Friday, May 16, 2014

Top Funds' Activity in Q1 2014

Sam Forgione of Reuters reports, Top U.S. hedge funds clung to eBay, sold GM in first quarter:
Top U.S. hedge fund managers in the first quarter zoned in on the consumer sector, with investments that included eBay Inc, Dollar General Corp and Walgreen Co.

Leon Cooperman's Omega Advisors opened a new stake of 1.7 million shares in discount retailer Dollar General, while Barry Rosenstein's Jana Partners increased its stake in drug store operator Walgreen by 4.8 million shares to 12.1 million shares, regulatory filings showed on Thursday.

EBay, which became a darling among top U.S. hedge funds in the fourth quarter just before billionaire activist investor Carl Icahn urged the company to spin off its PayPal payments business, continued to find fans in the first quarter.

Omega increased its stake in eBay to 2.9 million shares from 854,800 shares and Jana opened a new stake of 3.9 million shares during the first quarter.

The quarterly disclosures of manager stock holdings, in what are known as 13F filings with the U.S. Securities and Exchange Commission, are always intriguing for investors trying to divine a pattern in what savvy traders are selling and buying.

But relying on the filings to develop an investment strategy comes with some peril because the disclosures are backward looking and come out 45 days after the end of each quarter.

Still, the filings offer a glimpse into what hedge fund managers saw as opportunities to make money on the long side. The filings do not disclose short positions, bets that a stock will fall in price. And there is also little disclosure on bonds and other securities that do not trade on exchanges.

Upon request, the SEC also permits managers to omit sensitive stock positions from 13F filings. As a result, the public filings don't always present a complete picture of a manager's stock holdings.

Here are some of the hot stocks and sectors in which hedge fund managers either took new positions or exited from in the first quarter.

COCA-COLA ENTERPRISES

Tiger Global Management LLC, led by Chase Coleman and Feroz Dewan, slashed its stake in soft drink producer and distributor Coca-Cola Enterprises Inc by 14.5 percent to 6.7 million shares.

JPMORGAN CHASE & CO

Omega Advisors increased its stake in JPMorgan Chase & Co by 1.6 million shares to 1.7 million shares in the first quarter. The bank's shares rose 3.8 percent in the quarter, compared with a 2.2 percent gain in the S&P financial index , which includes all financial shares in the benchmark S&P 500 stock index.

GROUPON INC

Jana Partners increased its stake in Groupon Inc's class A shares by 9.8 million shares to 40.8 million class A shares. Chase Coleman and Feroz Dewan's Tiger Global Management got rid of its entire stake in the operator of a "deal-of-the-day" website.

GENERAL MOTORS CO

Jana Partners sold nearly all of its stake General Motors Co , cutting its holding by about 8 million shares to just 7,100 shares. Omega Advisors sold its entire stake of 1.05 million shares. Shares of the automaker fell 15.8 percent in the first quarter.

Since February GM has recalled 2.6 million cars because of defective ignition switches prone to being jostled into accessory mode while the cars are moving. That would shut off engines and disable power steering, power brakes and air bags. The problem has been linked to at least 13 deaths.
It's that time of the year again, when everyone gets to peer into the portfolios (with a lag) of overpaid hedge fund gurus charging 2 & 20 for leveraged beta (read more on the great hedge fund mystery to understand how rich hedge fund managers keep hoodwinking dumb public pensions).

Ryan Vlastelica of Reuters also reports, Major U.S. hedge funds sold 'momentum' Internet names in 1st qtr:
Top hedge funds shed their stakes in high-profile Internet names such as Netflix Inc and Groupon Inc in the first quarter, moving to peers viewed as more mature and less volatile.

High-growth Internet software and biotech companies were the darlings of 2013, but their shares started to fall sharply in early March. Netflix, last year's biggest S&P 500 gainer and an important hedge fund holding, is down more than 24 percent from its closing high this year.

Hedge funds invested in technology and healthcare fell 3.65 percent in April, the biggest monthly decline since October 2008 and extending March's 1.8 percent decline, according to data from Hedge Fund Research.

Among prominent hedge fund managers, Carl Icahn cut his holding in Netflix by 15.8 percent in the first quarter, reducing it to about 2.2 million shares. Tiger Global Management sold its entire stake of 663,000 shares during the quarter.

Netflix was up on the year for most of the first quarter, so the fund is likely to have sold at the right time.

Tiger also dumped its stake of 11.46 million shares in Groupon. That position was worth $134.9 million at the end of 2013 and $89.9 million at the end of the quarter.

The Internet software and services sector now accounts for about 10 percent of the top 100 long positions for equity/long short hedge funds, down from 20 percent to 25 percent in January, according to Credit Suisse data.

Long/short hedge fund managers moved to short bets in Internet names amid a meltdown in the group, according to Credit Suisse. Long positions in the group now account for about 25 percent of the overall gross exposure to the group, which adds together both long and short positions. That's the lowest rate in at least three years.

Some funds added to their "momentum" exposure, with Jana Partners increasing its stake in Groupon by almost 32 percent to 40.8 million shares.

Other funds moved to technology names with less lofty valuations and that are viewed as more established. Third Point sold its stakes in both Yahoo Inc and biotech company Gilead Sciences Inc but increased its Google Inc holdings by 31.3 percent.

EBay Inc, which became a darling among top U.S. hedge funds in the fourth quarter just before billionaire activist investor Carl Icahn urged the company to spin off its PayPal business, continued to find fans in the first quarter.

Omega more than tripled its stake in eBay, bringing it to 2.9 million shares, while Jana opened a stake of 3.9 million shares in the first quarter. Icahn, who backed down from his demands, disclosed a new stake in eBay, holding 27.8 million shares as of March 31.
No doubt about it, anyone long biotechs (IBB and XBI), small caps (IWM) and technology shares (QQQ) in Q1 got massacred as the big unwind clobbered high beta stocks.

People are now worried of inflation and more Fed tapering but I think their worries are misplaced and you will see risk assets take off once again in the second half of the year.

These are treacherous markets so let's look at more articles on where the "gurus" are investing. Frank Tang of Reuters reports, Paulson holds onto gold ETF, Soros adds gold miners in first-quarter:
Hedge fund Paulson & Co in Q1 maintained its stake in SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund as bullion prices rebounded from their biggest annual loss in 32 years in 2013, while PIMCO dissolved its gold ETF investment.

George Soros raised his stake in Barrick Gold Corp and gold mining companies ETFs, suggesting the big names in hedge funds took advantage of lower gold prices to increase positions in the precious metal used by many as a hedge.

Investors pay close attention to the quarterly filings by Paulson and other notable hedge fund managers because they provide the best insight into whether the so-called "smart money" has lost faith in gold as a hedge against inflation and economic uncertainty.

"Some institutions are stepping up to buy gold this year just like you would expect them to do when they find an asset valued at these attractive levels," said Adam Sarhan, CEO of New York-based Sarhan Capital.

Paulson & Co, led by longtime gold bull John Paulson, owned 10.2 million shares in the ETF worth $1.27 billion on March 31, unchanged from its holdings on December 31, a filing with the U.S. Securities and Exchange Commission showed on Friday.

That represents a gain of around $76 million as the price of gold gained 6.5 percent in the first quarter, following a drop of around 9 percent in the fourth quarter.

This marks the third consecutive quarter Paulson has stuck to his stake in the gold ETF.

"It's a plus for the market as big players are still holding onto gold to a degree, but I don't think that's reflective of the market tone," said Bill O'Neill, partner at commodities investment firm LOGIC Advisors in New Jersey.

Gold prices were still 7.5 percent higher for the year but market watchers said the yellow metal's failure to rally on geopolitical tensions and lackluster physical demand suggested downside risks.

In the second quarter of 2013, Paulson slashed its stake by more than half when bullion prices plummeted $225 between April 11 and 15, a record two-day drop for gold.

Among large institutional investors, PIMCO has dissolved its position in SPDR Gold Trust, marking its sixth consecutive quarterly cuts. PIMCO held 6.3 million shares of the gold ETF in the second quarter of 2012.

Some institutional investors continued to remain bearish on gold investments as the metal's price came under heavy pressure from rallying equity markets and an improving economic outlook.

SPDR Gold Trust held near a four-year low at about 800 tones of gold at the end of the first quarter, largely unchanged from its fourth-quarter level.

Institutional investors' massive stakes in SPDR Gold Trust have tremendous influence in gold prices as redemptions of their massive ETF mean dumping the metal in the open market.
I am keeping an eye on the SPDR Gold Shares (GLD). As I stated in my last comment on whiffs of inflation, gold won't take off again until the ECB starts engaging in major quantitative easing. That's why Soros and Paulson are long gold shares (I personally like Goldcorp when trading gold shares but the gold ETF offers more diversification).

Some hedge funds are looking at Asia for their investments. Svea Herbst-Bayliss reports, Hedge fund moguls put money on Asian Internet, low-volume stocks:
From Asian Internet stocks, which have boomed over the last year, to food and paper products companies, prominent hedge fund investors listed their favorite stocks on Thursday at an industry meeting dominated by talk of where markets will move.

John Burbank stuck with the Chinese Internet stocks that helped boost returns at his $3.8 billion Passport Capital last year. Real estate Internet portal Soufun Holdings, which climbed 121 percent in the last year, and discount online retailer Vipshop Holdings, which climbed 417 percent in the last year, made the list as his favorites.

"I am not negative on U.S. Internet companies but China is trading at a bigger discount," Burbank said at the annual SkyBridge Alternatives Conference known as SALT.

Burbank, whose picks have long included international companies and who taught in English in China decades ago, said "China is fundamentally changing and there is something to bet on." This year Burbank's flagship fund is up 0.5 percent through April, a person familiar with the number said.

Leon Cooperman, who runs $10.5 billion Omega Advisors, still likes banking company Monitise, listing it for the second straight year as a favorite and saying that its price can double in a year.

Cooperman also sounded a more positive note on the U.S. stock market at a time some other prominent hedge fund managers have issued a note of caution about how much higher equities can move. Although stocks moved to record territory earlier this week, the S&P 500 has been struggling to move meaningfully higher this year after gaining 30 percent last year.

He said U.S. stock prices are not a bargain but noted that the market "isn't priced to perfection" either, forecasting that the S&P 500, now trading at 1,870 could end the year at 2,000.

Steve Kuhn, head of fixed income trading at $14 billion Pine River Capital Management, advised selling out of bonds and moving into low volatility stocks, calling these types of companies "boring but beautiful."

He included food company ConAgra and paper and packaging manufacturer Rock-Tenn as picks. With Rock-Tenn he joked "this is a company that will not be disinter- mediated by Google."

Cooperman said stocks are still the best alternative among financial assets and likened investing in U.S. government bonds to trying to walk in front of a steamroller to pick up a dime.

Meanwhile Michael Novogratz, a principal at Fortress Investment Group, said that a sizable bet against U.S. Treasuries "makes sense."
Steve Kuhn is right, in these markets, high paying dividend stocks with low volatility are "boring but beautiful." A buddy of mine told me he's very happy investing in BCE Inc. (BCE), collecting his 5% dividend yield and not worrying about stock market volatility. "You get preferable tax treatment on dividends and the company has steady cash flows." (I recently switched to Bell Fibe and love it. Had enough of giving my money to PKP and his fist pump!).

Finally, hedge fund mogul Tepper warns: 'don't be too friggin' long':
Billionaire investor David Tepper, who runs hedge fund Appaloosa Management, sounded a cautious note on stock markets on Wednesday and told an audience "I'm nervous."

"I'm not saying go short, just don't be too friggin' long," Tepper, who has one of the best investing records in the industry said at the SkyBridge Alternatives Conference in Las Vegas.
Take everything these hedge fund moguls tell you publicly with a shaker of salt, especially when they talk at the SALT conference in Las Vegas. I wanna know what Tepper is investing in now, show me his book now, I couldn't care less about his public proclamations.

I will tell you where LTK Capital Management is honing in my attention for the second half of the year. I'm keeping a close eye on the Baker Brothers' portfolio which got clobbered in Q1. I am long Idera Pharmaceuticals (IDRA), BioCryst Pharmaceuticals (BCRX), Progenics Pharmaceuticals (PGNX), Pharmacyclics Inc. (PCYC), XOMA Corporation (XOMA), all of which got clobbered in Q1. Baker Brothers initiated a small position in Mast Therapeutics (MSTX). I'm also keeping a close eye on other shares I mentioned in my interview with Michael Castor.

Below, you can get a much more detailed glimpse into what top funds bought and sold in Q1 2014. Those of you who like to invest rather than swing trade should focus on the deep value and activist funds. They don't churn their portfolios as often but in these markets, be careful, nothing is safe.   

And I warn all of you, use this information wisely and remember, even the "gurus" get crushed and they play both sides of their trades. The stupidest thing you can do is blindly follow their portfolios thinking you are going to make money in the stock market. You will get burned!

Top multi-strategy hedge funds

As the name implies, these hedge funds invest across a wide variety of hedge fund strategies like L/S Equity, L/S credit, global macro, convertible arbitrage, risk arbitrage, volatility arbitrage and statistical pair trading.

Unlike fund of hedge funds, the fees are lower because there is a single manager managing the portfolio, allocating across various alpha strategies as opportunities arise. Below are links to the holdings of some top multi-strategy hedge funds I track closely:

1) Citadel Advisors

2) SAC Capital Management

3) Farallon Capital Management

4) Peak6 Investments

5) Kingdon Capital Management

6) Millennium Management

7) Eton Park Capital Management

8) HBK Investments

9) Highbridge Capital Management

10) Pentwater Capital Management

11) Och-Ziff Capital Management

12) Pine River Capital Capital Management

13) Carlson Capital Management

14) Mount Kellett Capital Management 

15) Whitebox Advisors

16) QVT Financial

Top Global Macro Hedge Funds

These hedge funds gained notoriety because of George Soros, arguably the best and most famous hedge fund manager. Global macros typically invest in bond and currency markets but the top macro funds are able to invest across all asset classes, including equities.

Soros and Stanley Druckenmiller, another famous global macro fund manager with a long stellar track record, have converted their funds into family offices to manage their own money and basically only answer to themselves (that is the sign of true success!).

1) Soros Fund Management

2) Duquesne Family Office

3) Bridgewater Associates

4) Caxton Associates

5) Tudor Investment Corporation

6) Tiger Management (Julian Robertson)

7) Moore Capital Management

8) Balyasny Asset Management

Top Market Neutral, Quant and CTA Hedge Funds

These funds use sophisticated mathematical algorithms to initiate their positions. They typically only hire PhDs in mathematics, physics and computer science to develop their algorithms. Market neutral funds will engage in pair trading to remove market beta.

1) Alyeska Investment Group

2) Renaissance Technologies

3) DE Shaw & Co.

4) Two Sigma Investments

5) Numeric Investors

6) Analytic Investors

7) Winton Capital Management

8) Graham Capital Management

9) SABA Capital Management

10) Quantitative Investment Management

Top Deep Value Funds and Activist Funds

These are among the top long-only funds that everyone tracks. They include funds run by billionaires Warren Buffet, Seth Klarman, and Ken Fisher. Activist investors like to make investments in companies where management lacks the proper incentives to maximize shareholder value. They differ from traditional L/S hedge funds by having a less diversified (more concentrated) portfolio.

1) Abrams Capital Management

2) Berkshire Hathaway

3) Fisher Asset Management

4) Baupost Group

5) Fairfax Financial Holdings

6) Fairholme Capital

7) Trian Fund Management

8) Gotham Asset Management

9) Sasco Capital

10) Jana Partners

11) Icahn Associates

12) Schneider Capital Management

13) Highfields Capital Management 

14) Eminence Capital

15) Pershing Square Capital Management

16) New Mountain Vantage  Advisers

17) Scout Capital Management

18) Third Point

19) Marcato Capital Management


20) Glenview Capital Management

21) Perry Corp

21) ValueAct Capital

23) Vulcan Value Partners

24) Letko, Brosseau and Associates

25) West Face Capital

Top Long/Short Hedge Funds

These hedge funds go long shares they think will rise in value and short those they think will fall. Along with global macro funds, they command the bulk of hedge fund assets. There are many L/S funds but here is a small sample of some well known funds.

1) Appaloosa Capital Management

2) Tiger Global Management

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) JAT Capital Management

8) Coatue Management

9) Leon Cooperman's Omega Advisors

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Brigade Capital Management

16) Discovery Capital Management

17) LSV Asset Management

18) Hussman Strategic Advisors

19) Cantillon Capital Management

20) Brookside Capital Management

21) Blue Ridge Capital

22) Iridian Asset Management

23) Clough Capital Partners

24) GLG Partners LP

25) Cadence Capital Management

26) Karsh Capital Management

27) Brahman Capital

28) Andor Capital Management

29) Silver Point Capital

30) Steadfast Capital Management

31) Brookside Capital Management

32) PAR Capital Capital Management

33) Gilder, Gagnon, Howe & Co

34) Brahman Capital

35) Bridger Management 

36) Kensico Capital Management

37) Kynikos Associates

38) Soroban Capital Partners

39) Passport Capital

40) Pennant Capital Management

41) Mason Capital Management

42) SAB Capital Management

43) Sirios Capital Management 

44) Hayman Capital Management

45) Highside Capital Management

46) Tremblant Capital Group

47) Decade Capital Management

48) T. Boone Pickens BP Capital 

49) Bronson Point Management

50) Senvest Partners

51) Viking Global Investors

52) Zweig-Dimenna Associates

Top Sector and Specialized Funds

I like tracking activity funds that specialize in real estate, biotech, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.

1) Baker Brothers Advisors

2) SIO Capital Management

3) Broadfin Capital

4) Healthcor Management

5) Orbimed Advisors

6) Deerfield Management

7) Sectoral Asset Management

8) Visium Asset Management

9) Perceptive Advisors

10) Redmile Group

11) Bridger Capital Management

12) Southeastern Asset Management

13) Bridgeway Capital Management

14) Cohen & Steers

15) Cardinal Capital Management

16) Munder Capital Management

17) Diamondhill Capital Management 

18) Tiger Consumer Management

19) Geneva Capital Management

20) Criterion Capital Management

21) Highland Capital Management


Mutual Funds and Asset Managers

Mutual funds and large asset managers are not hedge funds but their sheer size makes them important players. Some asset managers have excellent track records. Below, are a few funds investors track closely.

1) Fidelity

2) Blackrock Fund Advisors

3) Wellington Management

4) AQR Capital Management

5) Sands Capital Management

6) Brookfield Asset Management

7) Dodge & Cox

8) Eaton Vance Management

9) Grantham, Mayo, Van Otterloo & Co.

10) Geode Capital Management

11) Goldman Sachs Group

12) JP Morgan Chase & Co.

13) Morgan Stanley

14) Manulife Asset Management

15) RCM Capital Management

16) UBS Asset Management

17) Barclays Global Investor

18) Epoch Investment Partners

19) Thornburg Investment Management

20) Legg Mason Capital Management

21) Kornitzer Capital Management

22) Batterymarch Financial Management

23) Tocqueville Asset Management

24) Neuberger Berman

25) Winslow Capital Management

26) Herndon Capital Management

27) Artisan Partners

28) Great West Life Insurance Management

29) Lazard Asset Management 

30) Janus Capital Management

31) Franklin Resources

32) Capital Research Global Investors

33) T. Rowe Price

34) First Eagle Investment Management

35) Hexavest

Pension Funds, Endowment Funds, and Sovereign Wealth Funds

Last but not least, I track activity of some pension funds, endowment funds and sovereign wealth funds. I like to focus on funds that invest in top hedge funds and have internal alpha managers. Below, a sample of pension and endowment funds I track closely:

1) Alberta Investment Management Corporation (AIMco)

2) Ontario Teachers' Pension Plan

3) Canada Pension Plan Investment Board

4) Caisse de dépôt et placement du Québec

5) OMERS Administration Corp.

6) British Columbia Investment Management Corporation (bcIMC)

7) Public Sector Pension Investment Board (PSP Investments)

8) PGGM Investments

9) APG All Pensions Group

10) California Public Employees Retirement System (CalPERS)

11) California State Teachers Retirement System (CalSTRS)

12) New York State Common Fund

13) New York State Teachers Retirement System

14) State Board of Administration of Florida Retirement System

15) State of Wisconsin Investment Board

16) State of New Jersey Common Pension Fund

17) Public Employees Retirement System of Ohio

18) STRS Ohio

19) Teacher Retirement System of Texas

20) Virginia Retirement Systems

21) TIAA CREF investment Management

22) Harvard Management Co.

23) Norges Bank

24) Nordea Investment Management

25) Korea Investment Corp.

26) Singapore Temasek Holdings 

27) Yale Endowment Fund

Hope you enjoyed this comment and please remember to contribute to this blog by following the PayPal links on the top right-hand side under the banner. Institutional investors are kindly requested to subscribe ($500, $1000 or $5000 a year) and contact me directly via my email at LKolivakis@gmail.com for more information on these options.


Below, CNBC's Dominic Chu unveils what some of the biggest investors in the world are buying and selling, including David Tepper, George Soros, and Leon Cooperman.