Friday, August 17, 2018

Top Funds' Activity in Q2 2018

David Randall and Svea Herbst-Bayliss of Reuters report, U.S. hedge funds bet on retail, tech in Q2 as economy sizzled:
Prominent hedge fund managers appeared to make big second-quarter bets that the U.S. economy would continue to expand despite increasing concerns about a broadening trade dispute between the United States and China, regulatory filings showed Tuesday.

Third Point added new positions in payment companies PayPal Holdings Inc and Visa Inc, both of which are up more than 19 percent year to date. Greenlight Capital, run by billionaire investor David Einhorn, added new positions in low-to-middle income retailers including Dollar Tree Inc , Dollar General Corp, Gap Inc, and TJX Companies Inc, the parent company of discount retailers TJ Maxx and HomeGoods.

Activist fund Jana Partners added shares of broad-based exchange-traded funds that track the S&P 500 and the Russell 2000 indexes and took new positions in Wells Fargo & Co and food delivery company GrubHub Inc.

The flurry of new positions in cyclical companies came during a quarter in which U.S. gross domestic product increased at an annual rate of 4.1 percent, nearly double the 2.2 percent rate of the first quarter of the year, according to Commerce Department estimates.

A rally in cyclical companies would help boost hedge fund industry returns at a time when many fund firms are under pressure from investors to lower their fees or improve their performance. Hedge funds, on average, are up 1.5 percent since the start of January, according to research firm Hedge Fund Research, well behind the 6.2 percent gain in the benchmark S&P 500 index over the same time.

"Everyone is comparing everything to the S&P 500 and that's a very difficult hurdle for the last few years," said Sol Waksman, president of research firm BarclayHedge.

Quarterly disclosures of hedge fund managers stock holdings, in what are known as 13F filings with the U.S. Securities and Exchange Commission, are one of the few public ways of learning what the managers are selling and buying. But relying on the filings to develop an investment strategy comes with some risk because the disclosures come 45 days after the end of each quarter and may not reflect current positions. 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, or bets that a stock will fall in price. As a result, the public filings do not always present a complete picture of a management firm's stock holdings.

TRIMMING THE FAANGS

Large hedge fund managers cut their positions in some of the so-called FAANG stocks - the moniker given to Facebook Inc , Apple Inc, Amazon.com Inc, Netflix Inc , and Google-parent Alphabet Inc - that led the market higher last year.

Third Point sold all of its stake in Alphabet and divested 1 million shares of Facebook, reducing its position in the company by 25 percent. At the same time, it increased its stake in Microsoft Corp by nearly 310 percent, buying 1.7 million shares.

Omega Advisors, meanwhile, sold all of its position in Netflix and added new holdings in biotechnology companies including Madrigal Pharmaceuticals Inc and Deciphera Pharmaceuticals Inc.

A number of prominent fund managers sharply cut their stake in Apple only weeks before it became the first publicly traded U.S. company to be worth more than $1 trillion.

Einhorns Greenlight Capital slashed its stake by 77 percent, while Philippe Laffonts Coatue Management got rid of 95 percent. Advisory firm Diamond Hill Capital Management cut its stake by 27 percent. Other big holders, including Sanders Capital and Adage Capital Partners, trimmed only small amounts in the second quarter.
It's time to wrap up this week by looking at the quarterly filings of top hedge funds and other fund managers.

The data is lagged but we get a glimpse into their activity. I think there is a lot of great data to be manipulated here and I use this information as part of my toolkit when looking at stocks to buy, sell or when I want to increase/ decrease my positions.

But I always tell my readers to be aware of the current macro crosscurrents or risk getting clobbered in highly volatile markets.

Here are some of my recent market comments which you need to read:
 I also think it's important to read these comments:
Never mind what the gurus are buying and selling, some of them are excellent stock pickers, others aren't that great, but they all need to deal with the macro environment just like everyone else and if they don't get their macro calls right, they won't make money in these markets.

In fact, a lot of hedge funds are struggling this year because they're not getting the macro right. I suggest they subscribe to Francois Trahan's excellent portfolio research at Cornerstone Macro.

There are plenty of others I like but Francois ties everything to the market very well and his calls are forward looking and excellent.

Get the macro right. Get your sectors right on the long and short side. Then you can call yourself a real hedge fund that delivers alpha in good and bad times.

Alright, enough on macro, back to top funds' activity in Q2. Kate Rooney of CNBC reports, Warren Buffett's Berkshire Hathaway reloads on Apple, Goldman Sachs and airlines:
Warren Buffett's Berkshire Hathaway increased its stake in Apple by 5 percent, according to a regulatory filing Tuesday that discloses positions through the end of the second quarter.

Berkshire also upped its holdings of Goldman Sachs by 21 percent, Delta by 18.8 percent and Southwest by 18.7 percent, the filing said, and it added another 6.7 percent to its Teva stake, which it had doubled in the first quarter of this year.

Buffett's conglomerate has been steadily building its Apple stake for two years to become its second-biggest shareholder. Apple recently won the race to become the first U.S. company to reach a market value of $1 trillion, and its shares have surged 23 percent this year.

"If you look at Apple, I think it earns almost twice as much as the second most profitable company in the United States," Buffett told CNBC in May.

Banks have been another focus. Berkshire added to Goldman in the second quarter as the stock has fallen nearly 10 percent this year. Goldman recently announced that Lloyd Blankfein, its CEO for the last 12 years, will step down from that role in September and retire at the end of the year, to be succeeded by David Solomon.

The company made its first bet on Goldman Sachs in 2008 after the collapse of Lehman Brothers. The move was seen as a vote of confidence in the investment bank as the financial crisis worsened.

Buffett told CNBC earlier this year that Berkshire had added 75 million shares of Apple and exited its stake in IBM in the first quarter. The company also increased its stake in St. Louis-based agricultural product giant Monsanto in the first quarter.

Berkshire cut its holdings in Phillips 66 by 24 percent, Wells Fargo by 1 percent, and Charter Communications by 8.7 percent, as of the end of June. It also cut shares in American Airlines by 2.8 percent, and United Continental by 3.7 percent.
I was curious to see if Buffett added to his Teva (TEVA) stake, one of my core longs, and to see what other top funds were doing with this company.

You can go through Teva's top holders here but this is the image that I want to bring to your attention (click on image):


As you can see, top hedge funds like Poinstate, Millennium, Renaissance, Point72 (add Citadel, Two Sigma and others here) all increased their stake in Q2 and followed Warren Buffett and David Abrams here.

That proved to be a wise decision. On Thursday, Teva's shares soared more than 7% on news the FDA approved its generic EpiPen (click on image):


In case you're not aware, an EpiPen shortage has parents struggling during back-to-school season.


But there are plenty of other reasons why I like Teva and believe the stock is primed to go much higher over the next year or two barring a meltdown in the stock market which is always possible.

But it's not just Teva that impressed me this year. Check out shares of Mallinckrodt (MNK) since the start of the year:


And who are the top holders of Mallinckrodt? You'll see BlackRock but right after, Scopia Capital Management, and then Paulson and Bill Miller:


And when I looked at the top holdings of Scopia Capital Management, I was even more impressed because these guys aren't closet indexers, they take risks in a fairly concentrated portfolio and some of their picks are excellent.

That's what I want to see in an active manager. I want to see intelligent risk-taking, not closet indexers, and a more concentrated portfolio. I want to pay them to take intellignt risks.

Consultants have corrupted the industry to the point where active managers are afraid to take risks lest they suffer too much "tracking error" in any given year. It's truly pathetic.

Anyway, back to top funds' activity. I wish there was an easier way for me to go through all of it with you but it's paintakingly long and tedious work to go through everyone's portfolio.

When I went over Q1 activity, I went through a lot of stuff, like why I wasn't so convinced with David Tepper's decision to increase his holdings of Micron Technology (MU). It turns out I was right:


Still, Tepper significantly increased his stake in Micron again in Q2 and is the fifth largest institutional holder of the stock.

Maybe there is a bounce to be played here but I wouldn't buy and hold it, that's for sure.

Anyway, have fun reading articles on what top funds bought and sold last quarter here.

Also, take the time to read a great Institutional Investor article on Perceptive Advisors' Joseph Edelman, The 41% Man (h/t, Denis Parisien).

You'll recall I discussed Perceptive and Joe Edelman when I covered top funds Q4 activity. Not only is he the best biotech investor, he has the most impressive track record among active managers (with lots of vol which comes with the territory).

Edelman significantly increased his stake in Mirati Therapeutics (MRTX) in Q2, which was a great move:


I know this biotech very well because at one point I owned 5,000 shares at $5, sold it at $5.50, it fell to $3 and change and then the rest is history. Every time I look at that chart, I kick myself for not holding on through the volatility (the Baker Brothers and Broadfin made a killing here).

I'll end it there. Have fun looking at the second quarter activity of top funds listed below. The links take you straight to their top holdings and then click on the fourth column head, % chg, to see where they decreased (click once on % chg column head) and increased their holdings (click twice on % chg column head).

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) Appaloosa LP

2) Citadel Advisors

3) Balyasny Asset Management

4) Farallon Capital Management

5) Peak6 Investments

6) Kingdon Capital Management

7) Millennium Management

8) Eton Park Capital Management

9) HBK Investments

10) Highbridge Capital Management

11) Highland Capital Management

12) Pentwater Capital Management

13) Och-Ziff Capital Management

14) Pine River Capital Capital Management

15) Carlson Capital Management

16) Magnetar Capital

17) Mount Kellett Capital Management 

18) Whitebox Advisors

19) QVT Financial 

20) Paloma Partners

21) Weiss Multi-Strategy Advisors

22) 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 (Paul Tudor Jones)

8) Tiger Management (Julian Robertson)

9) Discovery Capital Management (Rob Citrone)

10 Moore Capital Management

11) Point72 Asset Management (Steve Cohen)

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

13) Joho Capital (Robert Karr, a super succesful Tiger Cub who shut his fund in 2014)

Top Quant and Market Neutral 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) Cubist Systematic Strategies (a quant division of Point72)

6) Numeric Investors

7) Analytic Investors

8) AQR Capital Management

9) SABA Capital Management

10) Quantitative Investment Management

11) Oxford Asset Management

12) PDT Partners

13) Princeton Alpha Management

14) Angelo Gordon

15) Quantitative Systematic Strategies

16) Bayesian Capital Management

17) Quadrature Capital

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

49) Polaris Capital 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) Viking Global Investors

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) Tiger Global Management (Chase Coleman)

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) Penserra Capital Management

29) Eminence 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) Tourbillon Capital Partners

60) Impala Asset Management

61) Valinor Management

62) Marshall Wace

63) Light Street Capital Management

64) Honeycomb Asset Management

65) Rock Springs Capital Management

66) Rubric Capital Management

67) Whale Rock Capital

68) Suvretta Capital Management

69) York Capital Management

70) 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) Birchview Capital

10) Ghost Tree Capital

11) Sectoral Asset Management

12) Oracle Investment Management

13) Perceptive Advisors

14) Consonance Capital Management

15) Camber Capital Management

16) Redmile Group

17) RTW Investments

18) Bridger Capital Management

19) Boxer Capital

20) Bridgeway Capital Management

21) Cohen & Steers

22) Cardinal Capital Management

23) Munder Capital Management

24) Diamondhill Capital Management 

25) Cortina Asset Management

26) Geneva Capital Management

27) Criterion Capital Management

28) Daruma Capital Management

29) 12 West Capital Management

30) RA Capital Management

31) Sarissa Capital Management

32) Rock Springs Capital Management

33) Senzar Asset Management

34) Southeastern Asset Management

35) Sphera Funds

36) Tang Capital Management

37) Thomson Horstmann & Bryant

38) Venbio Select Advisors

39) Ecor1 Capital

40) Opaleye Management

41) NEA Management Company

42) Great Point Partners

43) Tekla 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 (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

39) Victory 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) CI Investments

20) 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 looks at the highlights from this season's 13F filings. So Tepper sold his shares of Teva and increased his stake in Micron in Q2? Hmm, that wasn't a great move (I'll stick with Buffett and other top hedge funds on Teva).

And since the Queen of soul died yesterday, how's about we finally give some of these hedge funds the respect they deserve and sing a little song for them (what a voice!).

Lastly, speaking of respect, please respect my time and contributions by kindly supporting this blog on the top right-hand side via PayPal. I respect and thank all of you who take the time to contribute.



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