Since many hedge funds have exposure to gold in some fashion, we're posting up some interesting research from Raymond James on the topic of precious metals. Their commentary was published amidst the massive rally in the US dollar that definitely impacted the performance of gold. Given the action early in the year, they took advantage of the opportunity to look at the dynamic between gold, the US dollar, and gold related companies.
Maybe the most intriguing bit of research was their focus on equity stakes of gold miners and how they performed during the various swings in the price of gold. We note this correlation because while John Paulson's new gold fund will invest in derivatives on the price of gold, the main strategy is to acquire equity stakes in gold miners. Paulson is actually using these equity stakes as a wager against the US dollar. So, while many will examine the dynamic between the US dollar and gold, it is also worth taking a look at how shares of gold miners are affected as well.
If Paulson thinks the US dollar will decline, then he is essentially wagering that the price of gold will increase. More importantly though, it appears as if he thinks equity stakes in gold miners will produce greater returns based on the correlation. But, as you will see from the research below, you also have to look at company specific risk. This comes after Paulson & George Soros recently bought shares of a gold miner.
At any rate, you can examine Raymond James' research below. Of the companies they cover in the space, Aura, Osisko, Great Basin Gold, and San Gold performed the best "on average, across all three post 'risk aversion' rallies." The companies that suffered most over the big gold sell-off were Lake Shore, Golden Star, Aurizon and Yamana. Based on their research, Raymond James favors developers Anatolia and Detour, mid-tier producers San Gold and Crocodile, and large producers Agnico-Eagle and Eldorado.
Embedded below is Raymond James research on the dynamic between gold, the US dollar & gold related companies:
You can directly download a .pdf here.
Raymond James' gold research joins a bevy of other publications that we've posted on the topic of everyone's favorite precious metal. Resources include: global macro hedge fund Woodbine Capital's research on gold, Passport Capital's rationale for owning physical gold, as well as our in-depth look at John Paulson's new gold fund.
Friday, March 19, 2010
Dynamics of Gold, US Dollar & Gold Equities
What We're Reading ~ 3/19/10
Richard Wilson's new book Start A Hedge Fund Now [Richard Wilson]
If you're looking for quality investment related links on a daily basis, we want to again point out AbnormalReturns [Abnormal Returns]
Why Goldman Sachs (GS) is worth a look at these low P/E levels [Peridot Capitalist]
Where to invest when interest rates are so low [Aleph Blog]
An interview with Bruce Greenwald [Value Walk]
Taking a look at Novell (NOVL) [Merger Arbitrage Investing]
Atticus' Siritunga to launch new fund [FINalternatives]
Research on 'side by side' managers that run both mutual and hedge funds [All About Alpha]
Profile of legendary trader & founder of hedge fund Caxton, Bruce Kovner [NY Mag]
Sprott's Last Decade Retrospective [zero hedge]
Hedge funds: how big is too big? (direct .pdf download link) [Money Science]
A great Harvard thesis on the CDO meltdown (direct .pdf download link) [Harvard]
Pioneering fund stages second act (Jim Simons' Rentec) [WSJ]
Hedge fund Farallon regroups after a knockdown [WSJ]
An inside look at for-profit education companies [NYTimes]
Thursday, March 18, 2010
Seth Klarman's Baupost Group Wins Big With Facet Biotech (FACT), Sells Some Shares
Seth Klarman's hedge fund Baupost Group recently filed an amended 13D and a Form 4 with the SEC in regards to shares of Facet Biotech (FACT). In the Form 4, we see that Klarman has sold 1,506,875 shares at a price of $27 per share. This transaction took place on March 16th, 2010 and Baupost Group is now left with 2,000,000 shares of FACT, a 7.97% ownership stake in the company. For more investments from Klarman, we've detailed Baupost's portfolio.
This news comes after Facet Biotech saw a bid from Abbott Laboratories (ABT) to acquire the company for $27 per share, a 70% premium from where shares were trading before the bid. This is well above Biogen Idec's prior offer of $17.50 that preceded the most current bid from Abbott. So, Klarman has definitely locked in some solid gains here. You'll remember when we previously detailed how Baupost had secured the right to buy more FACT after Biogen's initial bid. It seems the hedge fund took a very active role in trying to generate shareholder value through a higher bid here. For more insight from this investment guru, check out Seth Klarman's lessons from the financial crisis.
Taken from Google Finance, Facet Biotech is "a biotechnology company dedicated to advancing its pipeline of several clinical-stage products and expanding and deriving value from its protein engineering platform technologies to improve the clinical performance of protein therapeutics."
Oaktree Capital & Howard Marks' Review of 2009
Oaktree Capital's Howard Marks is out with his latest investor letter in which he reviews the wild year of 2009. Marks always brings insightful commentary to the table and we'd previously highlighted his ways to play inflation. Turning to 2009, he sums up the action by writing (emphasis his),
"Ultra-low interest rates on reserve securities and the high returns promised on riskier ones combined to convince investors to reassume some of the risk they had sworn off just a few months earlier. The curtailment of forced selling and the arrival of a few buyers were enough to convert the sweeping decline into a rally ... Thus, remarkably given the circumstances, 2009 was the best year in history for most of our markets. This shows that good fundamentals aren't a prerequisite for gains. Too-cheap prices, a halt to fundamental deterioration and forced selling, improved psychology and the arrival of buyers can be enough."
Marks also noted that Oaktree exemplified counter-cyclical behavior and was pleased with the results as they were largely buying bargains in 2008. For 2009, Oaktree as a firm was up 38.9%, the best gain in their history. For 2008, they lost 20.7%. We've also posted up some other hedge fund performance numbers from last year for those interested in comparing. Marks called the recent markets the "craziest two-year seesaw I've ever seen." The past two years have been the perfect illustration of buying when there's blood in the streets and selling when greed and complacency take over.
Looking forward, Marks notes that Oaktree only nibbled at real estate in 2009. They have been building capital up in order to deploy it in this sector at the right time. Simply put, they are being patient here. This certainly sticks to their counter-cyclical focus. And while real estate has already been beaten down, it looks like the opportune time to swoop in is still ahead.
We'll end with some of Marks' closing remarks where he identifies some very practical investing lessons. He writes (emphasis his),
"I don't believe volatility defines risk, but it does introduce the risk of grave error ... Losing faith and selling out at the bottom is the cardinal, irreparable sin in investing, and the bigger the decline, the higher the probability of doing so and the greater the penalty. Thus 2008 presented the biggest opportunity in history to convert downward fluctuations into permanent losses."
Embedded below is Howard Marks' entire review of 2009. RSS & Email readers will need to come to the site to view it:
As always, great insight from Oaktree's chairman. We've also previously covered some of his other commentary, including Marks' thoughts on how to play inflation. For more great hedge fund investor letters, head to our coverage of Perry Partners' letter as well as the recent one from Dan Loeb's Third Point.
Hedge Fund GLG Partners: Research on Effect of Analyst Recommendations
UK based hedge fund GLG Partners is out with some intriguing research on the effect analyst ratings have on a stock. This is actually a follow-up to some previous commentary where they concluded the following:
- European analyst recommendations outperform
- 'Buy' recommendations outperform more consistently than 'Sell' recommendations
- A bunch of handpicked sell-side firms by GLG outperformed the rest of analyst recommendations in Europe
With that in mind, they move next to the topic of: Which analysts should you pay attention to? Simply put, they find that large broker 'buy' recommendations move junk stocks more significantly than any other category. They also find that 'buy' picks are generally more powerful than 'sell' picks. As one can imagine, stocks that are disliked take a beating when 'sell' recommendations are issued. Large brokers also have more of an impact when they put out a 'sell' on some of the most popular stocks.
Overall, some interesting research from GLG Partners, a hedge fund firm that was recently ranked 22nd on a list of the world's largest hedge funds. It's obvious that sell-side research and alerts have an impact on a stock price, it's just interesting to see it quantified. Things could get even more interesting if they had singled firms out and done a case by case study to determine which sell-siders had the most influence. It looks like we'll have to patiently wait for someone to generate such data.
Taken from GLG's website, embedded below is their look at what type of sell-siders you should pay attention to:
You can directly download a .pdf here.
For more insight from GLG Partners, we covered when Pierre Lagrange recently presented at a hedge fund panel. And for more of our coverage of the UK, head to our posts on positions hedge funds hold in the UK.
Fairholme's Berkowitz Starts AIG Position, Talks About Where He's Finding Value
According to Morningstar, recent fund manager of the decade Bruce Berkowitz has initiated a position in American International Group (AIG). Apparently, the Fairholme Fund now has exposure to the following:
- 20% of some tranches of convertible debt
- 13 million shares of AIG common stock
- other AIG bonds
The real kicker here is the common stock. What does he think it is valued at? Many have likened shares of AIG to spins at the roulette tables. We can understand his purchases of debt as he has more layers of protection that way. The equity stake is puzzling, to say the least. Berkowitz thinks that government involvement has 'cleansed' the company and he thinks the firm is positioned to move forward. In terms of other notable investment managers who have purchased AIG recently, we saw that Lee Ainslie's hedge fund Maverick Capital added AIG, albeit as a smaller brand new position in the fourth quarter.
This portfolio maneuver by Berkowitz sticks with his theme of betting on financials & turnarounds. He has a large position in shares of Citigroup (C) and is the largest unsecured creditor in the ongoing General Growth Properties (GGP) situation. In addition to this portfolio theme, we've covered how Berkowitz also likes healthcare plays.
Additionally, Berkowitz recently sat down with Consuelo Mack on Wealthtrack to discuss where he is currently finding value. Embedded below is the video and RSS & Email readers will need to come to the site to view it:
Overall, an intriguing move from the domestic mutual fund manager of the decade. He raised many eyebrows with his large Citigroup purchase. We'd argue that he'll raise even more with his new AIG stake so we'll have to see how it plays out. Berkowitz of course will be presenting at the upcoming Value Investing Congress and you can hear more of his thoughts there.
Tuesday, March 16, 2010
Michael Lewis' New Book: The Big Short
Noted author Michael Lewis' newest book entitled The Big Short: Inside the Doomsday Machine was just released. Recently, the television show "60 Minutes" had a feature on this book and interviewed Michael Lewis as well as Scion Capital hedge fund manager Michael Burry, who Lewis profiled in the book for his bet against subprime.
The most fascinating aspect about this story is how Burry saw how subprime was deteriorating even long before the most 'famous' managers who also profited on this play (like John Paulson). If you enjoyed Gregory Zuckerman's book on John Paulson entitled The Greatest Trade Ever, then it seems you would also be fond of Lewis' new book.
Embedded below are two videos from "60 Minutes" on CBS where Steve Kroft interviews both author Michael Lewis and hedgie Michael Burry. Email readers will need to come to the site to watch the videos:
Video 1
Watch CBS News Videos Online
Video 2
Watch CBS News Videos Online
It definitely sounds like a captivating story as Lewis writes about how Wall Street outsiders figured out what was going on and then won big. It's definitely worth checking out Michael Lewis' new book, The Big Short. We'll certainly be reading it and will post up a review when finished.
Carl Icahn Exercises Warrants On Tropicana Entertainment
We have an interesting transaction out of Carl Icahn's camp to bring you up to date on. On March 9th, 2010, Icahn (through his various investment vehicles and subsidiaries) exercised warrants on Tropicana Entertainment. In aggregate, he received 784,158 shares at a price of $0.01. According to a Form 4 filing with the SEC, the expiration date on the warrants was June 5th, 2010 and the date exercisable was March 8th, 2010. Icahn of course graced the recently updated Forbes' billionaire list as well.
Following the reported transactions, Icahn owns 12,664,179 shares of Tropicana Entertainment. On March 8th, Icahn also announced that Tropicana had emerged from bankruptcy, eliminating $2.5 billion of pre-existing indebtedness. Taken from the company's recent press release, their CEO Scott Butera said that, "We are very pleased that we have been able to turn the Company around in the wake of the country's deep financial crisis. We have also secured an ownership group that has a long proven track record of success in the gaming industry. By constantly adjusting to market conditions, we have built the foundations of our company in a way that positions us to achieve profitable long term growth."
To see what else the corporate raider has been up to, check out Icahn's investor letter, as well as his hedge fund's portfolio. In terms of other recent maneuvers, we've also seen Icahn add to his Take Two interactive stake (TTWO).
Taken from Tropicana Entertainment's website, they are "a privately held company that, along with its affiliates, owns or operates 9 casinos and resorts in Indiana, Louisiana, Mississippi, Nevada, and New Jersey."
Technical Analysis Round-Up: Gold, S&P 500 & the US Dollar
We just wanted to take a second to highlight some interesting charts and technical analysis videos we've come across lately so let's dive right in and appropriately start with the stock market in general. The market has been uptrending pretty ferociously over the past month or so and many are calling for a near-term pullback. The MarketClub team has put out a technical analysis video on the S&P 500 and they note that the recent rally has been on low volume. Not to mention, they highlight that the market has been hovering around resistance as of late. All signs seem to point to a pullback in the near-term as the rally is due for a healthy breather. Click below to watch the S&P 500 analysis:
We'll turn next to everyone's favorite precious metal. They have also released a video on gold and we took note because gold seems to have put in a bearish engulfing pattern which is typically negative. They highlight that the big level to watch in gold is $1,091. If that level is taken out to the downside then gold could potentially trade down to $1,060 or so. Overall though, they think gold is in a trading range for the near-term. We keep checking in on gold because tons of hedge funds have exposure to it, whether it be a macro bet, a hedge, or for some other purpose in their portfolios. John Paulson has even launched a gold fund for his bet against the US dollar. Click below to see MarketClub's thoughts on the much talked about metal:
Also, given that we just mentioned that John Paulson is betting against the US dollar via his new gold fund, we figured it'd be a good time to see what the dollar looks like these days. Marketclub also has a technical analysis video on the US dollar and they wonder whether it is reversing again or not. They pull up a EUR:USD chart and note that there are two important levels on the chart, the recent highs in December of 2009 and the big lows in March of 2009. After outlining fibonacci retracements, they determine that it has bounced off a level of support and it technically looks like it wants to head higher. Click below to hear their thoughts on the USD:
Lastly, here's the latest weekly watchlist from the OptionAddict. His video details technical analysis trade setups for those looking for near-term opportunities, primarily of the swing trade variety. He takes a look at various chart patterns, trends, and highlights them all in the embedded video below:
Then you can also watch MarketClub's video on gold here and their analysis of the S&P500 here. As always, plenty of charts to keep your eye on within these ever-changing markets.
Soros Fund Management Files 13G on NovaGold Resources (NG)
George Soros' hedge fund firm Soros Fund Management recently filed a 13G on shares of NovaGold Resources (NG). The filing was made due to activity on March 11th and in the disclosure we see Soros now has an 8.49% ownership stake in the company with 18,700,164 shares. This is not a new position for them as they previously owned shares as we noted when we looked at Soros' portfolio.
Additionally, we already knew that these NG shares actually came from an offering direct from NovaGold. Interestingly enough, John Paulson's hedge fund Paulson & Co also took part in another NG offering under the same terms. These two hedgies secured shares at a nicely discounted price of $5.50 per share. So, there's nothing wildly new here, but we get a glimpse as to just how much NovaGold Soros now owns.
Taken from Google Finance, NovaGold Resources is "a precious metals company, which is engaged in the exploration and development of mineral properties in Alaska, the United States and British Columbia, Canada. The Company conducts its operations through wholly owned subsidiaries, partnerships and joint ventures. The Company is primarily focused on gold properties, some of which also have copper, silver and zinc resources."
For more portfolio maneuvers from the top investment managers out there, check in daily with our hedge fund portfolio tracking series.
Eric Mindich's Hedge Fund Eton Park: Portfolio Update
Eric Mindich's hedge fund firm Eton Park Capital has filed a 13G with the SEC in regards to shares of Pampa Energia (PAM). The disclosure was made due to activity on March 2nd, 2010 and they now show a 5.22% ownership stake in PAM with 3,188,840 shares. In their previous 13F filing which shows positions as of December 31st, 2009, Eton Park owned 1,999,590 shares. That means in the past three months, they've boosted their holdings 59.47% by adding 1,189,250 more shares.
For more of our coverage on Mindich, we recently posted up his thoughts from a hedge fund panel regarding whether or not there is alpha in asset allocation. Additionally, we've also covered how Eton Park has expanded their UK positions and some other positions they've added to.
Taken from Google Finance, Pampa Energia is "an Argentina-based holding company that, through its subsidiaries, is engaged in the electric energy industry. The Company’s business is structured in three areas: Electric Generation, Electric Transmission, and Electric Distribution."
Eton Park is one of the hedge fund portfolios we've cloned in our Market Folly portfolio that was created with Alphaclone. Stay tuned as we cover the rest of Eton Park's portfolio holdings soon.
George Soros Interview At Hong Kong University
Recently, noted investor George Soros gave a series of lectures at the Central European University in Budapest. He then followed up that talk with a conversation at The University of Hong Kong and you can hear his thoughts below. We've recently covered activity out of his hedge fund as we detailed Soros Fund Management's addition to their NovaGold Resources position. Soros also recently graced the most recent version of Forbes' billionaire list.
Embedded below is the video of the conversation with George Soros in Hong Kong moderated by Professor Richard Wong. Email readers will need to come to the site in order to view it:
Always interesting to hear Soros' take on things. For more on the legendary investor, head to Soros Fund Management's portfolio.
Monday, March 15, 2010
Most Popular Articles on MarketFolly.com
It's been a while since we last updated the list of most popular articles here at Market Folly. Here's some reads you might have missed:
1. Goldman Sachs VIP List of most important stocks to hedge funds
2. Last chance for a discount to the Value Investing Congress
3. Warren Buffett's Recommended Reading List
4. Top hedge fund long & short positions: Goldman Sachs report
5. Hedge fund Perry Partners' annual letter
6. The Quants by Scott Patterson: Our review of the book
7. Forbes billionaire list: Hedge fund managers that made the cut
8. Paolo Pellegrini's PSQR Capital annual letter
9. World's largest hedge funds
10. Why hedge funds like Mead Johnson Nutrition (MJN)
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Thank you for reading! If you've found the site useful, please consider making a donation (via PayPal or credit card). We appreciate your support. And if you aren't already, make sure you're receiving our daily hedge fund updates for free via email or for free via RSS reader.
Market Folly March Madness: Fill Out Your Bracket!
We thought that it would be fun to start an annual contest amongst Market Folly readers now that the NCAA Men's College Basketball Championship is here.
This is one of the most exciting times of the year in the sports world and many of you are probably big fans like we are (Rock Chalk Jayhawk). So, it's time to fill out your brackets! We've setup a free group over on CBS Sports and feel free to invite anyone and everyone.
You will need to sign up for a free CBS Sports account in order to play so make sure you do that before trying to join our contest. Once you have an account, make sure to enter the group password & the link below will take you right to our sign-up page:
Group Name: Market Folly March Madness
Password: mf
Click here to sign-up for Market Folly March Madness @ CBS Sports for free!
Best of luck to everyone participating!
Friday, March 12, 2010
The Quants By Scott Patterson: Book Review
We've finally had a chance to read Wall Street Journal reporter Scott Patterson's book. So today, we're reviewing The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It. Right off the bat, we can tell you that the majority of readers will find this book interesting. Why? Because it takes you inside the secretive world of hedge fund manager Jim Simons of Renaissance Technologies (RenTec). Not to mention, it also profiles Ken Griffin of Citadel Investment Group, Cliff Asness of AQR Capital, Peter Muller of Morgan Stanley's PDT (process driven trading) hedge fund, and Boaz Weinstein of Saba Capital (previously at Deutsche Bank).
If you're like us and crave information regarding these mysterious managers, then this is for you. Patterson's book reads like a narrative and paints a clear picture of each of the gentlemen that have been instrumental in the development of the quantitative side of Wall Street. The Quants starts by focusing on Ed Thorp, a mathematics professor known for making money via beating blackjack with his book, Beat the Dealer. It then shifts to how Thorp went on to help pioneer the quant field on Wall Street with his convertible arbitrage strategy. The book describes the history and evolution of quantitative trading, framing things nicely before shifting focus to the financial crisis.
As the tale progresses, we see how some quants nearly collapsed in 2007. Patterson highlights just how deadly leverage gone wrong can be. It seems quants began to stray from the most important tenets of risk management and, yet again, we're faced with a Wall Street story filled with greed, leverage, and hubris. And as the quant 'godfather' Thorp preached: you shouldn't bet more than you can afford to lose.
So, what's enjoyable about the book? The in-depth profiles of Simons, Griffin, Asness & more, of course. But what's also fascinating is the overall storyline regarding the near implosion of many of these managers during late 2007. Industry insiders will already be familiar with this 'crisis before the crisis,' but the book definitely showcases what a truly scary time this was. It details the stories that began to leak out back during their meltdown, including how Cliff Asness was punching computer screens and how Muller's fund unit lost $300 million in a single day. Also, the tie-ins and focus on poker in The Quants was intriguing as all these fund managers love to play and fittingly, are quite good at the game.
What the book lacks: Technical details. Given the subject matter, we expected more of an in-depth look at the methods within this ever-growing segment of Wall Street. However, we concede that when writing a book which will be read by a wider audience, concessions have to be made. Casual investors will find the book satiating while hardcore industry veterans might crave a bit more detail.
In the end, this book's story epitomizes the constant greed found on Wall Street. Equally important, it helps shine a spotlight on a mysterious and complex corner of the markets that many otherwise wouldn't normally gain access to. While Patterson often uses cliches in his writing, the in-depth focus on these quant hedge fund managers during perilous times more than compensates. The Quants is your ticket inside their seemingly secretive world.
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For other insightful books on markets and investing, be sure to check out our other book reviews, as well as our recommended reading lists.
Phil Hempleman's Hedge Fund Ardsley Partners Bullish On Pharmaceuticals: 13F Filing
(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)
This is the first time we've covered Philip Hempleman's Ardsley Partners so let's get a brief background. Hempleman founded the firm in 1987 and it is a long/short equity focused hedge fund that uses bottom-up stockpicking (the ideal type of fund for tracking purposes). Ardsley runs various funds including their Offshore Fund, Partners Fund, Partners Institutional Fund, etc and last we heard, they manage over $1 billion.
The positions listed below were Ardsley Advisory Partners' long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.
Brand New Positions
Google (GOOG) Calls
Merck (MRK)
Healthcare ETF (XLV) Calls
Merck (MRK) Calls
Apple (AAPL) Calls
Pfizer (PFE)
Teva Pharmaceuticals (TEVA)
Direxion Small Cap Bear 3x (TZA) Calls
Yuhe (YUII)
Baxter (BAX)
EGO Resources (EOG)
Healthcare ETF (XLV)
China Information (CPBY)
Fuel Systems (FSYS)
Aeropostale (ARO)
H&R Block (HRB)
Kenexa Corp (KNXA)
Avago Technologies (AVGO)
China Valves (CVVT)
Increased Positions
Telvent (TLVT): Increased position by 97.4%
American Public Education (APEI): Increased by 41.7%
Proshares Ultrashort 20 year Treasury (TBT) Calls: Increased by 40%
Reduced Positions
Zhongpin (HOGS): Reduced position by 4.8%
Mylan (MYL): Reduced by 1.15%
Removed Positions (Sold out completely):
Schlumberger (SLB) Calls
Google (GOOG)
Alcatel Lucent (ALU)
Apple (AAPL)
Schering Plough (SGP) ~ merger transaction complete
General Electric (GE) Calls
XTO Energy (XTO)
Gilead Sciences (GILD)
CVS Caremark (CVS)
China Natural Gas (CHNG)
Halliburton (HAL)
Chesapeake Energy (CHK)
Plains Exploration (PXP) Calls
State Street (STT)
Brocade Communications (BRCD)
Tellabs (TLAB)
Smart Balance (SMBL)
Exco Resources (XCO)
Asiainfo (ASIA)
Thermo Fisher Scientific (TMO)
Top 15 Holdings by percentage of assets reported on 13F filing
- Google (GOOG) Calls: 6.12%
- Proshares Ultrashort 20 Year Treasury (TBT) Calls: 5.74%
- Merck (MRK): 5.41%
- Healthcare ETF (XLV) Calls: 5.11%
- Merck (MRK) Calls: 4.51%
- Telvent (TLVT): 4.39%
- Yongye (YONG): 4.25%
- Apple (AAPL) Calls: 3.47%
- Zhongpin (HOGS): 3.08%
- Rino International (RINO): 2.54%
- Pfizer (PFE): 2.24%
- Teva Pharmaceuticals (TEVA): 2.08%
- Direxion Small Cap Bear 3x (TZA) Calls: 2.03%
- Mylan (MYL): 1.95%
- American Public Education (APEI): 1.92%
The most intriguing aspect of Hempleman's portfolio is the fact that the majority of his top holdings are brand new positions and he sold completely out of previous large positions. So, we're definitely seeing some significant turnover here. It's apparent that Ardsley Partners fancies using options to make some of their investment wagers and we see that they are using calls on ultrashort exchange traded funds. Since they are betting that an ultrashort fund will rise via calls, we can interpret this as a short position, a hedge, or just a bearish bet. His largest bearish wager is on 20 year treasuries with calls on TBT. In the past, we've constantly detailed how many hedge funds are betting on rising interest rates.
Turning back to the equities portion of their portfolio, Ardsley initiated Pfizer as a new stake in the fourth quarter, a position we've noted that many hedge funds added. Interestingly enough, they also own two of the major generic pharmaceutical producers in TEVA and MYL. As you can see, health is a very apparent theme in Hempleman's hedge fund portfolio.
Of the stocks that Ardsley Advisory Partners sold completely out of last quarter, there are many notable names. Hempleman's hedge fund dumped past large positions in Schlumberger (SLB) Calls, Google (GOOG), Alcatel Lucent (ALU), and Apple (AAPL). So, there is an apparent shift in their portfolio here as they dump common stock of certain names in favor of call options. Overall, Ardsley reduced basic materials exposure and ramped up healthcare exposure.
Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $607 million this quarter compared to $525 million last quarter, a 15% increase. Remember that these filings are not representative of the hedge fund's entire base of AUM.
In our portfolio series we've already covered a ton of long/short equity hedge funds, including:
Value, Event-Driven or Activist focused funds such as: Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Warren Buffett's portfolio, David Tepper's Appaloosa Management, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, Bill Ackman's Pershing Square Capital Management, Ricky Sandler's Eminence Capital.
'Tiger Cub' and 'Tiger Seeded' funds (hedgies somehow tied to Julian Robertson): Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, Matt Iorio's White Elm Capital, David Gallo's Valinor Management, Tom Brown's Second Curve Capital, and Robert Citrone's Discovery Capital.
As well as hedge funds employing other strategies: John Paulson's hedge fund Paulson & Co, Philip Falcone's Harbinger Capital Partners, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management.
Be sure to check back daily for our new updates.
Matthew Grossman's Hedge Fund Plural Investments: Portfolio Glance (13F Filing)
(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)
This is the first we've covered Matthew Grossman's hedge fund so here's some background. Grossman founded Plural Investments in 2008 with $900 million after previously serving as the Chief Investment Officer of CR Intrinsic (of Steven Cohen's SAC Capital). Prior to that, Grossman was an energy analyst with Julian Robertson's Tiger Management. Needless to say, he has quite the resume when it comes to prominent fund managers.
Fourth quarter 2009 was actually the very first time that Plural filed a 13F with the SEC. So, we don't have any quarter over quarter portfolio changes to update you on. However, this is the first major glimpse at their portfolio and as such we'll provide their top holdings.
Top 20 Holdings by percentage of assets reported on 13F filing
- Alcon (ACL) Calls: 7.64%
- Grainger (GWW): 3.07%
- Goldman Sachs (GS): 2.64%
- SPDR Gold Trust (GLD): 2.33%
- Eaton (ETN): 2.05%
- Bucyrus (BUCY): 2.02%
- US Oil Fund (USO): 1.95%
- Goodyear Tire & Rubber (GT): 1.92%
- Dr Pepper Snapple (DPS): 1.91%
- Flowserve (FLS): 1.77%
- Alcon (ACL): 1.75%
- Humana (HUM): 1.67%
- Wellpoint (WLP): 1.55%
- Union Pacific (UNP): 1.37%
- CSX (CSX): 1.28%
- Watsco (WSO): 1.19%
- Bank of New York Mellon (BK): 1.12%
- Cablevision (CVC): 1.11%
- Lincoln National (LNC): 1.10%
- Norfolk Southern (NSC): 1.07%
So, an intriguing first look at Grossman's Plural Investments. Right away you can notice a few sector themes here. While they represent a smaller portion of his overall portfolio, railroads definitely catch the eye here. Grossman's hedge fund owns practically all the remaining majors left after Burlington Northern's acquisition by Warren Buffett's Berkshire Hathaway. Plural owns shares in CSX, UNP, and NSC. Also, we see that Grossman fancies healthcare here as he owns shares in both Wellpoint and Humana. By far and away their largest position though is Alcon as they own both calls and common stock on the name. Lastly, we'll make note of yet another hedge fund with exposure to gold (via GLD). Whether it be for hedging, a macro bet, or some other purpose though, we don't know. Overall, an interesting mix of stocks and we look forward to being able to compare portfolios next quarter.
Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $826 million this quarter. Remember that these filings are not representative of the hedge fund's entire base of AUM.
In our portfolio series we've already covered a ton of long/short equity hedge funds, including:
Value, Event-Driven or Activist focused funds such as: Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Warren Buffett's portfolio, David Tepper's Appaloosa Management, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, Bill Ackman's Pershing Square Capital Management, Ricky Sandler's Eminence Capital.
'Tiger Cub' and 'Tiger Seeded' funds (hedgies somehow tied to Julian Robertson): Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Jonathan Auerbach's Hound Partners, Lee Hobson's Highside Capital, David Stemerman's Conatus Capital, Matt Iorio's White Elm Capital, David Gallo's Valinor Management, Tom Brown's Second Curve Capital, and Robert Citrone's Discovery Capital.
As well as hedge funds employing various strategies ranging from long/short to merger arbitrage to global macro: John Paulson's hedge fund Paulson & Co, Philip Falcone's Harbinger Capital Partners, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management, Phil Hempleman's Ardsley Partners.
Be sure to check back daily for our new updates.
What We're Reading ~ 3/12/10
Good interview with Paul Sonkin of the Hummingbird Value Fund [Value Walk] ~ Sonkin will be presenting at the upcoming Value Investing Congress as well
Reflections on gold as an asset class [Pragmatic Capitalist]
A great in-depth look at Ackman & Berkowitz's plan for General Growth Properties [Value Plays]
Value opportunities in insurance stocks says Wilbur Ross [Street Capitalist]
An interview with James Montier [Simoleon Sense]
An interesting look at Tudor's Tensor fund [CT News]
Gabriel Nechamkin is back with another hedge fund [FINalternatives]
Do newsworthy hedge funds underperform? [CXO Advisory]
Barton Biggs on why Large Caps are undervalued [Business Insider]
Top portfolio moves from their ultimate stock pickers [Morningstar]
A look at the for-profit education plays hedgies seem to be split on opinion [Seeking Alpha]
Interview with Meridee A. Moore, founder of Watershed Asset Management, a $2 billion hedge fund in SanFran [NYTimes]
The value of content that SeekingAlpha has received for free [World Beta]
Thursday, March 11, 2010
Falcone's Harbinger Dumps Calpine (CPN) Shares, Adds Options
In an amended 13D filed with the SEC, Philip Falcone's hedge fund Harbinger Capital Partners is now showing a 2.21% ownership stake in Calpine (CPN) with 10,000,000 shares. The filing was made due to activity on March 3rd, 2010 and the fine print reads, "This amount consists of Shares that the Reporting Person may be entitled to obtain upon the exercise of options." Digging into the filing further, we see that Harbinger has acquired options that are exercisable into shares within 60 days for their Master & Special Situations funds, as they bought $18,000 worth of options. This paints a vastly different picture from what we last saw when we looked at Harbinger's portfolio. After having a dismal 2008, Harbinger had a solid showing last year as they finished up 46.5% as we noted in our 2009 hedge fund performance numbers post.
These transactions comes after a wave of selling as Falcone's fund was disposing of CPN shares throughout January. We now also see that Harbinger's Master Fund sold 18,310,600 Calpine shares on March 3rd at a price of $10.75 per share. Their Special Situations Fund sold 9,155,300 shares at the same price on the same date. Then, interestingly enough, Harbinger purchased the above referenced options on the same day.
Here is a graphical breakdown of their recent transactions in Calpine:
(click to enlarge)In conclusion, they dumped a bunch of shares and then picked up options. So, they're definitely up to something here and we'll continue to watch the developments. For more from Philip Falcone's hedge fund, check out our coverage of Harbinger's portfolio.
Taken from Google Finance, Calpine is "a wholesale power company in the United States. Calpine owns and operates natural gas-fired and geothermal power plants in North America and has a presence in power markets in the United States. Its portfolio consists of two types of power generation technologies: natural gas-fired combustion turbines, which are combined-cycle plants, and renewable geothermal conventional steam turbines."
Philippe Laffont's Coatue Management Doubles Down on STEC (STEC)
In an amended 13G filing with the SEC, Philippe Laffont's hedge fund Coatue Management has disclosed a 7.5% ownership stake in STEC (STEC) with 3,763,221 shares. The filing was made due to activity on February 23rd, 2010 and represents a massive increase in their position. As we previously detailed in Coatue's portfolio, the hedge fund owned 1,864,941 shares of STEC back on December 31st, 2009. So, in the past three months, they've increased their position 101.8% by adding 1,898,280 more shares.
Coatue Management is a hedge fund founded by Philippe Laffont in 1999. They employ a long/short equity strategy and focus on technology, media & telecom stocks. For more on Laffont's hedge fund, head to our very recent post on Coatue's portfolio as well as our coverage of a technology trends presentation they've given in the past.
Taken from Google Finance, STEC is "a global provider of enterprise-class Flash solid-state drives (SSDs) for enterprise-storage systems and servers that companies use to retain and access their critical data. The Company’s products are designed specifically for storage systems and servers that run applications requiring a high level of input/output operations per second (IOPS) performance, capacity, reliability and low latency."
Keep up with the rest of our updates on hedge fund portfolios via our tracking series.
