What We're Reading ~ 6/4/10

Back to square one in the markets [Abnormal Returns]

And by the way, learn to love uncertainty in the markets too [Kirk Report]

Economic activity: Intermodal rail traffic hits a new high [Pragmatic Capitalism]

Don't feel so bad about your May performance [The Reformed Broker]

Slightly dated, but still a great in-depth look at the long case for Citigroup (C) [Kinnaras Capital]

Of course we just covered why Bill Ackman bought Citigroup [Market Folly]

From oil spills to opportunities [Street Capitalist]

Warren Buffett on the difference between gambling and speculating [WSJ MarketBeat]

Pershing Square finds bargain in General Growth Properties [Institutional Investor]

Hedge funds post biggest monthly loss since crisis [BusinessWeek]

A great interview with Ray Dalio of Bridgewater Associates [Barron's]

Icahn acquires Lawson Software stake [Reuters]

Teaser of an upcoming piece on Steven Cohen of SAC Capital [Vanity Fair]

Hedge Funds Reduce Risk: Very Low Net Long Equities Exposure

Given the recent market downturn and ramp up in volatility, it should come as no surprise that hedge funds have been unwinding risk as of late. Bank of America Merrill Lynch's newest hedge fund monitor report gives us a look at their exposure levels and we see that long/short equity funds have very low net long exposure. However, they have been boosting exposure to inflation plays, growth, and emerging markets. Based on CFTC data, l/s funds reduced gross exposure by selling long positions but also by covering shorts in the S&P 500 and Russell 2000. The majority of longs they sold came from the Nasdaq 100 which would seem to indicate that hedgies were broadly favoring technology names. This would largely coincide with what we've seen from Goldman Sachs' VIP list of stocks that matter most to hedge funds.

Long/short funds are only 18% net long, significantly below the historical average of 35-40%. They are currently favoring growth and high quality stocks, something we've already seen evidence of in our hedge fund portfolio tracking series. And as mentioned above, they've also started to move significantly into emerging markets plays over the course of the last month. Depending on the region, this could possibly tie into the fact that these funds overall have positive inflation expectations. Lastly, we see that l/s funds reduced their already low market exposure a bit more over the past week.

Market neutral funds, on the other hand, are net long equities but have reduced small cap exposure. Surprisingly enough, despite their net long position they managed to escape the month of May largely unscathed. These funds have generally favored value names and have increased that lean over the past few weeks. Market neutral funds also have negative inflation expectations and have been in many 'low quality' names.

Global macro funds bought 10 year treasuries last week and then also aggressively covered their net short US dollar positions. Bank of America Merrill Lynch also points out that these funds have been shorting emerging markets but are still net long the EAFE. This is an interesting dynamic as you have l/s funds ramping up long exposure there and conversely global macro funds increasing short exposure. Lastly, we saw that overall hedgies were covering shorts in the Japanese yen, selling crude oil, and covering crowded shorts in natural gas.

In terms of performance, the month of May was brutal for hedge funds and as a whole they lost 3% throughout the majority of the month. While that may seem tame compared to the market indices, there are definitely some outliers. We saw recently that Shumway Capital Partners' Sakkonet Fund lost around 10%, Eddie Lampert's ESL Investments was down 15%, Chris Hohn's The Children's Investment Fund lost 9% and Andreas Halvorsen's Viking Global was down 4.2%. As evidenced by some of the figures above, it should come as no surprise that long/short equity was the worst performing strategy of the month as funds were overall down 5.13% through the majority of May.

Back in early May, we discovered that global macro funds were net short equities and in the weeks prior to that we saw the smart money was selling equities. So, some funds were definitely able to head off the stampede to the exits. But as you can see from above, some of the carnage was still not pretty. Embedded below is the entire Bank of America Merrill Lynch hedge fund monitor report:



You can download a .pdf copy here.

So, while we definitely signs of funds heading for the exits before this most recent downturn, many hedgies were still blindsided. It's an interesting dynamic when you see hedge fund managers talking about how 2010 will be great for stockpicking and short selling opportunities, yet long/short equity was the worst performing strategy last month. For more on the most important stocks to hedge funds, head to Goldman Sachs VIP list. And to see some of the latest ideas from fund managers, check out the Ira Sohn Investment Conference recap as well as our daily portfolio tracking series.

Hedge Fund Shumway Capital Partners Adds Large New Stakes in Kraft Foods, Comcast (13F Filing Q1 2010)

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up is Chris Shumway's hedge fund Shumway Capital Partners. Prior to founding his firm, Shumway was previously one of Julian Robertson's right-hand men at legendary hedge fund Tiger Management. As such, he joins the other successful Tiger Cubs and is included in the Tiger Cub portfolio created with Alphaclone for hedge fund replication. Shumway Capital Partners focuses on intensive fundamental research to drive their long/short equity strategy. Back in 2009, Shumway was listed in Barron's top 100 hedge funds for 2009 with a rolling 3-year annualized return of 28%. However, 2010 has proven difficult for the firm as their Sakkonet Fund was down 10% in May after they had gained 4.3% through April. Shumway received his MBA from Harvard Business School and his undergraduate degree from the University of Virginia.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Kraft Foods (KFT)
Comcast (CMCSA)
Air Products & Chemicals (APD)
Bank of America (BAC)
General Dynamics (GD)
Bard (BCR)
Staples (SPLS)
Liberty Global (LBTYA)
CME Group (CME)
Comcast (CMCSK)
TD Ameritrade (AMTD)
Illumina (ILMN)
Lowe's (LOW)
Discovery Communications (DISCA)
Cablevision (CVC)
Hartford Financial (HIG)
Sigma Aldrich (SIAL)
Waters (WAT)
Annaly Capital Management (NLY)
Credit Suisse (CS)
Liberty Global (LBTYK)
Illinois Toolworks (ITW)
SBA Communications (SBAC) Notes


Increased Positions
Novo (NVO): Increased position size by 413.8%
Goldman Sachs (GS): Increased by 275.4%
Baidu (BIDU): Increased by 85.4%
Apple (AAPL): Increased by 62.4%
Cisco Systems (CSCO): Increased by 57.2%
Disney (DIS): Increased by 47.6%
PNC Financial (PNC): Increased by 32.2%
Ingersoll-Rand (IR): Increased by 28.5%
Pfizer (PFE): Increased by 21.1%


Reduced Positions
Wells Fargo (WFC): Reduced position by 74.7%
Omnicom Group (OMC): Reduced by 70.8%
Juniper Networks (JNPR): Reduced by 62.4%
Pepsico (PEP): Reduced by 61.4%
Las Vegas Sands (LVS): Reduced by 60.2%
Urban Outfitters (URBN): Reduced by 57.9%
St Jude Medical (STJ): Reduced by 54.8%
Ctrip (CTRP): Reduced by 53.7%
JPMorgan Chase (JPM): Reduced by 45.8%
Gap (GPS): Reduced by 41.9%
Mastercard (MA): Reduced by 36.4%
Johnson & Johnson (JNJ): Reduced by 24.7%
Quest Diagnostics (DGX): Reduced by 22.9%
Visa (V): Reduced by 22.6%
Salesforce.com (CRM): Reduced by 15.4%


Positions They Sold Out of Completely
Qualcomm (QCOM)
Qualcomm (QCOM) Calls
Select Sector Financials (XLF) Calls
EMC (EMC)
Freeport McMoran (FCX)
Brocade Communications (BRCD)
Colgate Palmolive (CL)
CVS Caremark (CVS)
Radioshack (RSH)
Memc Electronics (WFR)
Fifth Third (FITB)
Allstate (ALL)
AOL (AOL)
Monsanto (MON)
Research in Motion (RIMM)
NII Holdings (NIHD) Notes
Kinross Gold (KGC) Notes
BioMarin Pharmaceutical (BMRN) Notes


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

1. Apple (AAPL): 9.5%
2. Disney (DIS): 5.8%
3. Cisco Systems (CSCO): 5.3%
4. Kraft Foods (KFT): 5.3%
5. Teva Pharmaceuticals (TEVA): 5.3%
6. Pfizer (PFE): 4.6%
7. Equinix (EQIX): 4.5%
8. Goldman Sachs (GS): 3.9%
9. Time Warner (TWX): 3.7%
10. Johnson & Johnson (JNJ): 3.5%
11. Comcast (CMCSA): 2.7%
12. Visa (V): 2.5%
13. Baidu (BIDU): 2.4%
14. Mastercard (MA): 2.2%
15. JPMorgan Chase (JPM): 2.1%

Shumway's biggest portfolio change was their new position in Kraft Foods (KFT) as it is now their fourth largest US equity long. Numerous other hedgies like KFT these days, including Bill Ackman who previously detailed his investment thesis on Kraft. Additionally, Shumway started quite a sizable stake in Comcast (via CMCSA and CMCSK). They were also out adding to some of their mainstay holdings such as Apple, Cisco Systems, Disney, and Pfizer.

We also wanted to point out that their Equinix (EQIX) position listed above is only their equity stake. Shumway also holds various notes and their aggregate exposure to EQIX actually makes it one of their largest positions (slightly smaller than the size of their CSCO stake). And if you hadn't already noticed, many stocks in their portfolio are those on Goldman Sachs' VIP list of stocks most important to hedge funds. Maybe that helps explain their poor performance in the month of May.

On the selling side of things, Shumway Capital Partners was also somewhat active. In the fourth quarter of 2009, we saw that Shumway was betting big on Wells Fargo (WFC). Well, that certainly changed quickly as they dumped almost 75% of their position in the first quarter of 2010. However, in the financial sector they added to their stakes in Goldman Sachs and PNC Financial. Additionally, they sold completely out of hedge fund favorite stocks Qualcomm, EMC, Research in Motion and Freeport McMoran. It was also interesting to see Shumway sell out of CVS Caremark as we've seen some other hedge fund managers bullish on CVS shares as of late.

Assets reported on Shumway's 13F filing were $7.9 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 14 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, Phil Falcone's Harbinger Capital Partners, and David Stemerman's Conatus Capital. Be sure to check back daily for new hedge fund updates.

Why Bill Ackman Bought Citigroup (C)

Last week we detailed a summary of investment ideas from various hedge fund managers at the Ira Sohn Conference. Pershing Square's Bill Ackman was one of the many speakers and though he ran out of time in his presentation, he did briefly mention he had purchased 150 million shares of Citigroup (C). Ackman was then recently interviewed by Yahoo TechTicker to talk about Christine Richard's new book which he is the subject of, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. However, TechTicker also had the chance to ask him about his new purchase.

Ackman was actually surprised when he took this stake because back in the throngs of the crisis he could never see himself owning a financial company only twelve months later. Keep in mind that the US government recently announced the sale of 1.5 billion shares of Citigroup (C) and they have plenty more to sell. This fact has acted as somewhat of an overhang on the stock. But Ackman certainly isn't bashful and dove right in.

While Ackman fully admits that Citigroup is still working through their problems, he sees them as one of the "best capitalized banks" out there currently due to the conversion of the government's preferred stake. Elaborating on this thesis, Ackman thinks the zero rate interest policy is benefiting the bank as they are earning very attractive spreads. Lastly, he loves their solid balance sheet backed by a huge deposit base. So, it definitely sounds as though he believes he's buying a proven franchise in recovery mode. For the rest of Ackman's investments, we've detailed Pershing Square's portfolio.

Ackman isn't the only prominent hedgie who recently bought shares either. Phil Falcone's Harbinger Capital Partners recently disclosed a new massive stake in Citigroup. Not to mention, John Paulson's hedge fund owns a large position as well. At the same time though, we also saw Dan Loeb's Third Point exit C in the first quarter, Lee Ainslie's Maverick Capital dump their position and Andreas Halvorsen's Viking Global also sold out, so not everyone out there is bullish on Citi. David Tepper's Appaloosa Management trimmed over half of their stake in C, but it is still one of their largest equity positions. Overall though, Citigroup is still one of the most important stocks to hedge funds as determined by Goldman Sachs' VIP list.

Shifting back to Ackman's thoughts on the market overall he said, "Look at large-cap, very high quality businesses today [and] they seem pretty cheap to me." Embedded below is Ackman's video interview from TechTicker:

His overall sentiment that mega cap stocks are undervalued is a common belief held by numerous investment managers. At the Ira Sohn, Jeremy Grantham also said to buy high quality stocks as well because the massively momentous market rally of 2009 largely left higher quality names behind as managers re-risked and favored stocks of lower quality. Ackman thinks Citigroup is one of those high quality names and is bullish on shares, despite the impending sale of the government's stake. We'll definitely keep an eye on this one to see how it turns out. For more of the latest moves from prominent investment managers, head to notes from the Ira Sohn Conference as well as our daily hedge fund tracking series.

Hedge Fund Bridger Management Boosts iStar Financial (SFI) Position

In a 13G filed with the SEC due to activity on May 20th, Roberto Mignone's hedge fund Bridger Management has disclosed an updated stake in iStar Financial (SFI). Per the filing, Bridger now shows a 5.6% ownership stake with 5,190,000 shares. This is a slight increase in their position because Mignone's hedge fund owned 4,690,000 as of March 31st when we detailed Bridger's portfolio. This means that over the past two months, they've added an additional 500,000 shares (a 10.66% boost in position size).

Mignone received his degree from Harvard and his MBA from Harvard Business School. He founded Bridger after previously founding Blue Ridge Capital with John Griffin and working at Julian Robertson's Tiger Management before that. In terms of other recent portfolio activity from his hedge fund, Mignone recently revealed two new positions. Additionally, we'd previously detailed some of his investment thoughts for 2010 from a hedge fund panel.

Taken from Google Finance, iStar Financial is a "finance company focused on the commercial real estate industry. The Company primarily provides financing to high-end private and corporate owners of real estate, including senior and mezzanine real estate debt, senior and mezzanine corporate capital, as well as corporate net lease financing and equity."

For more of Mignone's investments, head to our coverage of Bridger's portfolio.

Hedge Fund Eton Park Increases Position in Airgas (ARG), Bets on Takeover

Due to activity on May 21st, 2010, Eric Mindich's hedge fund Eton Park Capital has disclosed an updated position in Airgas (ARG). Per a 13D filed with the SEC, we learn that Eton Park now has a 7.27% ownership stake in the company with 6,014,200 shares. This is an increase in their position as back on March 31st, 2010 they owned 3,910,000 shares. So, over the past two months, Mindich's firm has added 2,104,200 shares (a 53.8% increase in their position size). They spent $370 million to acquire the additional exposure and the filing did mention that part of this transaction was conducted on margin.

This makes Eton Park the second largest shareholder of Airgas (ARG), a company which recently received a buyout offer from Air Products & Chemicals (APD) for $60 per share. Eton is obviously wagering that Air Products & Chemicals will increase their offer as shares of Airgas are currently trading around $62, above the $60 offer price. Please also keep in mind that since Eton Park is an arbitrage focused fund, they most likely have hedged this position somehow (possibly via shorting shares of Air Products). They are not required to disclose short positions so we will not be able to see the other part of this trade they could theoretically have on.

For other recent investments from Eric Mindich's hedge fund, check out Eton Park's new position in Cohen & Company (COH) as well as their new stake in Sable Mining (SBLM). And for more of our coverage on Mindich, we recommend checking out some of his thoughts on whether or not there is alpha in asset allocation at a previous hedge fund panel.

Taken from Google Finance, Airgas is "a distributor of industrial, medical and specialty gases (delivered in packaged or cylinder form), and hardgoods, such as welding equipment and supplies. Airgas is a producer of nitrous oxide in the United States, the liquid carbon dioxide producer in the Southeast, the producer of atmospheric merchant gases in North America and a distributor of process chemicals, refrigerants, and ammonia products."

For the latest investments from prominent managers, head to our hedge fund portfolio tracking series.

What We're Reading ~ 5/28/10

Pequot Capital & Art Samberg to pay $28 million to settle insider trading charges [FINalternatives]

Scottwood Capital got taken to the woodshed last month [Dealbreaker]

Taking issue with/smacking down David Einhorn's Ira Sohn speech [Pragmatic Capitalism]

The genetic makeup of winning stocks, a case study [Valuehuntr]

How hedge funds shaped financial reform [AR Hedge]

Is Google (GOOG) a growth or value stock? [YCharts]

Tons of hedge funds bought Google in the first quarter, Citi thinks it's a buy too [Business Insider]

Lessons for the apprenticed investor [Big Picture]

Equity analysts are always overoptimistic [Greenbackd]

Seven worries for Wall Street & what's next [Marketwatch]

How StockTwits is changing trading (we're an active participant) [Fast Company]

Tigris Financial goes all-in on gold (subscription required to view; here's a WSJ discount) [WSJ]

Some recent hedge fund performance numbers (they're ugly) [HFAlert]

Hedge funds are eyeing auto-parts makers for possible acquisitions [BusinessWeek]

Many hedge funds have been buying CME Group, here's a reason why [Fortune]

David Einhorn's Ira Sohn Presentation: "Good News for the Grandchildren"

Earlier, we posted a compilation of notes from the Ira Sohn Conference and we also detailed Steve Eisman's presentation, Subprime Goes to College. Next, we're detailing the speech from Greenlight Capital's David Einhorn. The hedge fund manager's speech entitled, "Good News for the Grandchildren" focuses on how our grandchildren won't have to pay for the consequences of our actions; we will. He thinks a crisis has already unfolded and that our generation will be the ones paying for it. Instead of watching the situation spiral into a debt crisis, Einhorn urges us to address the situation right now. As you can imagine, Einhorn likes gold and gold stocks. In particular, he mentioned African Barrick Gold (ABG) traded in London.

Additionally, Einhorn attacked the ratings agencies and again mentioned he was still short Moody's (MCO) and McGraw Hill (MHP). Some of you will remember that Einhorn originally laid out his short thesis on these names at last year's Ira Sohn Conference when he presented The Curse of the Triple-A. To see what else Einhorn has been investing in, we highlighted his new position in NCR and we've also covered Greenlight's portfolio for those interested. To learn more about Einhorn and his investment process, we recommend checking out his book, Fooling Some of the People All of the Time.

Embedded below is David Einhorn's presentation from yesterday's Ira Sohn Investment Conference entitled, "Good News for the Grandchildren":



You can also download a .pdf copy here.

For more coverage of this event, be sure to head to notes from the Ira Sohn Conference as well as Steve Eisman's presentation, Subprime Goes to College. And if you want to see the latest portfolio moves from top investment managers, head to our ongoing hedge fund portfolio tracking series.

Steve Eisman & FrontPoint Partners Ira Sohn Presentation: Subprime Goes to College

Earlier we aggregated a compilation of notes from the Ira Sohn Investment Conference where some very prominent hedge fund managers detailed investment ideas. One of those managers was Steven Eisman of FrontPoint Partners (Morgan Stanley). You may be familiar with him as he was profiled as one of the successful subprime traders in Michael Lewis' book, The Big Short.

Eisman thinks he has identified the next 'subprime' so to speak and gave a presentation at the Ira Sohn Conference entitled, "Subprime Goes to College." This speech provided a negative thesis on the for-profit education plays. In particular, Eisman is bearish on Apollo Group (APOL), ITT Educational (ESI), Corinthian Colleges (COCO), and Education Management (EDMC). Lastly, he also dislikes Washington Post (WPO) due to their ownership of the Kaplan test preparation business. His general thesis focuses on two factors: Washington clamping down on the industry and a rise in employment (generating a decline in enrollment). He notes that a key to the problem here is the 'rating' these institutions receive from accreditation boards and he likens these boards to the ratings agencies who blessed subprime mortgages.

Embedded below is the Ira Sohn presentation from Steven Eisman & FrontPoint Partners entitled, 'Subprime Goes to College':



You can download a .pdf copy here.

As we've detailed numerous times, the for-profit education space is an investor battleground with a clear divergence of opinion. Stephen Mandel's hedge fund Lone Pine Capital has been bullish on education plays. In fact, at least year's Ira Sohn event, he gave a bullish presentation on Strayer Education (STRA). While he has since scaled back his position some, we saw he still owned it when we detailed Lone Pine's portfolio. We also recently saw Roberto Mignone's hedge fund Bridger Management buy shares of Princeton Review (REVU), another test preparation service.

That said, we've also noted that some of these managers have had a recent change of heart. David Stemerman's hedge fund Conatus Capital had been long and sold out of their education plays. Andreas Halvorsen's Viking Global also exited Apollo Group recently. Additionally, there are also numerous high profile detractors such as Jim Chanos who gave a negative presentation on for-profit education at last year's conference. And now, Eisman has joined the mix with his negative view too. We'll watch with great interest to see how this one plays out. For more great ideas from hedge fund managers, head to our aggregation of notes from the Ira Sohn Investment Conference and be sure to also check out our hedge fund portfolio tracking series.

Ira Sohn Conference Notes: Investment Ideas From Hedge Fund Managers

This year's Ira Sohn Conference was packed with investment presentations from heavy hitting hedge fund managers including Seth Klarman, David Einhorn, Bill Ackman, David Tepper, Larry Robbins and more. Like the Value Investing Congress (in-depth notes from that recent event here), you get a plethora of ideas from top talent. Presentations at Ira Sohn in years past include Greenlight Capital's David Einhorn blasting Lehman Brothers before it failed and Pershing Square's Bill Ackman detailing his bullish stance on shares of General Growth Properties when they were trading below $1 (as they now trade north of $13).

We covered many of last year's Ira Sohn presentations for those interested and the list goes on, but you get the picture. Without further ado, let's dive into some of the investment presentations we've aggregated from various sets of notes that were sent to us, as well as the live-tweeting of NY Times' Michael de la Merced and additional coverage from Barron's Tiernan Ray. We'll post up more in-depth presentations as they become available.


David Tepper of Appaloosa Management: Tepper was nonchalant in the outset of his presentation where he mentioned that his firm had lost $1 billion in AUM over the past month, yet he shrugged his shoulders and joked 'what are ya gonna do?' He then shifted to his current investment ideas such as his bet on AIG 8.175 junior subordinated debt. It trades somewhere around 70 cents on the dollar and he thinks this mispricing is due to a misunderstanding of AIG's capital structure. Additionally, Tepper likes Bank of America (BAC) and thinks it could see $27 in the next year. Sticking with banking, he also likes Spanish giant Banco Santander (STD). Lastly, Tepper also likes commercial mortgage backed securities (CMBS) here. Regarding the economy and a potential turnaround, he is hopeful and thinks we can handle it. His funds are typically invested in 70% debt and 30% equity. Currently, his debt exposure is 50% corporate and 20% asset backed. We recently detailed Appaloosa's portfolio for those interested in the rest of Tepper's investments.


David Einhorn of Greenlight Capital: Einhorn had all kinds of negative things to say about the creditworthiness of the US. His presentation was entitled, "Good News for the Grandchildren" implying that grandchildren won't have to pay off the government's spiraling debt. Einhorn actually thinks that a crisis has unfolded already and our generation will be the ones paying for it. He says it is very necessary to address the situation now rather than spiral into a debt crisis. Einhorn again lambasted the credit ratings agencies and thinks official ratings should be eliminated. He notes that Treasury Secretary Timothy Geithner is 'all-in' because he thinks that the US's credit rating will never be cut. To this though, Einhorn said, "I don't believe a US debt default is inevitable." In his presentation, Einhorn mentioned that he is still short Moody's (MCO) as well as McGraw Hill (MHP), the parent company of ratings agency Standard & Poors. Einhorn originally laid out a short thesis on these names at last year's Ira Sohn Conference in a presentation, The Curse of the Triple-A.

Einhorn then shifted the discussion to real-world costs and inflation. He went on to say that, "if your goal is to never see inflation, you will never see it until it is rampant." Einhorn was critical of the government's zero interest rate policy and warns it can create another bubble. He thinks that higher rates would actually lead to increased lending in the private sector because right now all you're seeing is banks playing the yield curve. Einhorn outlined all the past scenarios where the Federal Reserve didn't see a bubble until it was too late: from Long Term Capital Management to the dot-com bubble to the housing bubble and now to the sovereign debt crisis.

In terms of investment ideas, he likes African Barrick Gold (LON: ABG) traded in London. He thinks this name is cheap and could eventually be added to various indexes as well which would serve as a catalyst for institutional buying. Einhorn ended by saying, "We own some gold and some gold stocks for our investors and for ourselves. We will worry about our grandchildren later." If you'll remember a long while back, we first detailed when Greenlight Capital started storing physical gold. In recent activity, regulatory filings disclosed Einhorn's new position in NCR and we've also detailed Greenlight's portfolio. To learn more about Einhorn and his investment process, we recommend checking out his book, Fooling Some of the People All of the Time.


Bill Ackman of Pershing Square Capital Management: In typical Ackman fashion, he crammed an 80-slide presentation into 15 minutes. He proposed a "Wait to Rate" system to reform the rating agency business where it would be illegal for an agency to issue a rating within sixty days of the security's issuance. And if the agencies mess up, then they should lose their status. Turning to specific investment ideas, Ackman again focused on General Growth Properties (GGP). Some of you will remember that Ackman presented this same idea last year when shares were ridiculously cheap. Last year's premise with this name was an argument that the company's assets were worth more than their liabilities and that this bankruptcy was different than most.

This year, Ackman's GGP thesis continues on in that he sees very little mall construction over the next three to five years, an area GGP already has a dominant position in. He highlights that GGP is being split up into two entities: GGP & GGO. GGP would be the cash-flow generating side of the business and GGO would represent underperforming but valuable assets. Lastly, Ackman quickly remarked that his firm Pershing Square has been buying Citigroup (C) in recent weeks and has assembled a position of 150 million shares, but ran out of time to elaborate on the stake. For more on Ackman's investing style, he is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. Additionally, we've previously profiled Pershing Square and detailed Ackman's portfolio.


Seth Klarman of Baupost Group: Klarman continued his stern and gloomy comments from last week. He essentially gave a speech on what he would say if he were called in front of Congress to discuss Wall Street. He likened short sellers to policeman and reiterated the fact that they are not evil. He commented negatively on risk regulators, saying that they will inevitably make mistakes and that they won't be able to head off the next crisis at the pass. He feels the market should work itself out and that there should be no bailouts and that only the strong should survive. Klarman noted that many institutions have been bailed out and that the government's action related to AIG has 'raised moral hazards to new heights.' Klarman also joined in on the berating of the ratings agencies saying something should be done about them. Lastly, Klarman says that anyone in a transaction with a counterparty thinks the other investor is wrong, that's the beauty of a market. Just a few days ago we highlighted Seth Klarman's recommended reading list so definitely check that out. We also posted a summary of Klarman's speech at the CFA conference and have previously detailed Baupost Group's portfolio as well.


Steve Eisman of FrontPoint Financial Services Fund (Morgan Stanley): This name should be familiar to those of you who have read Michael Lewis' The Big Short, as he was one of the investors profiled in the story of the subprime trade. His presentation was entitled, "Subprime Goes to College" and as you can guess, he's negative on for-profit education companies. Those of you who followed the Ira Sohn Conference last year will remember that Jim Chanos gave a similar presentation berating these companies. Eisman sees Washington continuing to clamp down on the industry after these companies hired seemingly every lobbyist out there in previous years. He notes that a key to the problem here is the 'rating' these institutions receive from accreditation boards and he likens these boards to the ratings agencies who blessed subprime mortgages.

Eisman focused specifically on Apollo Group (APOL) and noted that if employment figures started to rise, APOL & others could see EPS declines of 40% annually. His presentation called out numerous other players in the space, including ITT Educational (ESI), Corinthian Colleges (COCO), and Education Management (EDMC). Eisman also painted Washington Post (WPO) in a negative light due to their ownership of the Kaplan test preparation business. That last one is intriguing because we recently saw Roberto Mignone's hedge fund Bridger Management buy shares of Princeton Review (REVU), a fellow test prep service.

The dichotomy of opinion continues as the for-profit education space has been an area ripe for debate. We've seen many prominent hedge fund managers own sizable stakes as Stephen Mandel's Lone Pine Capital has been bullish on education plays. That said, we've also noted that some of these managers have had a recent change of heart. David Stemerman's Conatus Capital had been long and sold out of their education plays. Andreas Halvorsen's Viking Global also exited Apollo Group recently. Additionally, there are also numerous high profile detractors such as Chanos and now Eisman.


Jamie Dinan of York Capital: Dinan's first idea was Coca Cola Enterprises (CCE) as they saw Coca Cola buy their bottling operations in the US earlier this year. He loves CCE's free cash flow. We've actually seen numerous other prominent hedge funds owning CCE shares as well, so they're definitely not alone in this pick. Dinan's second bet is on ING (ING). He values it at 1.2x book resulting in a value of 9.32 euros a share. He also noted that post bankruptcy equities are good places to be. This is a sweet spot for York Capital given their focus and he cited Lyondell (LALLF) as an example as he thinks it's worth $22 (it currently trades around $17). We just yesterday detailed some of York's recent portfolio activity for those interested.


Larry Robbins of Glenview Capital: Robbins highlighted that the market's P/E multiple is 12.3x and as the political presence in Washington grows, the P/E shrinks. He thinks now is a great time for stockpicking and not cash, 10 year treasuries or debt. He says to buy definitive growth and avoid high valuations. In particular, Robbins likes McKesson (MCK), Express Scripts (ESRX), Life Technologies (LIFE) and Fidelity National Information (FIS). Regarding FIS specifically, he agrees with the board's decision to reject Blackstone's bid and is in favor of the leveraged recapitalization plan. Regarding Express Scripts, he sees stable earnings and points out they have cash on hand to buy back stock or make acquisitions. We've pointed out that Andreas Halvorsen's Viking Global is bullish on ESRX as well. On Life Technologies, Robbins highlights organic growth, a defensive business mix, and potential industry consolidation. He also likes McKesson because it has a ton of cash, great free cash flow, and is trading at 11x earnings. For more from Robbins, we've previously outlined his thoughts on the case for global equities in 2010 at a hedge fund panel.


Jon Jacobson of Highfields Capital: Jacobson, formerly of Harvard's endowment and now one of the founders of Highfields, listed Sallie Mae (SLM) as his favorite pick. The main thesis here is that it is moving into a fee-based business with a great management team. He noted that the street has had a hard time valuing shares due to the gross leverage. And while this play is risky, he thinks it's undervalued. In a run-off scenario, Jacobson thinks SLM is worth between $15 and $25. While Sallie Mae is term funded, he argues they are adequately capitalized. He mentioned its legacy "FFELP" business is worth $6-8 a share on its own. SLM trades at 2x earnings and many of their competitors are essentially gone. SLM enjoys economies of scale, the credit quality of their loans is getting much better, and Jacobson also mentioned insider buying. Shares were up in aftermarket trading following his presentation. Shifting to the general commentary, Jacobson also cited his concern for the climate in Washington as he claims there is no leadership and that many US states are the American equivalent of Greece, bankrupt or about to be. Overall, he feels that the government is simply delaying these problems for future generations. We've covered some of Jacobson's previous thoughts at a hedge fund panel where he addressed whether or not there is alpha in asset allocation.


Daniel Arbess of Perella Weinberg Partners/Xerion Capital: Arbess' presentation focused on China. He specifically likes Yum Brands (YUM), as the fast food chain has great exposure to that country. Additionally, he likes Ivanhoe (IVN) in the metallurgical coal space as he's bullish on gold and commodities as well. On gold specifically, he says "I doubt we're at a top" but at the same time he does not like it as a safe haven against inflation. In currency trades, he likes a trade of short the Japanese yen and long the Canadian dollar. Arbess also listed Celanese (CE) as one of his picks. Lastly, he sees more distressed credit opportunities coming up as maturities start to roll in. And like many other presenters, he had an unpleasant view of the current political administration and their actions. Turning lastly to the debt crisis, Arbess thinks there are no quick fixes and the outcome is unpredictable. In the past, we've previously covered some brief portfolio activity out of Perella Weinberg.


Jeremy Grantham of GMO: His favorite picks were commodities and in particular, timber. He highlights this because it's the only asset class that did not lose value in the 1970's or during the Great Depression. His second pick centered on emerging market equities and thirdly, Grantham also favors high quality US stocks. Armed with a chart displaying equity valuation of mega caps since 1955, he points out that mega cap valuation has declined since 1955 and they currently represent great value. Shifting to macro thoughts, he thinks the UK housing bubble has yet to burst and that prices could fall as much as 33% more and also warned of a possible bubble in Australia.


Niall Ferguson: He mentioned that now is not the time to short Treasuries. However, he also cautioned to avoid holding 10 year bonds to maturity. Scarily enough, Ferguson thinks the US will be like Greece by 2013 and that we won't be able to 'print' our way out of this mess.


That wraps up our aggregation of notes from the Ira Sohn Investment Conference. If you enjoyed our coverage, please consider receiving our free hedge fund updates via email or our free updates via RSS reader. Thank you to those that sent us notes and stay tuned as we'll post up in-depth presentations as we receive them.

David Stemerman's Hedge Fund Conatus Capital Favors Tech: 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 filings.)

Next up is David Stemerman's hedge fund Conatus Capital. Stemerman founded his firm last year with $2.3 billion after he left Stephen Mandel's Lone Pine Capital. Conatus places an emphasis on bottom-up individual stockpicking via a long/short equity strategy. Stemerman's firm focuses on the quality of the business and the quality of the associated management team. They seek short positions by identifying companies that are seeing increased competition from low-cost alternatives and those that are being displaced by new technology. We've previously taken a more in-depth look at Conatus' investment process for those interested. For 2009, Stemerman's firm finished up 19.16% as detailed in our hedge fund performances post.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
JPMorgan Chase (JPM)
Union Pacific (UNP)
American Tower (AMT)
US Bancorp (USB)
FMC Technologies (FTI)
City National (CYN)
Mead Johnson Nutrition (MJN)
Sotheby's Holdings (BID)
Charles Schwab (SCHW)
Webmd Health (WBMD)


Increased Positions
BHP Billiton (BHP): Increased position size by 103%
Ctrip.com (CTRP): Increased by 94.4%
Wells Fargo (WFC): Increased by 91.8%
Amazon.com (AMZN): Increased by 84%
Schlumberger (SLB): Increased by 73%
Bed Bath & Beyond (BBBY): Increased by 58.5%
Visa (V): Increased by 54.9%
Goldman Sachs (GS): Increased by 52.5%
NetApp (NTAP): Increased by 48.5%
Urban Outfitters (URBN): Increased by 38.4%
Google (GOOG): Increased by 35%
Polo Ralph Lauren (RL): Increased by 35%
Walter Energy (WLT): Increased by 29.4%
Salesforce.com (CRM): Increased by 25.9%
Citrix Systems (CTXS): Increased by 23.6%
Crown Castle (CCI): Increased by 20.8%


Reduced Positions
Priceline.com (PCLN): Reduced position size by 34.4%


Positions They Sold Out of Completely
Abercrombie & Fitch (ANF)
Credicorp (BAP)


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

1. Apple (AAPL): 5.6%
2. Express Scripts (ESRX): 4.4%
3. Google (GOOG): 3.9%
4. Estee Lauder (EL): 3.9%
5. Cognizant Technologies (CTSH): 3.9%
6. Amazon.com (AMZN): 3.9%
7. Walter Energy (WLT): 3.9%
8. Cisco Systems (CSCO): 3.8%
9. Medco Health (MHS): 3.8%
10. Schlumberger (SLB): 3.4%
11. Wells Fargo (WFC): 3.3%
12. Visa (V): 3.3%
13. Covidien (COV): 3.2%
14. JPMorgan Chase (JPM): 2.8%
15. Bed Bath & Beyond (BBBY): 2.8%


As you can see, Conatus Capital did little in the way of selling in the first quarter of 2o10. In fact, they were quite active on the buying side, adding to numerous existing stakes like BHP Billiton, Ctrip.com, Wells Fargo, and Amazon.com. They also started brand new stakes in JPMorgan Chase, Union Pacific, and American Tower among others. Given the recent market decline, it will be intriguing to see next time around whether Conatus was reducing long exposure or if they continued to add.

Since Stemerman previously plied his trade at Stephen Mandel's Lone Pine Capital, it should come as no surprise that this portfolio has obvious similarities to Lone Pine's. While the typical 'hedge fund favorite stocks' like Apple and Amazon are present, both Conatus and Lone Pine are bullish on shares of Estee Lauder and Cognizant Technologies, names we don't see as frequently in hedge fund portfolios.

Lastly, we want to point out the three sectors Conatus seems to like the most: technology, health, and energy. They own the typical tech bellwethers in Apple, Google, Cisco, and Amazon. But at the same time, they're focusing on niche segments like cloud computing. Shifting to pharmacy benefit management companies (PBMs), Conatus has a large position in Express Scripts, a company we saw fellow hedge fund Viking Global heavily favors. Additionally, Conatus is long Medco Health as their ninth largest US equity long. In energy, Conatus likes Schlumberger and Walter Energy. In the end though, technology is by far and away the overwhelming theme as five of their top ten positions are in tech.

As we've previously detailed, Conatus is bullish on cloud computing and this is evident from their positions in VMWare, Citrix Systems, and NetApp. And as we've also highlighted, hedge funds favor wireless tower stocks and Conatus is no different: they own all three majors in American Tower, Crown Castle, and SBA Communications.

Assets reported on the 13F filing were $2.6 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, and Phil Falcone's Harbinger Capital Partners. Be sure to check back daily for new hedge fund updates.

Phil Falcone's Harbinger Capital Shows Massive New Citigroup Position: 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 filings.)

Next up is Philip Falcone's hedge fund Harbinger Capital Partners. Harbinger is a multi-billion dollar hedge fund firm with a focus on both distressed assets and equity plays. They often take highly concentrated positions and so they're an easier fund to track. After horrible performance in 2008, Harbinger rebounded in 2009 and finished up 46.5% as noted in our hedge fund performances post. In terms of recent portfolio activity, we detailed Harbinger's new position in African Medical Investments and saw that they've been selling New York Times shares. Falcone's firm has actually been quite active and ambitious as of late as we learned they will be starting a 4G wireless network as they make a large bet on mobile data transmission.

The positions listed below were Harbinger's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Citigroup (C)
NRG Energy (NRG)
Bunge (BG)
Seagate (STX)
Trina Solar (TSL)
Consol Energy (CNX)
VIX Short-term Futures (VXX)
Harbinger Group (HRG)
Vantage Drilling (VTG)
Clearwire (CLWR)
Pioneer Drilling (PDC)
Calpine (CPN) Calls


Increased Positions
Strategic HL & RS (BEE): Increased position size by 252.8%
SPDR Gold (GLD): Increased by 145%
Corn Products (CPO): Increased by 141.9%
Exco Resources (XCO): Increased by 75.7%
Superior Well Service (SWSI): Increased by 33.6%


Reduced Positions
Harry Winston (HWD): Reduced by 60.1%
Istar Financial (SFI): Reduced by 54%
Sprint (S): Reduced by 33.8%
Freeport McMoran (FCX): Reduced by 11.8%


Positions They Sold Out of Completely
Calpine (CPN)
Walter Energy (WLT)
Interpublic (IPG)
Take-Two Interactive (TTWO)
Cloud Peak (CLD)
ProShares Ultrashort Financials (SKF)
Alpha Natural Resources (ANR)
August Resource (AZC)
ICO (ICOG)
Mgic Investments (MTG)
Delta Petroleum (DPTR) Notes


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

1. Citigroup (C): 15.2%
2. Sprint (S): 10.1%
3. New York Times (NYT): 10%
4. NRG Energy (NRG): 8.5%
5. SPDR Gold (GLD): 7.2%
6. Exco Resources (XCO): 6.9%
7. Corn Products (CPO): 6.5%
8. Bunge (BG): 5.2%
9. Complete Production (CPX): 4.6%
10. Calpine (CPN) Calls: 4%
11. Freeport McMoran (FCX): 3.4%
12. US Airways (LCC): 3.2%
13. Terrestar (TSTR): 2.2%
14. Seagate (STX): 2%
15. Trina Solar (TSL): 1.7%

Please keep in mind that these equity holdings are by no means representative of Harbinger's entire portfolio. They undoubtedly also hold numerous distressed plays and positions in other markets that aren't required to be disclosed. That said, we do get an interesting look at some of their long US equities exposure which totals $1.9 billion.

Harbinger started a few massive new long positions in the first quarter, most notably in Citigroup and NRG Energy. They also disposed of longstanding stakes in Calpine, Walter Energy, and Take-Two Interactive. The latter is interesting because we've seen corporate activist Carl Icahn adding TTWO shares and actively trying to drum up shareholder value. And while Harbinger sold completely out of CPN common stock, they also added a new position in CPN call options so they still have some exposure there.

One interesting talking point is Harbinger's use of exchange traded funds presumably as hedging tools. They've held a position in SPDR Gold Trust (GLD) for a while but heavily added to it in the first quarter. They also started a brand new stake in VXX, an ETF based on the volatility index (VIX). As volatility increases (as it definitely has as of late), VXX increases in value. In essence, Harbinger is looking for hedges against panic and for assets that might increase when equity markets are declining.

Lastly, we highlight Harbinger's continued stake in numerous natural resource plays. They've owned and have been in & out of various plays but seemingly like Freeport McMoran and Cliffs Resources the best.

Assets reported on the 13F filing were $1.9 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, and Roberto Mignone's Bridger Management. Be sure to check back daily for new hedge fund updates.

Roberto Mignone's Bridger Management Adds Financials, Exits 'Hedge Fund Favorite' Names: 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 filings.)

Next up is Roberto Mignone's hedge fund Bridger Management. Bridger focuses on long/short equity and event driven strategies (which you'll see evidence of in their portfolio below). Last we heard, Bridger has just under $3 billion in assets under management and is closed to new investors because Mignone likes to focus on investing rather than running a large organization. Not to mention, he argues that once you garner too large of an AUM pool, you can't have a short portfolio of complementary size. After all, Mignone is known for his sleuthing abilities on the short side. Previously, we had detailed some of his investment thoughts for 2010 from a hedge fund panel.

Before founding Bridger, Mignone co-founded Blue Ridge Capital with John Griffin in 1996, another hedge fund we track here on the site. And before that, both Mignone and Griffin worked at Julian Robertson's legendary Tiger Management. As such, they are both 'Tiger Cub' hedge funds. Mignone received his degree from Harvard and his MBA from Harvard Business School. In terms of recent portfolio activity disclosed after the date of the filing's we're covering, Bridger revealed two new positions.

The positions listed below were Bridger's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Centene (CNC) ~ we detailed the specifics of this stake when they first disclosed it
Genpact (G)
Waters (WAT)
Iesi-Bfc (BIN)
JPMorgan Chase (JPM)
Goldman Sachs (GS)
Marriott (MAR)
Red Hat (RHT)
XTO Energy (XTO)
Comerica (CMA)
AMR (AMR)
Fuel Systems (FSYS)
Istar Financial (SFI)
Medifast (MED) ~ we detailed the specifics of this new position earlier
Marshall & Ilsley (MI)
Key Corp (KEY)
Suntrust Bank (STI)
Xenoport (XNPT)
Cathay Gen Bancorp (CATY)
Wonder Auto Tech (WATG)
Popular (BPOP)
Bristol Myers Squibb (BMY)
Carefusion (CFN)
Macquarie (MIC)
Iberiabank (IBKC)
Nektar Therapeut (NKTR)
Acorda (ACOR)
Immunogen (IMGN)
Glacier Bancorp (GBCI)
Amedisys (AMED) Puts


Increased Positions
Morgan Stanley (MS): Increased position size by 150%
Electronic Arts (ERTS): Increased by 73.8%
Regions Financial (RF): Increased position by 72.7%
Casella Waste Systems (CWST): Increased position by 48.6%
Davita (DVA): Increased position by 33%
State Street (STT): Increased position by 32.9%
Exxon Mobil (XOM): Increased position by 30.8%
Boston Scientific (BSX): Increased position by 26.6%
Synovus Financial (SNV): Increased position by 20.5%
Waste Connections (WCN): Increased position by 19.3%


Reduced Positions
Aetna (AET): Reduced by 70%
Life Tech (LIFE): Reduced by 67.8%
Millipore (MIL): Reduced by 42%
Eclipsys (ECLP): Reduced by 39.6%
OSI Pharmaceuticals (ONXX): Reduced by 33.6%
Jazz Pharmaceuticals (JAZZ): Reduced by 28.1%
Biogen Idec (BIIB): Reduced by 17.6%


Positions They Sold Out of Completely
Royal Carribean (RCL)
Apple (AAPL)
First American (FAF)
Microsoft (MSFT)
Green Mountain Coffee Roasters (GMCR)
Amerigroup (AGP)
Allergan (AGN)
Republic Service (RSG)
Warner Chilcott (WCRX)
Expedia (EXPE)
United Therapeutics (UTHR)
Talecris Biotherapeutics (TLCR)
Ritchie Bros (RBA)
Mannkind (MNKD)
Mako Surgical (MAKO)
Petmed (PETS)
Ehealth (EHTH)
Given Imaging (GIVN)
Sanderson Farms (SAFM)
CIT Group (CIT)
Amylin Pharmaceuticals (AMLN) Puts


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

1. Waste Connections (WCN): 3.4%
2. Pall (PLL): 3.3%
3. Covidien (COV): 3.1%
4. Cardinal Health (CAH): 3%
5. Medtronic (MDT): 3%
6. Dr Pepper Snapple (DPS): 3%
7. Centene (CNC): 2.9%
8. Morgan Stanley (MS): 2.9%
9. Amgen (AMGN): 2.8%
10. Unitedhealthcare (UNH): 2.4%
11. Millipore (MIL): 2.4%
12. Las Vegas Sands (LVS): 2.3%
13. Berkshire Hathaway (BRK.A): 2.3%
14. Hyatt Hotels (H): 2.3%
15. Genpact (G): 2.2%

In the first quarter, we saw Bridger completely sell out of a few names that are typically hedge fund favorites which was interesting. They exited Apple, Microsoft, CIT Group, and Green Mountain Coffee Roasters. Many of these names are on Goldman Sachs VIP list of the stocks most important to hedge funds. Other positions Bridger also sold sizable partial positions in include Aetna, Life Tech, and Eclipsys.

In terms of additions, we already knew about their new Centene position, but now you see how large it is in the context of their overall portfolio. Not to mention, their new ownership of Genpact (G) is notable too as it's their fifteenth largest US equity long. They also added to exiting position Waste Connections, which is now their largest holding. We also make note of their addition in shares of Electronic Arts. Just yesterday we examined Chase Coleman's hedge fund Tiger Global and saw they were clearly bullish on ERTS.

And while Bridger's large focus is on the health space, you obviously see many financial plays scattered in their portfolio. They were adding to regional banks like Regions and Synovus in the first quarter and added shares of big banking plays as well, like JPMorgan Chase and Morgan Stanley.

Assets reported on Bridger's 13F filing were $2.5 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, and Chase Coleman's Tiger Global. Be sure to check back daily for new hedge fund updates.

Bill Ackman's Pershing Square Receives Borders Group Warrants (BGP)

In a Form 4 filed with the SEC last evening, we see that Bill Ackman's hedge fund firm Pershing Square Capital Management has received warrants to purchase shares of common stock in Borders Group (BGP). The transaction date was May 21st and the warrants expire October 9th, 2014 with a conversion price of $0.65. Pershing received warrants to purchase an aggregate of 2,701,837 shares of BGP. Additionally, due to an adjustment, Pershing's hedge funds will also be issued warrants to purchase 8,542,399 shares of common stock. Since Pershing's hedge funds have ownership interests in BGP Holdings, Ackman's funds have exposure to a total amount of 17,401,837 warrants. As of March 31st, we saw that Ackman owned 10,597,980 shares of common stock when we looked at Pershing Square's portfolio.

As per Pershing's recently filed 13D on BGP, we see that Ackman's firm has a 31.5% ownership stake in the company with an aggregate amount of common stock beneficially owned totaling 27,999,817. Ackman's Borders exposure also includes cash settled total return equity swaps covering 4,376,163 notional shares of common stock which are not included in the above totals. As such, Pershing's aggregate economic exposure to Borders Group is then 36.4%. For background on Bill Ackman, check out our profile of Pershing Square.

Taken from Google Finance, Borders Group is "an operator of book, music and movie superstores and mall-based bookstores." If you want to learn more about Ackman and his investing style, he is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff.

James Dinan's Hedge Fund York Capital Files 13D on Sybase (SY)

James Dinan's hedge fund York Capital recently filed a 13D with the SEC disclosing a new position in shares of Sybase (SY). This is the first time we've really detailed the portfolio activity out of York Capital so here's a brief background: Dinan's firm is a hedge fund that invests in both public equities and fixed income. Their primary focus is companies with catalysts such as mergers & acquisitions, restructurings, special situations, distressed plays, etc. Taken from York's website, they think that, "While the markets may be efficient on balance, there are pockets of inefficiency that can be exploited by experts who know where to look." York was founded in 1991 by Dinan and today manages over $12 billion. At the end of the first quarter, we saw that York was up 4.52% for the year in our hedge fund performance post.

Due to activity on May 13th, York has disclosed a 4.2% ownership stake in Sybase with 3,659,183 shares and the aggregate amount of funds used to purchase these securities was $273,603,384. Keep in mind that a 13D filing signifies an activist stake so we'll have to see what York has planned. Per the filing, Dinan's firm says they acquired shares "for investment purposes and not with a view towards changing or influencing control of the company." They bought shares after a tender offer was announced by Sheffield Acquisition Corp for all of Sybase's outstanding shares.

It looks like York purchased the majority of their position in the $64.xx range on May 12th & 13th. However, they also disclosed a steady stream of sales from May 19th to May 21st, and it's not clear if they're still reducing their position. But, the filing does note that on May 21st, York ceased to be the beneficial owner of a 5% stake in the company. While this is just speculation on our part, it's almost as if they bought a large position which triggered a regulatory filing, but they are already reducing or winding down this position. Unfortunately there is no information as to whether or not they've continued selling this week; the filing only encompasses sales up to May 21st.

At a recent investment conference, hedge funds Highbridge and York Capital both said they were taking risk off the table, so maybe this coincides with that, who knows. For those interested, York has disclosed their transaction details of the shares they acquired at the bottom of their 13D filing here. So, we'll definitely have to keep a close eye on this one. This is a brand new equity stake for York because as of March 31st they did not own any SY shares per their most recent 13F filing.

Taken from Google Finance, Sybase is "delivers enterprise software and services to manage, analyze and mobilize information. The Company provides open, cross-platform solutions that deliver information anytime, anywhere, providing decision-ready information to the right people at the right time."

As always, for the latest movements from prominent investment managers, head to our hedge fund portfolio tracking series.