That view is reinforced by the Yield Curve, which has been one of the most reliable predictors of recessions. To wit, every recession for the past 50 years has been preceded by an inverted Yield Curve (short-term interest rates above long-term interest rates). Currently, the Yield Curve is very steeply sloped."

The market strategist also moves on to highlight that 68% of companies beat revenue estimates during the recent earnings season. He is looking for a reflex rally off the massively oversold conditions. During this theorized rally, he instructs readers to 'prune' portfolios of underperforming stocks.

The only question we're left with is which *select* stocks is Saut referring to? He advocates buying "fundamentally sound stocks with decent dividend yields." And even though this list is from May, here are Saut's favorite investment ideas. Do with that what you will.

Embedded below is Jeff Saut's latest market commentary:



You can download a .pdf copy here.

Calling All Contrarians: What Signals Do You See?

Since every site on the internet seems to be spewing venom about how the government sucks, the ratings agencies suck, and the markets suck, we thought we'd head a different direction and start compiling a list of any contrarian signals out there.

First, a disclaimer: this isn't some batshit bottom-calling bonanza post. We don't engage in the X-Games sport of chainsaw juggling. This is merely an exercise similar to the one we penned back on March 8th, 2009 in our post: ranting, raving & contrarian signals that outlined just how crazy things were at the time.

This past Sunday night before markets opened to trade for the first time since the US debt downgrade, some people were exclaiming that it felt like the eve of Lehman Brothers' demise.

On Twitter, we opined that such a claim seemed ridiculous. Maybe the financial crisis made us numb to volatility, but it didn't feel nearly as extreme as 2008; not even close. Lehman was a forced deleveraging while this seems to be an unwind of QE2 excesses.

Comparisons aside, we thought it would be a prudent exercise to rationally process and analyze what we're seeing rather than spit out another article of doom that you've already read ten times. Legendary investor Jim Rogers once said, "I sell euphoria and buy panic." So today we look for signs of panic.

Current Contrarian Signals?


1. The Volatility Index (VIX) has surged from 17.5 in late July to 48 currently. The last time it was this high? Summer 2010 during the market's pullback. Since inception 25 years ago, the volatility index has only been above 44 on 9 different occasions. While it can still undoubtedly go higher (it touched 80 during the financial crisis), there has been a dramatic ramp in volatility.

2. Capitulation? This term is extremely overused. The word 'capitulation' was thrown around 396 times on CNBC last week with their octaboxes of people all talking over each other. On August 4th we tweeted that capitulation usually comes AFTER those calling for it piss themselves and reverse course. You need true panic. One example follows:

3. Hedge Fund Manager Barton Biggs: While this is only one example of 'capitulation', it does give hope to the contrarians out there. Last week $1.4 billion hedge fund Traxis Partners head Barton Biggs called stocks a "strong buy." Only a week later, he himself has capitulated (or made a smart move, depending on your view) by taking "some risk off," saying he hated to be doing so. This is merely one example of people throwing in the towel, but this is the type of behavior seen during true capitulation.

4. Retail Investors Freaking the F Out: You all probably have that one retail investor friend that doesn't pay attention to markets all that often but still wants to make money. You are their "go-to" market guy. When they start calling you wondering what the f*ck is going on, that might be a contrarian signal. When they call you saying they sold everything, that's usually a contrarian signal. Don't know about you, but we received these phone calls yesterday.

5. Bank Charges For Holding Cash: This is somewhat an outlier given it applies to accounts holding $50 million or more, but it's still worth mentioning. Instead of being invested, there is so much cash sitting around in accounts at Bank of New York Mellon that they began charging clients to hold cash in their accounts. One-month Treasury bills traded at a negative yield and indicated that investors were willing to *pay* the government to take their money.

5. ZeroHedge Crashes: The popular market website with a cult-like following crashed on Sunday night due to insane traffic as bears tried to congregate in victory and scared bulls looked for answers.

5. Dow Posts Sixth-Largest Point Loss: The market saw its worst day since the financial crisis as it tumbled 634 points. Stocks have fallen 15% in just over two weeks and such outlier events can be contrarian signals.

6. ??? What other contrarian signals (if any) are you seeing? On the flip side, what bearish confirmations are you seeing? We're looking for both sides of the argument so let us know your thoughts in the comments below.

Again, the disclaimer for those who forgot: bottom-calling is for schoolboy bitches and this post is merely surveying the carnage.

David Gallo's Valinor Management Adds to Popular (BPOP) Position

David Gallo's hedge fund firm Valinor Management recently filed a 13G with the SEC due to portfolio activity on July 26th in shares of Popular Inc (BPOP). Per the filing, Valinor has revealed a 5.12% ownership stake in BPOP with 52,300,172 shares.

This marks a 52% increase in Valinor's position size in Popular since the first quarter. While this recent trading took place in late July, it's impossible to guess if the hedge fund has done anything with the position since then during August's tumultuous market decline. Since July 26th, shares of BPOP are down 16% and hit a new 52 week low today.

In other activity from the hedge fund, we've detailed Valinor's stake in Swift Transportation (SWFT).

Per Google Finance, Popular is "a diversified, publicly owned bank holding company. The Company operates in two markets: Puerto Rico and Mainland United States. In Puerto Rico market the Company provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (BPPR), as well as auto and equipment leasing and financing, mortgage loans, investment banking, broker-dealer and insurance services through specialized subsidiaries. In Mainland United States market, the Company operates Banco Popular North America (BPNA), including its wholly owned subsidiary E-LOAN, Inc. (E-LOAN)."

Eric Mindich's Eton Park Capital Buys More MSCI

Eric Mindich's hedge fund Eton Park Capital just filed a 13G with the SEC on its position in MSCI Inc (MSCI ). Per portfolio trading on July 29th, Eton Park has disclosed a 5.81% ownership stake in with 7,000,000 shares.

This activity represents a 18.6% increase in the hedge fund's position size because at the end of the first quarter, they owned 5,900,000 shares. Per data from the first quarter, Eton Park is now the fourth largest shareholder of MSCI shares.

MSCI is very visible in markets as popular indexes (and exchange traded funds) bear its name, such as the iShares MSCI Emerging Markets Index (EEM).

Of other funds we track, Stephen Mandel's hedge fund Lone Pine Capital had previously owned MSCI back in 2009 but sold it in 2010. Thomas Steyer's Farallon Capital held a sizable position at the end of Q1, but we won't know their recent Q2 position size until next week.

In other activity from Eton Park, we detailed their new position in 3Leg Resources.

Per Google Finance, MSCI Inc is "a provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance products and services. The Company consists of two segments: the Performance and Risk business and the Governance business."

Larry Robbins' Glenview Capital Buys Clearwire (CLWR): Investment Thesis

Larry Robbins' hedge fund firm Glenview Capital just filed a 13G with the SEC regarding shares of Clearwire (CLWR). Due to portfolio activity on July 28th, Glenview has disclosed a 6.53% ownership stake in CLWR with 16,228,264 shares.

This activity marks a 76.5% increase in their position size since the end of the first quarter. So while they were buying as recently as the end of July, the crazy market volatility that has followed in August makes it hard to know if they've battened down the hatches and held onto these recently acquired shares, or if they instead chose to reduce risk. We've also detailed how Glenview bought Flextronics (FLEX) as well.

Glenview's Thesis on Clearwire

Glenview's previous letter outlined their thesis on Clearwire (CLWR) as they own equity and debt. The company owns 45 billion MHz of wireless spectrum and was the first true '4G' wireless network. They like CLWR under the notion that capex was behind the company ($20 billion) and growth was ahead. The stock currently trades around $1.52.

Robbins goes on to say that the main backdrop for investing in CLWR is that, "over the next four years, mobile traffic growth is expected to increase 40 times, driven by increased video usage and data plans on PCs/tablets/smartphones ... The appeal of Clearwire is therefore simple; Clearwire has aggregated an unmatched amount and a sufficient quality of spectrum to be a viable 4G offering for a wireless carrier."

The hedge fund likes Clearwire because: "a) there is significant downside support from asset value, b) the investment to build those assets is substantially behind them, and c) the wireless industry is at an inflection point in terms of demand for these assets."

Another bit worth noting: CLWR is owned mainly by strategic investors (~84%), primarily by Sprint (S). Glenview hypothesizes that should the AT&T (T) and T-Mobile merger be approved, Sprint could compete by moving to purchase the rest of Clearwire. Either way, Glenview likes the risk/reward of CLWR.

To see the rest of Glenview's investments, be sure to subscribe to our Hedge Fund Wisdom newsletter, as a new issue will be released in the next two weeks that updates top hedge fund portfolios.

What We're Reading ~ 8/8/11

Dreman's contrarian investment rules [World Beta]

What concerns Passport Capital [Distressed Debt Investing]

On bond management [Aleph Blog]

Let's face it, market correction makes sense [Peridot Capitalist]

Why this is not 2008 [Capital Observer]

Paulson's flagship fund down 21.6% [FT]

Profile of Lansdowne's Paul Ruddock [Bloomberg]

Andy Beal becomes billionaire with FDIC assets [Bloomberg]

Are hedge funds too big to fail? [WSJ]

Steven Cohen's forbidden transcript [Reuters]

Introduction of the social web index [StockTwits]

Web 2.0: how to spot the top [Reformed Broker]

Don't call it the next tech bubble yet [Fortune]

Social networks: are real names required for real socializing? [AVC]

An inside look at the rise and fall of Research in Motion (RIMM) [Boy Genius Report]

Depressing but nonetheless: 25 documents you need before you die [WSJ]

E-Trade Baby Loses Everything - Fake Commercial

This fake commercial titled, 'E-Trade Baby Loses Everything' is pretty appropriate given the torrential wave of selling the stock market has seen over the past week. If you're at work, be warned that there's lots of cursing/bleeping.

Email readers will need to come to the site to watch the video:

Perry Capital's Investment Thesis on Iron Mountain (IRM)

Hedge fund Perry Capital's recent letter to investors outlines why they added to their existing position in Iron Mountain (IRM) in the second quarter. We also posted up Perry's thoughts on credit in another post. Regarding their equity stake in IRM, Perry writes,

"The company’s main business is physical document and data tape storage where it has the #1 market share. In part due to the urging of a shareholder, the company is engaging in a series of changes that should unlock value and drive returns to shareholders. We believe management’s commitment to the shareholders, new board appointments, reductions in capital expenditures, the recent sale of its non-core digital business, rationalization of its international operations, and potential conversion to a REIT all bode well for shareholder value creation. Along with the defensive nature of the business model, management has committed to return $2.2bn of cash to shareholders by 2013 (equal to one third of its market capitalization). This should provide adequate downside protection in an uncertain market environment."

Perry Capital 767 Fifth Avenue New York, NY 10153
212-583-4000 investorrelations@perrycap.com

Perry Capital: European Markets to Provide Credit Opportunity in Coming Months

Richard Perry's hedge fund firm Perry Capital returned -0.93% in the second quarter and is up 2.69% for the year. The firm now manages $8.6 billion and has used the market volatility to add to their positions in their highest conviction names.

In a past investor letter, we highlighted how Perry saw a growing amount of event-driven opportunities. Their second quarter letter to investors outlines why they sell existing positions:

1. more compelling opportunities are created by the markets
2. a position reaches value
3. our original thesis is refuted based on newly uncovered data.

Perry also writes, "we are comfortable holding higher cash levels when we see potential opportunities on the horizon. The European sovereign debt crisis could be the cause of the next market dislocation."


Credit Positions

The hedge fund's letter mentioned their position in preferred securities of government sponsored enterprises (GSE's) such as Fannie Mae and Freddie Mac. As 90-day delinquencies have been steadily declining, Perry feels the US taxpayers could recoup the $164 billion preferred investment. In the past we've pointed out how Michael Kao's Akanthos Capital Management likes GSE preferreds as well.

Perry also believes that peripheral European markets will be a 'robust' credit opportunity over the upcoming months. Additionally, Perry utilized the June sell-off to add "a small amount of structured credit to the portfolio with a particular focus on asset-centric instruments."


Equity Positions

The hedge fund sold their position in Equinox Minerals as Barrick Gold (ABX) purchased the company and after Zambian approval, Perry tendered its shares into the offer. They also exited their position in Swiss pharmaceutical company Actelion (ETR:ACT) after a failed attempt by an activist shareholder and a disappointing jury verdict.

They also added to their existing position in Iron Mountain (IRM). You can view Perry Capital's thesis on Iron Mountain here.


For more recent hedge fund letters, we've also posted up:

- Ivory Capital's thoughts on why value investing isn't working in this market

- Dan Loeb & Third Point's Q2 letter

- Oaktree Capital & Howard Marks' thoughts on the US debt ceiling

- Corsair Capital's Q2 letter

- David Einhorn & Greenlight Capital's letter

FINforums Annual Hedge Fund Summit: 10% Discount

On September 14th, 2011 in New York City, join FINforums, the events arm of top hedge fund news site FINalternatives, as distinguished experts from the hedge fund industry speak candidly about the biggest issues affecting managers today.

Topics covered include: The global macro outlook for Q4 and beyond; The best investment strategies for finding alpha; Techniques for successful marketing and capital raising; Regulatory and compliance updates; Alternative hedge fund structures (managed accounts, UCITS, investible indices); An institutional investor roundtable, and more.

Registration Discount for Market Folly Readers:

Hedge funds / Buyside = $295
Service Providers / Others = $695

Use discount code FOLLY11 for a 10% discount

Register Today, Space is Limited

Speakers Include:

Frank Ahimaz, CIO, Museum of Modern Art (MoMA)
Michael Alexander, Director, Smarsh Inc.
David Asman, Anchor, Fox News and Fox Business Network
Peter Carey, Managing Director, SkyBridge Direct
Jack Flaherty, Investment Manager, GAM
Simon Fludgate, Principal, Aksia
Bruce Frumerman, CEO, Frumerman & Nemeth
Ibrahim Gharghour, Managing Partner and CIO, Pulse Capital Partners
Todd Groome, Chairman, AIMA
Deepak Gurnani, Head of Hedge Funds, Investcorp
Constance Hunter, Chief Economist, Aladdin Capital Management
Jeremy Kroll, Co-founder and CEO, K2 Global Consulting
Joseph McAlinden, CIO, Catalpa Capital Advisors
Michelle McCloskey, Head of Hedge Fund Research, Man Investments
Eric Munson, Managing Director, Stride Capital
Vinod Paul, Managing Director, Eze Castle Integration
Cathleen Rittereiser, Dir. Of Investor Relations, Concordia Advisors
Larry Smith, Chairman and CIO, Third Wave Global Investors
Don Steinbrugge, Managing Partner, Agecroft Partners
Lisa Vioni, President and CEO, Hedge Connection
Christopher Vogt, Global Head of Hedge Funds, Allstate Investments
Ezra Zask, Founder and President, SFC Associates

Hedge Fund Third Point Reduces Equity Exposure For Third Consecutive Month

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

Net Exposures Down Yet Again

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

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

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

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


Third Point's Top Positions

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

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

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

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

Margin Call Movie Trailer: New Film About the Financial Crisis

Below is the movie trailer for the new financial film, Margin Call. It will be in theaters on October 21st, 2011 and features actors such as Kevin Spacey, Jeremy Irons, Demi Moore, Stanley Tucci, Paul Bettany, Simon Baker, and Zachary Quinto.

The movie is about the beginning stages of the financial crisis as it chronicles the final 24 hours of Lehman Brothers and is filmed from the viewpoint of people working at the (now extinct) Wall Street investment bank. The film is written and directed by J.C. Chandor.

Embedded below is the Margin Call movie trailer (email readers come to the site to watch):

While this movie probably won't top the legendary movie, Wall Street, hopefully Margin Call is at least better than Wall Street 2.

Market Strategist Jeff Saut Cautiously Favors the Upside

Market strategist's Jeff Saut latest commentary continues to focus on key support/resistance levels in the S&P 500. Last week he was concerned about market action. As the markets gyrate back and forth (essentially trading sideways), he waits for a resolution. This week, he can't help but be slightly optimistic, writing:

"Nevertheless, earnings continue to be the driver of the stock market's buoyancy and earnings remain robust as 73% of the 345 U.S. companies that have reported 2Q11 earnings have beaten estimates."

However, he also points out the obvious that if the debt ceiling is not raised, we'll see another downside hit. Saut's support levels for the S&P 500? 1316-1320 and the second is 1292-1296.

Lastly, it must be highlighted that Saut quoted lesser known rapper Tech N9ne in his missive, in what has to be an industry first.

Embedded below is Jeff Saut's latest market commentary:



You can download a .pdf copy here.

For more from Saut, head to his piece on the biggest worries of 15 European portfolio managers.

David Einhorn Buys Huntington Ingalls Industries (HII)

David Einhorn's hedge fund Greenlight Capital started a brand new stake in Huntington Ingalls industries (HII) per a 13G just filed with the SEC. Due to portfolio activity on July 15th, Greenlight has disclosed a 5.1% ownership stake in HII with 2,510,000 shares.

Huntington Ingalls was spun-off from Northrop Grumman (NOC) and started trading in April 2011. NOC operates in the security industry focusing on aerospace, information and electronic systems, etc. Since being spun-off, shares of HII are down almost 15%.

To read up on the rest of recent portfolio activity from this hedge fund, head to Greenlight Capital's Q2 letter as well as Einhorn's presentation from the Ira Sohn Conference.

Per Google Finance, Huntington Ingalls Industries Inc (HII) "designs, builds and maintains nuclear and non-nuclear ships for the United States Navy and Coast Guard, and provides aftermarket services for military ships around the globe. HII’s business divisions are Ingalls Shipbuilding and Newport News Shipbuilding (NNS)."

And to learn to invest like Einhorn, check out his recommended reading list.

Why Value Investing Isn't Working In This Market (Hedge Fund Ivory Capital)

Curtis Macnguyen's value-oriented hedge fund Ivory Capital says that the current market is very difficult for fundamental value investors as market participants opt for growth over value.

Earlier today we posted up Ivory Capital's Q2 letter and in it they outline the main reasons why the rules of value investing aren't working:


1. Excess Liquidity: "If there is very little cost to money, then it matters much less how much one is willing to pay for an asset; valuation becomes less relevant."

2. Scarcity Value of Growth Stocks: Investors are willing to pay-up for revenue growth in a low growth environment.

3. Mutual Fund Flows & ETFs: As value funds underperform, investors sell them off, depressing prices even further.

4. Quantitative Strategies: Models have de-emphasized valuation and emphasized momentum and revenue growth instead.

5. Poor Capital Allocation: Large/mega cap companies aren't allocating efficiently, creating an overhang in shares. Activism is needed to alleviate this.

6. Short-term Focus: There is a ton of pressure on funds from investors to generate returns NOW. Managers sell positions that aren't working (i.e. value stocks), sending shares lower. We noted how fellow hedge fund Shumway Capital shut down mainly due to short-term fixation by investors.



So while many value investors are having a hard time in this market, momentum chasers are seemingly having a field day. Be sure to check out Ivory Capital's investor letter for risks in the current market and updates on their current positions.

Curtis Macnguyen's Ivory Capital Q2 Letter

Founded in 1998 by Curtis Macnguyen, Ivory Capital is a long/short equity hedge fund that focuses on value-based investments. It's worth noting that before founding Ivory, Macnguyen worked at Siegler, Colliery & Co, the same shop that Greenlight Capital founder David Einhorn previously worked for.

Ivory is based in Los Angeles and today we're covering their second quarter letter that updates their portfolio.

At quarter end, Ivory Capital's top five positions were:

1. Microsoft (MSFT) 6.5%
2. Yahoo! (YHOO) 5.1%
3. Citigroup (C) 4.0%
4. DeNA Co (TYO:2432) 2.7%
5. Advanced Micro Devices (AMD) 2.6%


Performance & Equity Exposure

Ivory finished the second quarter -2.2% and year to date for 2011 they are -1.85%. Their equity exposure is 69.5% long and 43.4% short, leaving them net long 26.1%. While they saw outperformance in their other long positions of Sprint Nextel (S) and CVS Caremark (CVS), other longs hurt them.


Position Updates: Western Digital (WDC), Seagate Technology (STX) & Hospira (HSP)

The hedge fund thinks that consolidation in the hard disk drive industry should bring solid economics and dampen the cyclical nature of the industry. They also like STX's share repurchases and dividend (4.5% yield).

The current issue of our Hedge Fund Wisdom newsletter analyzes STX as numerous other hedge funds own shares (and it also features analysis of YHOO, a controversial stock at the moment).

Ivory also fancies generic injectables and infusion pump maker Hospira (HSP) because they see it as a strategic asset with 25% market share and high barriers to entry.

Embedded below is Ivory Capital's Q2 letter to investors (email readers come to the site to view):



For more letters from hedge funds, we've posted up the following:

- Oaktree Capital: Howard Marks' latest commentary

- Corsair Capital sees increased volatility ahead

- David Einhorn & Greenlight Capital's Q2 letter

- Third Point buys MOS & SLE

- Jonathan Ruffer worried about China

Third Point Buys Mosaic (MOS) & Sara Lee (SLE): Q2 Letter

Dan Loeb's hedge fund firm Third Point is out with its second quarter letter. Months ago, Loeb said he would no longer be writing the quarterly letters but his displeasure with the government caused him to take to the keyboard again.

Loeb notes that while he is typically a bottom-up investor, the economic and political environment require that investors pay attention to and incorporate macro factors into their thought process.

As we already pointed out last month, the hedge fund reduced equity exposure and the letter confirms this further. Third Point's rationale:

"Beginning in April, we concluded that the equity market no longer offered compelling upside considering the S&P was up ~9% YTD despite the heightening of the issues noted above as well as the Japanese earthquake and tsunami disasters. Towards the end of the quarter, we started to increase our single name short equity portfolio, largely because we saw that the market had started to reward individual stock picking for the first time in months, as correlations finally started to fall."

And even though they reduced net equity exposure, they did do some buying in the quarter:

Mosaic (MOS)

The fertilizer giant intrigued Loeb's fund due to the removal of a large overhang: the Cargill family selling their stake in the company. Third Point acquired their stake via a secondary at $65 per share. They have also subsequently added to their position during the market volatility.

They like grain and corn fundamentals and think potash fertilizer has "yet to recover to trend-line levels of demand."

Sara Lee (SLE)

They already owned this position, but added to their stake in Q2. Third Point believes that the market underestimates the company's earnings power and thinks both of their businesses (meat and coffee) could be attractive to strategic buyers.


Embedded below is Third Point's Q2 letter to investors (email readers come to the site to view it):



For more from Third Point, check out Dan Loeb's recommended reading list.