Top Funds' Activity in Q2 2017
Hedge-fund manager David Tepper, known for taking positions in out-of-favor companies in his Appaloosa Management hedge fund, added stakes in embattled Wells Fargo Co and several energy companies in the second quarter as the price of oil fell, according to quarterly filings released Monday.It's time for our quarterly sneak peek into the portfolios of "money manager gods" but before I begin looking into what top funds bought and sold during the second quarter, let me once again state my top three macro conviction calls going forward:
Among the six new energy companies Tepper added to his fund were Antero Resources Corp, Southwestern Energy Co, and Chesapeake Energy Corp.
Shares of each company are down by 20 percent or more year-to-date as part of a broad sell-off in energy companies. The price of oil hit a 9-month low in June due to concerns about a glut of supply. Overall, energy companies in the S&P 500 are down 12.7 percent for the year through Friday, compared with a 9.3 percent gain in the broad index.
Tepper, who manages roughly $17 billion overall, bought approximately 681,000 shares of Wells Fargo during the quarter. Shares of the company are down 4 percent for the year as the company faces the ramifications of a scandal over unauthorized account openings and lawsuits that charged it modified borrower's mortgages without their authorization.
Overall, shares of financial stocks in the S&P 500 gained 6.9 percent for the year through Friday.
In addition to energy and financial companies, Tepper took a roughly 3.7 million-share stake in Chinese online retailer Alibaba Group Holdings Ltd, making it the third-largest holding in the fund. Dan Loeb's Third Point once again has a stake in Alibaba, having bought 4.5 million shares during the second quarter. Shares of the company are up 76 percent year-to-date after the company raised its revenue forecast in June.
Other new additions to the fund included down-market retailer Dollar General Corp, mall-based retailer L Brands Inc, and travel bookings site Expedia Inc, filings show.
Among technology stocks, Tepper added approximately 449,000 shares of Facebook Inc, increasing his stake in the company by 23 percent, and sold all of his shares of Snap Inc. Shares of the social media company have slid 14 percent since its $3.4 billion initial public offering in March on increased investor concerns that the company may never turn a profit.
- Long US long bonds (TLT) as I see the US economy slowing and global deflation spreading to the United States.
- Long the USD (UUP) as I see the global economy following the US economy and slowing. Even if the Fed pauses its rate hikes, the USD will gain as global economies start slowing. If a crisis hits, it's bullish for the greenback and yen.
- Short oil (OIL), energy (XLE) and metals and mining (XME) shares as well as commodity currencies. Why in the world would you be long energy and commodities with global deflation looming around the corner? That's just plain nuts.
And even though I worry about deflation, I'm also weary of utilities (XLU), REITs (IYR) and even consumer staples (XLP) as I find a lot of these dividend "safe places to hide" are way overvalued and can get clobbered if markets melt down. People don't realize that dividends don't protect you from a market meltdown.
As far as biotech (XBI and IBB) and technology (XLK), the two sectors I liked most right before Trump got elected, I believe these high beta, high flyers are cruising for a major bruising and they will get clobbered when markets head south. This will impact healthcare (XLV) as there are a lot of biotech shares that drove that ETF up.
What about gold (GLD), the sector Ray Dalio recently recommended on LinkedIn to hedge against geopolitical and other risks? Even though there may be a tradable rally, I'm not touching gold given my bullish views on the greenback and I firmly believe that only US long bonds (TLT) will protect your portfolio from the ravages of global deflation.
Importantly, I see huge deflationary risks in the world which is why I truly believe US long bonds (TLT) offer investors the best risk-adjusted returns over the next year or longer and will prove to be the ultimate diversifier, protecting your portfolio from being obliterated as deflation roils all risk assets.
When I tell you that all my money and the money of my loved ones is in US long bonds (TLT), I mean it and the bad news is this isn't the market to be diversified among many ETFs or even to pick stocks, you risk getting killed either way because I foresee both active and passive strategies getting whacked hard over the next six months to a year (active less than passive).
I had to begin this comment with my macro views because every time I post a comment on what top funds bought and sold last quarter, people get all excited and ask me "What did Soros buy? What about Tepper, Griffin et al.?
Listen to me carefully, it doesn't matter what these top funds bought and sold last quarter, I stick by my macro views one hundred percent and that's why I am recommending US long bonds (TLT). If I had Tepper's fund in my hedge fund portfolio, I'd be grilling him on his contrarian energy bets and even his love affair with tech stocks.
"But Leo, that's David Tepper you're talking about! You can't question him, Ray Dalio and other elite hedge fund managers, they have more money than you'll amass in one million lifetimes and everyone listens to them, not you."
That's true but that's also the problem, people glorifying uber-wealthy hedge fund managers, paying them extraordinary fees when all they should be doing is raising their exposure to boring old US long bonds (TLT) and pay NO fees.
I'm willing to bet anyone reading this comment that over the next year, US long bonds will significantly outperform hedge funds on a risk-adjusted basis.
"Yeah but that's not sexy. Hedge funds and other alternative investments offer higher returns than bonds over a long period and we get to travel to New York, London, and other cool places to meet these managers who wine and dine us at nice restaurants and take good care of us, making us feel very important."
I hear you, my dear pension fund managers, been there, done that. All I can say is what the late great George Carlin repeated many times: "It's all bullshit and it's bad for you."
"Leo, is that your hyperthyroid talking or is that really you?". I assure you it's really me, I'm treating my hyperthyroid with two little Tapazole pills every morning and should be fine in one month (the endocrinologist told me I have Grave's disease and likely had it for a long time, but it's treatable).
Folks, I know, bonds aren't sexy. The Maestro and others think there's a bubble in bonds, but they don't understand the inflation deflation mystery. They think Trump will save us with tax cuts and big spending on infrastructure, and rates will rise to new highs. Keep dreaming, I warned you a long time ago, nobody trumps the bond market, especially not Trump.
In fact, I'm on record stating the 10-year Treasury note yield is headed below 1% and might touch 0.5% or head even lower if a global deflationary crisis develops.
When that happens, you won't care what Tepper and Soros bought or sold in the stock market. Soros will come out ahead of the hedge fund pack once again, not based on his stock selection skills, but on his great bearish macro calls.
That's why Soros is the undisputed king of hedge funds, because he understands the macro environment better than anyone else.
On that note, let me share some other articles covering what top funds bought and sold in Q2:
- Big-name U.S. hedge funds shed healthcare stocks during the rally in second-quarter
- U.S. hedge funds bearish on FAANG stocks in second-quarter: SEC filings
- Hedge fund Elliott ups stakes at BHP by crossing threshold
- Hedge fund Paulson & Co trims stake in Valeant
- Hedge Funds Break Up With Long-Adored Apple and Facebook Shares
- Druckenmiller Exits Barrick as Templeton, Adage Boost Stakes
All I can tell you is analyzing and trading markets and stocks is a passion of mine. 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 and I have a list of stocks I track in over 100 industries/ themes to see what is moving in real time.
When I tell you these aren't the markets you want to be playing in, I know exactly what I'm talking about because I'm watching these markets closely every day and my deflationary macro call looms large and is weighing on on all risk assets, not just stocks.
These ARE NOT the markets you want to be making any bullish or contrarian bets on. Trust me when I tell you global deflation will obliterate all risk assets and the only refuge will be in US long bonds (TLT).
On that cheery note, have fun looking at the second quarter activity of top funds I listed below (just click on links and then click on the fourth column head, % chg, to see where they descreased and increased their holdings).
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) Paloma Partners
20) Weiss Multi-Strategy Advisors
21) 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 across fixed income, currency, commodity and equity markets.
George Soros, Carl Icahn, 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) Icahn Associates
3) Duquesne Family Office (Stanley Druckenmiller)
4) Bridgewater Associates
5) Pointstate Capital Partners
6) Caxton Associates (Bruce Kovner)
7) Tudor Investment Corporation
8) Tiger Management (Julian Robertson)
9) Moore Capital Management
10) Point72 Asset Management (Steve Cohen)
11) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)
12) Joho Capital (Robert Karr, a super succesful Tiger Cub who shut his fund in 2014)
Top Market Neutral, Quant and CTA Hedge Funds
These funds use sophisticated mathematical algorithms to make their returns, typically using high-frequency models so they churn their portfolios often. A few of them have outstanding long-term track records and many believe quants are taking over the world. 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
12) PDT Partners
13) Princeton Alpha Management
Top Deep Value, Activist, Event Driven 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 (the one-man wealth machine)
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) Gabelli Funds
15) Highfields Capital Management
16) Eminence Capital
17) Pershing Square Capital Management
18) New Mountain Vantage Advisers
19) Atlantic Investment Management
20) Scout Capital Management
21) Third Point
22) Marcato Capital Management
23) Glenview Capital Management
24) Apollo Management
25) Avenue Capital
26) Armistice Capital
27) Blue Harbor Group
28) Brigade Capital Management
29) Caspian Capital
30) Kerrisdale Advisers
31) Knighthead Capital Management
32) Relational Investors
33) Roystone Capital Management
34) Scopia Capital Management
35) Schneider Capital Management
36) ValueAct Capital
37) Vulcan Value Partners
38) Okumus Fund Management
39) Eagle Capital Management
40) Sasco Capital
41) Lyrical Asset Management
42) Gabelli Funds
43) Brave Warrior Advisors
44) Matrix Asset Advisors
45) Jet Capital
46) Conatus Capital Management
47) Starboard Value
48) Pzena Investment 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) Adage Capital Management
2) Appaloosa LP
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 (it shut down again, for now)
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) Tide Point 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) Park West Asset Management
55) Melvin Capital Partners
56) Owl Creek Asset Management
57) Portolan Capital Management
58) Proxima Capital Management
59) Tiger Global Management
60) Tourbillon Capital Partners
61) Impala Asset Management
62) Valinor Management
63) Viking Global Investors
64) Marshall Wace
65) Light Street Capital Management
66) Honeycomb Asset Management
67) Whale Rock Capital
70) Suvretta Capital Management
71) York Capital Management
72) 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) Armistice Capital
2) Baker Brothers Advisors
3) Palo Alto Investors
4) Broadfin Capital
5) Healthcor Management
6) Orbimed Advisors
7) Deerfield Management
8) BB Biotech AG
9) Ghost Tree Capital
10) Sectoral Asset Management
11) Oracle Investment Management
12) Perceptive Advisors
13) Consonance Capital Management
14) Camber Capital Management
15) Redmile Group
16) RTW Investments
17) Bridger Capital Management
18) Boxer Capital
19) Bridgeway Capital Management
20) Cohen & Steers
21) Cardinal Capital Management
22) Munder Capital Management
23) Diamondhill Capital Management
24) Cortina Asset Management
25) Geneva Capital Management
26) Criterion 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) Southeastern Asset Management
34) Sphera Funds
35) Tang Capital Management
36) Thomson Horstmann & Bryant
37) Venbio Select Advisors
38) Ecor1 Capital
39) Opaleye Management
40) NEA Management Company
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 (Bill Miller)
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
37) Brandywine Global
38) Brown Capital Management
Canadian Asset Managers
Here are a few Canadian funds I track closely:
1) Addenda Capital
2) Letko, Brosseau and Associates
3) Fiera Capital Corporation
4) West Face Capital
5) Hexavest
6) 1832 Asset Management
7) Jarislowsky, Fraser
8) Connor, Clark & Lunn Investment Management
9) TD Asset Management
10) CIBC Asset Management
11) Beutel, Goodman & Co
12) Greystone Managed Investments
13) Mackenzie Financial Corporation
14) Great West Life Assurance Co
15) Guardian Capital
16) Scotia Capital
17) AGF Investments
18) Montrusco Bolton
19) Venator Capital Management
Pension Funds, Endowment Funds, and Sovereign Wealth Funds
Last but not least, I the track activity of some pension funds, endowment 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, CNBC's Leslie Picker digs deeper into what the quarterly SEC filings by big-name investors say about the sectors they're buying and selling. Glad to see Ray Dalio increased his stake in US long bonds (TLT) in Q2.
And CNBC's traders discuss how David Tepper of Appaloosa Management, one the most respected and legendary investors in the hedge fund business, is betting big on technology (geez, what a pathetic shmooze fest this was, almost made me heave).
Third, on a more serious note, if there was any doubt about what kind of person went to protest in Charlottesville, Virginia, over the weekend, Vice News’s documentary should put those questions to rest. Watch this disturbing documentary and share it with others (warning: not easy to watch and highly offensive but it exposes the hatred, bigotry, and anti-Semitism right in our backyard).
Lastly, Larry Summers, former Treasury secretary, gives his thought about the role of executives on President Trump's advisory councils. Summers doesn't mince his words and that's why I respect him.
Update: My comment was written prior to the terrorist attack in Barcelona which was behind Thursday's selloff. These senseless acts of terrorism only add to my fears, as do geopolitics in North Korea and elsewhere, but that's not what I'm basing my macro calls on. My macro calls are based on a slowdown in the US economy, followed by a global slowdown which will export deflation to the United States. In this deflationary environment, only US nominal long bonds (TLT) will save your portfolio from being ravaged.
The message here is clear, forget what hedge fund gurus are buying and selling. Now isn't the time to play with stocks, now is the time to be very defensive and load up on US long bonds (TLT), hunkering down as global deflation obliterates all risk assets, not just stocks.
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