Friday, May 22, 2015

Top Funds' Activity in Q1 2015

Sam Forgione of Reuters reports, Top U.S. hedge funds continued to dump Apple amid rally:
Top U.S. hedge fund management firms, including Leon Cooperman's Omega Advisors and Philippe Laffont's Coatue Management, continued to reduce or slash stakes altogether in Apple Inc (AAPL.O) during the first quarter, as shares of the iPhone maker rallied.

According to regulatory filings released on Friday, Coatue cut its holding of Apple by selling 1.2 million shares during the first three months of this year, but it remains the fund's single biggest U.S. stock investment, with 7.7 million shares. Omega Advisors sold all of its 383,790 shares in Apple during the first quarter, while Rothschild Asset Management cut its stake by 107,953 to 938,693 shares, filings showed on Friday.

David Einhorn's Greenlight Capital also cut its exposure in Apple during the first quarter, slashing its stake by 1.2 million shares to 7.4 million shares.

Apple shares rose 12.7 percent in the first quarter and have continued to increase. Since the end of March, the shares have risen 3.6 percent through Thursday's close. Including Friday's trading, shares are up 3.3 percent since the end of March.

In the fourth quarter, David Einhorn's Greenlight Capital and Coatue Management reduced their stakes in Apple, which was a big winner in 2014, with its shares rising nearly 38 percent.

At the end of 2014, Apple was one of the hedge fund community's favored positions, according to Goldman Sachs. Their analysis of more than 850 funds with $2 trillion in assets showed 12 percent of hedge funds counted it among their top 10 holdings. And given its size as the largest publicly traded U.S. company, that made it "key for both hedge fund and index performance," Goldman said in its February report.

Not every big hedge fund manager is souring on Apple. Ray Dalios' Bridgewater Associates increased its stake by 473,500 shares to 732,997. And billionaire hedge-fund activist Carl Icahn kept his stake unchanged at 52.8 million shares as of the end of the first quarter.

The actions were revealed in quarterly disclosures of manager stock holdings, known as 13F filings, with the U.S. Securities and Exchange Commission. They are of great interest to investors trying to divine a pattern in what savvy traders are selling and buying.

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 on the long side.

The filings do not disclose short positions. As a result, the public filings do not always present a complete picture of a management firm's stock holdings.
The whole world knows Carl Icahn's views on Apple. He thinks underweight Apple bets will hurt funds' performance and he might be right on that call as the so-called "biotech and buyback bubble" keeps inflating. Listening to his wise son, Brett, Icahn senior has also made a killing in Netflix (NFLX), one of the top performing Nasdaq stocks this year. They still maintain 10% of the portfolio in this company but don't bother chasing Netflix higher now, the big money has already been made.

But should you invest like Icahn? That was a topic in a recent CNBC debate. When I look closely at his top holdings, there are stock bets I like and others where he's getting killed. For example, his big bets on Chesapeake Energy (CHK), Transocean (RIG) and CVR Energy (CVI) have hurt his fund (interestingly, Viking Global just took a position in Transocean in Q1). And Icahn's pump and dump of Voltari (VLTC) which I recently discussed here is an abomination.

Still, what I like about Icahn is he has the balls to take outsized bets on companies he has conviction on and he typically turns out to be right on his big bets which is why so many people track his fund's holdings closely.

Where else are well known hedge funds making big bets? Nathan Vardi of Forbes reports, Hedge Funds Keep Betting Big On Health Care:
In recent years, some of the most prominent hedge fund victories have been all about health care. Larry Robbins, the billionaire founder of Glenview Capital Management, has generated excellent performance in the last two years by allocating a big chunk of his portfolio to hospital stocks—one of his hedge funds has posted a three-year annualized return of 57%. Billionaire William Ackman had the biggest year of his hedge fund career in 2014 because of Botox-maker Allergan, which was responsible for 19.1% of Ackman’s gross return.

In the first three months of 2015, hedge funds continued to rush into health care, chasing returns in the sector that has led the U.S stock market this year. Hedge funds increased their long exposure to health care to $289.67 billion, according to research firm Novus, making up 10.35% of the net assets under management of stock-picking hedge funds. Novus, which does not include quantitative trading hedge funds in its stock holding analysis, says that in the last year hedge funds have gone from being underweight health care to overweight.

The most popular hedge fund health care stock by far is Actavis, the generic drug maker that bought Allergan this year for $67 billion and is run by Brent Saunders, a CEO who is popular with both Ackman and Carl Icahn. Goldman Sachs released a report on Thursday that showed Actavis is the most popular stock with hedge funds that it tracks, even more popular than Apple. There are 171 hedge funds invested in Actavis and those hedge fund owned $20.3 billion of the stock at the end of March, according to Novus. The only company in America in which hedge funds held more stock, according to Novus, was Apple.

Actavis is a hedge fund-fueled stock. Hedge funds owned 24% of the outstanding shares at the end of March. Big positions in Actavis are owned by funds managed by billionaire John Paulson, whose Paulson & Co., had Actavis as its second-biggest U.S. holding at the end of March, and billionaire Andreas Halvorsen, who has made Actavis the biggest U.S. stock position of his some $30 billion hedge fund.

Actavis was recently the second-biggest holdings of billionaire Dan Loeb’s Third Point hedge fund, which had biotech company Amgen as its biggest position at the end of March. These two stocks alone made up about a quarter of Loeb’s U.S. stock holdings. A big buyer of Actavis in the first quarter of 2015 was billionaire Stephen Mandel’s Lone Pine hedge fund.

Valeant Pharmaceuticals is the second-most popular health care stock with the hedge fund crowd when measured by the value of shares held by hedge funds, according to Novus. There are 100 hedge funds that own $17.8 billion of the stock. Valeant is a hedge fund machine that was essentially created by ValueAct Capital Management, the San Francisco hedge fund run by Jeffrey Ubben. The stock is Ubben’s biggest holding by far, recently making up more than 21% of his U.S. stock portfolio. It made up more than a quarter of Bill Ackman’s U.S. stock portfolio at the end of March after his Pershing Sqaure hedge fund finally took a position this year in the drug maker that Ackman had teamed up with in early 2014 to try to buy Allergan. Valeant is Ackman’s biggest position so far in 2015.

Johnson & Johnson is a health care stock owned by 163 hedge funds. More hedge funds own Johnson & Johnson than any other health care stock except for Actavis. Pfizer is another drug company that has long been very popular with hedge funds, which own more than $6 billion of the stock, as is Gilead Sciences, where 141 hedge funds owned nearly $5 billion of the stock at the end March, according to Novus.

What healthcare stocks were hedge funds buying in the first quarter? Davita Healthcare Partners is one example. They have also been playing the mergers that have dominated the industry, buying shares of Salix Pharmaceuticals, Hospira and Pharmacyclics.
It's that time of the year folks, when everyone gets hot and bothered over what overpaid and over-glorified hedge fund gurus bought and sold last quarter.

Let's go over some more articles. Akin Oyedele of Business Insider reports on the top stock pick from each of 50 biggest hedge funds. You can click on the image below to view them:

Goldman also came out with the 100 most important stocks to hedge funds. You can click on the images below to see the top 50 long and the top 50 short positions:

Top 50 longs (click on image):

Top 50 shorts (click on image):

Whale Wisdom provides a cool "heat map" on their site going over 13 F filings from top funds where you can sort top picks by sector and even see ones from previous quarters (click on image below):

Now, here's my take on all this. Unless you're a professional stock trader or investor, please ignore these articles and information from sites like market folly, Insider Monkey, Holdings Channel, and Whale Wisdom.

All this information overload will just confuse the hell out of you. Holding a top long position of hedge funds doesn't mean you will make money. Conversely, holding a top short position of a hedge fund doesn't mean you will lose money. In fact, Goldman Sachs told hedge fund clients this week to buy stocks that are unloved by their peers if they want any chance of beating them.

So why bother looking at the portfolios of top funds? And who exactly are top funds right now? I'll answer these questions with the help of my friends at Symmetric, Sam Abbas and David Moon.

In my opinion, Sam and David have created one of the best services to track hedge fund holdings and more importantly to dynamically rank hedge funds based on their holdings and their alpha generation.

Sam took some time earlier this week to walk me through their product which only costs $200 a month (no lockup! LOL!) and where you can literally go over the portfolios of top funds in great detail to see if they're adding real alpha. Honestly, it's amazing, I highly recommend you contact them here and try it out, it's simply amazing.

And by the way, I'm not affiliated with Symmetric, nor have they provided me with any money to plug them. They were nice enough to provide me with a free tryout and I'm using my knowledge of hedge funds and benchmarks to help them think about how they can improve their product.

Symmetric provides an in-depth report every quarter and Sam allowed me to share some information from their latest report with my readers:
The Symmetric Twenty comprise the top twenty ranked long-short equity managers. We force-rank the entire Symmetric universe according to their realized StockAlpha year to date, 12 months back and three years back. The list is further adjusted to reflect those whose StockAlpha has not only the greatest magnitude, but also the greatest consistency over each period.

The following chart shows the cumulative StockAlpha for the Symmetric Top 20 vs. cumulative StockAlpha for the entire hedge fund universe. The chart demonstrates the magnitude of dispersion between the best and most consistent stock pickers and the average stock pickers. The Symmetric Top 20 have added over 25% of StockAlpha above the average hedge fund over the past 3 years or roughly 8% a year. With hedge fund fees typically being around 2% of assets and managed and 20% of profits, its clear that only the very top stock pickers are worth paying for. The average hedge fund would return negative StockAlpha after fees (click on image).

And who are the top  20 funds right now according to Symmetric? Click on the chart below to view them:

They also provided the most profitable trades of the Symmetric Twenty in Q1 2015 (click on image):

And they provide the Symmetric Twenty's top five new positions as well as the top five increased positions in Q1 2015 (click on image).

Not surprisingly, Broadfin run by Kevin Kotler is at the top of Symmetric top 20 list. I track this fund's portfolio very closely as it's in the red hot biotech space which I like so much. There are many other funds I like in this space, including Baker Brothers, Perceptive Advisors, Palo Alto Investors and many more (see my list below).

Sam was also kind enough to do some custom work for me, looking at the funds that I track closely below. I can literally do some serious attribution analysis on all these funds. He provided me with some of the most crowded trades and top winners and losers for the funds I track (click on images):

Deep Value

L/S Equity

Sector Specific

Sam Abbas of Symmetric also shared this valid point with me on replicating hedge fund strategies:
Most allocators approach hedge fund replication using 13-Fs by pointing out the 45 day delay with filings releases and the lack of information about the short side/international part of the book. The standard argument is that this makes replication a bad idea.
We don't think this is the right way to think about it. A better approach is to ask: do the benefits of being invested directly in the fund (short exposure + inter quarter trading + international exposure) make up for the 2/20 in fees and long lockup periods? 2/20 is such an enormous performance drag that in some cases you may be better off than the net return of the fund just by replicating the publicly disclosed book.
At the very least allocators should be benchmarking their funds net returns to a synthetic replicated version to understand what value they are getting above and beyond what is available cheaply.
I thank Sam Abbas for all his wonderful insights. Once again, please contact them here for more information on this wonderful service they provide. You will be blown away!

Below, you can click on links to view the top funds of many hedge funds and other funds I track. This is a dynamic list that keeps getting bigger and bigger. Typically what happens is I look at stocks that are doing well and look at who the largest holders are to gain ideas as to which funds to add to my list. That's why the list keeps growing. I also added many Canadian funds for those of you looking to see what the big Canadian funds are buying and selling up here.

Finally, I'm a stock market junkie and track thousands of companies in over 100 sectors and industries. I've built that list over many years and keep adding to it. I regularly look at the YTD performance of stocks, the 12-month leaders, the 52-week highs and 52-week lows. I also like to track the most shorted stocks and highest yielding stocks in various exchanges.

Gaining an edge on stock picking is a full time job. Please remember that these schizoid markets move on a dime and are heavily influenced by macro factors. Even the very best stock pickers get their hands handed to them from time to time and if they tell you otherwise, they're blatant liars.

Having said this, there is a reason why people like peering into Warren Buffett's portfolio or that of Seth Klarman (shown in pic at the top) or his protege, David Abrams, the one-man wealth machine. These managers are incredible stock pickers with a long and enviable track record. They don't hug benchmarks, they take very concentrated bets in a few stocks they really like and hold them for a long time, which is why they've delivered incredible outperformance over a very long period.

But even they aren't gods and they can't predict the future. These are very tough markets to make money in and I highly recommend you read my comment on slugging through a rough stock market as well as my more recent comments on hedge funds preparing for war and whether you should prepare for global reflation.

I'm still long a few biotechs which I like to trade around but these markets are making me increasingly nervous because there are a lot of hidden risks on the macro front and some not so hidden that worry me.

I can share a lot more information on specific stocks and macro risks with institutional investors that subscribe to this blog via the third option ($5,000 a year). Once again, I ask you all to please take the time to donate and show your appreciation for my work. You can do so via PayPal at the top right-hand side of this blog.

On that note, have fun peering into the portfolios of top funds below. I cover a lot of funds, not just hedge funds.

Top multi-strategy and event driven 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, merger arbitrage, distressed debt 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) Balyasny Asset 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) Highland Capital Management

11) Pentwater Capital Management

12) Och-Ziff Capital Management

13) Pine River Capital Capital Management

14) Carlson Capital Management

15) Magnetar Capital

16) Mount Kellett Capital Management 

17) Whitebox Advisors

18) QVT Financial 

19) Visium Asset Management

20) York Capital Management

Top Global Macro Hedge Funds and Family Offices

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.

George Soros, Stanley Druckenmiller, Julian Robertson and now Steve Cohen have converted their hedge funds into family offices to manage their own money and basically only answer to themselves (that is my definition of true investment success).

1) Soros Fund Management

2) Duquesne Family Office (Stanley Druckenmiller)

3) Bridgewater Associates

4) Caxton Associates (Bruce Covner)

5) Tudor Investment Corporation

6) Tiger Management (Julian Robertson)

7) Moore Capital Management

8) Point72 Asset Management (Steve Cohen)

9) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)

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

11) Oxford Asset Management

Top Deep Value, Activist and Distressed Debt Funds

These are among the top long-only funds that everyone tracks. They include funds run by legendary investors like Warren Buffet, Seth Klarman, Ron Baron 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 more concentrated portfolio. Distressed debt funds typically invest in debt of a company but sometimes take equity positions.

1) Abrams Capital Management

2) Berkshire Hathaway

3) Baron Partners Fund (click here to view other Baron funds)

4) BHR Capital

5) Fisher Asset Management

6) Baupost Group

7) Fairfax Financial Holdings

8) Fairholme Capital

9) Trian Fund Management

10) Gotham Asset Management

11) Fir Tree Partners

12) Elliott Associates

13) Jana Partners

14) Icahn Associates

15) Schneider Capital Management

16) Highfields Capital Management 

17) Eminence Capital

18) Pershing Square Capital Management

19) New Mountain Vantage  Advisers

20) Atlantic Investment Management

21) Scout Capital Management

22) Third Point

23) Marcato Capital Management

24) Glenview Capital Management

25) Perry Corp

26) Apollo Management

27) Avenue Capital

28) Blue Harbor Group

29) Brigade Capital Management

30) Caspian Capital

31) Kerrisdale Advisers

32) Knighthead Capital Management

33) Relational Investors

34) Roystone Capital Management

35) Scopia Capital Management

36) ValueAct Capital

37) Vulcan Value Partners

38) Okumus Fund Management

39) Eagle Capital Management

40) Sasco Capital

41) Lyrical Asset Management

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) Omega Advisors (Leon Cooperman)

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Bronson Point Management

16) Hoplite 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) New Mountain Vantage

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) Bloom Tree Partners

50) Cadian Capital Management

51) Matrix Capital Management

52) Senvest Partners

53) Falcon Edge Capital Management

54) Melvin Capital Partners

55) Owl Creek Asset Management

56) Portolan Capital Management

57) Proxima Capital Management

58) Tourbillon Capital Partners

59) Valinor Management

60) Viking Global Investors

61) York Capital Management

62) Zweig-Dimenna Associates

Top Sector and Specialized Funds

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

1) Baker Brothers Advisors

2) Palo Alto Investors

3) Broadfin Capital

4) Healthcor Management

5) Orbimed Advisors

6) Deerfield Management

7) BB Biotech AG

8) Ghost tree Capital

9) Sectoral Asset Management

10) Oracle Investment Management

11) Perceptive Advisors

12) Consonance Capital Management

13) Camber Capital Management

14) Redmile Group

15) RTW Investments

16) Bridger Capital Management

17) Southeastern Asset Management

18) Bridgeway Capital Management

19) Cohen & Steers

20) Cardinal Capital Management

21) Munder Capital Management

22) Diamondhill Capital Management 

23) Cortina Asset Management

24) Geneva Capital Management

25) Criterion Capital Management

26) SIO Capital Management

27) Daruma Capital Management

28) 12 West Capital Management

29) RA Capital Management

30) Sarissa Capital Management

31) SIO Capital Management

32) Senzar Asset Management

33) Sphera Funds

34) Tang Capital Management

35) Venbio Select Advisors

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) Frontier Capital Management

36) Akre Capital Management

Canadian Asset Managers

Here are a few Canadian funds I track closely:

1) Letko, Brosseau and Associates

2) Fiera Capital Corporation

3) West Face Capital

4) Hexavest

5) 1832 Asset Management

6) Jarislowsky, Fraser

7) Connor, Clark & Lunn Investment Management

8) TD Asset Management

9) CIBC Asset Management

10) Beutel, Goodman & Co

11) Greystone Managed Investments

12) Mackenzie Financial Corporation

13) Great West Life Assurance Co

14) Guardian Capital

15) Scotia Capital

16) AGF Investments

17) Montrusco Bolton

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

Below, dissecting the latest 13-F filings with the Fast Money traders. Also, inside hedge fund manager Seth Klarman's investments, with CNBC's Brian Sullivan and Kate Kelly. You can view a list of Klarman's top holdings from the link above or just click here.

I wish all of my American readers a nice long weekend. In the meantime, feel free to contact me directly ( if you need anything specific and please remember to donate and/ or subscribe to my blog at the top right-hand side. Thank you!

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