Top Funds Activity: Q4 2012
Hedge fund heavyweights from Leon Cooperman's Omega Advisors to Barry Rosenstein's Jana Partners threw in the towel on Apple Inc in the fourth quarter, while other managers found discount retailers Dollar General Corp and Dollar Tree Inc attractive, regulatory filings showed on Thursday.As you can read above, some top hedge funds made money with certain bets while others lost. It's that time of the quarter again where we get to peer into the activity of top funds in the last quarter to see what they were buying and selling.
Apple has been the topic du jour since last week, when prominent hedge fund manager David Einhorn sued the company to get it to deploy its $137 billion cash pile more effectively and halt a 35 percent drop in its share price from a record high in September.
Cooperman, whose hedge fund had $7 billion in assets as of last November, sold his entire stake of 266,404 Apple shares; Rosenstein sold all of the 143,000 shares he held.
However, Einhorn's Greenlight Capital, holder of roughly 1.3 million Apple shares, found some company: David Tepper's Appaloosa Management increased its Apple stake to 912,661 shares and billionaire George Soros added about 100,000 Apple shares during the fourth quarter.
Herbalife, which has been under scrutiny after hedge fund manager Bill Ackman called the nutritional supplements company an unsustainable pyramid scheme, drew the attention of the market late Thursday. Billionaire investor Carl Icahn said he now owns 14 million shares in the company, taking his ownership to nearly 13 percent of Herbalife. The news sent shares up 17 percent in after-hours trading.
Consumer- and retail-related stocks appear to have been the flavor of the fourth quarter.
Patrick McCormack's $2 billion Tiger Consumer Management LLC took a new, 2.15 million-share stake in discount retailer Dollar Tree, while Farallon Capital Management LLC bought 4.3 million shares of Dollar General.
Maverick Capital Management also increased its position in Family Dollar Stores, to 4.2 million shares from 2.8 million shares, during the fourth quarter. Family Dollar shares were losers in January, down 11.4 percent.
The quarterly disclosures of hedge fund stock holdings - in so-called 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.
The filings also offer insight into how managers positioned themselves at year end to benefit from the big run-up in stock prices in early 2013.
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 can offer a glimpse into what hedge fund managers saw as opportunities to make money on the long side. The filings don't disclose short positions, bets that a stock will fall in price. And there's also little disclosure on bonds and other securities that don't trade on exchanges.
Here then are some of the hot stocks and sectors in which hedge fund managers either took new positions or exited from in the fourth quarter.
CONSUMER AND RETAIL
Farallon, founded by recently retired billionaire Thomas Steyer, took a new stake in retailer Sally Beauty Holdings of 4.7 million shares, and Jana initiated a new position in retailer Fifth & Pacific Companies (formerly Liz Claiborne Inc) of 3.3 million shares.
Tiger Consumer Management cut its stake in luxury retailer Michael Kors Holdings Ltd by 394,269 shares to 1.6 million.
Eton Park Capital Management, a $12 billion hedge fund run by former Goldman Sachs trader Eric Mindich, initiated a new position in Best Buy Co of 1.6 million shares during the fourth quarter. Best Buy was one of the best performing stocks in January, up over 37 percent.
Tiger Global Management, a roughly $6 billion fund run by Chase Coleman and Feroz Dewann, loaded up on Amazon Inc. Tiger Global now owns 1.23 million shares, up from 480,000.
TECHNOLOGY
Tiger Global trimmed its stake in Apple, to 1.05 million shares from 1.3 million, and sold all of its 698,000 shares of Google Inc and its 11.7 million-share stake in Facebook Inc. Tiger slashed its Yahoo Inc position to 14 million shares from 25 million.
JAT Capital, founded and run by John A. Thaler, slashed its stake in Facebook to about 530,000 shares, significantly down from 6.1 million. But JAT opened a new stake in Yahoo of 2.8 million shares. It also re-entered LinkedIn with about 340,000 shares, after dissolving a stake some time in the third quarter.
Tiger Global has been a darling of the investment community for delivering a string of strong returns at a time many hedge funds were up only low single digits. Industry legend Julian Robertson gave the fund its start.
SOLAR
Tiger Global also opened a new 1 million-share stake in First Solar, which was one of January's biggest losers, down 8.75 percent.
But JAT Capital slashed its stake in First Solar during the fourth quarter to about 790,000 shares, from about 1.6 million shares.
FINANCIALS
Activist investor Daniel Loeb's Third Point LLC accumulated a $148.2 million stake in Morgan Stanley, buying 7.8 million shares of the securities company. The disclosure is the first public acknowledgement of the size of the hedge fund's position, which was mentioned in an investor letter last month.
Greenlight's Einhorn unloaded his entire 658,700 stake in Genworth Financial Inc during the fourth quarter. John Paulson's Paulson & Co and credit-focused trader Boaz Weinstein of Saba Capital Management may have had better timing.
Paulson took a 3.9 million-share position and Saba added roughly 2.3 million shares in Genworth during the fourth quarter. The stock was one of January's best performers with a gain of 22 percent.
Eton Park sold its entire 148,000-share stake in U.S. lender CIT Group Inc and Bruce Berkowitz's Fairholme Funds cut a its exposure to 3.2 million shares from 11.1 million shares.
CIT held preliminary talks over the past year and a half to sell itself to banks, including Toronto-Dominion Bank and Wells Fargo & Co, but nothing came of the conversations, according to three people familiar with the specialty finance company.
Once again, never buy and sell anything because of what some hedge fund honcho did last quarter. I use this information to gain insight into risk-taking behavior of hedge funds and like to see where they are concentrating their bets.
Importantly, I like to see if funds are adding significantly to positions that went against them or initiating big new positions in stocks that got hit hard last quarter or were in a long basing pattern.
For example, have a look at the one year chart of Netflix (NFLX). As you can see, the stock rocketed up this quarter and is one of the top-performing Nasdaq stocks so far this year (click on image):
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Now, have a look below at which funds were the top holders of Netflix as of December 31, 2012 (click on image):
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Among the top holders, you will see many well known funds whose activity I track every quarter. Interestingly, you'll see that Carl Icahn's fund increased its positions by 343%, Jana Partners by 138% and Coatue Management initiated a sizable new position They all made great money on Netflix.
Another top performer this year is Research in Motion which is now called BlackBerry (BBRY). Go back to read my comment on another RIM job. As you can see below, the stock made a huge run-up going into the launch on BB10 and has been volatile ever since as traders take some profits (click on image):
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Looking at the top holders of Blackberry as of December 31st, 2012, you'll see Fairfax Financial didn't sell a single share and Viking Global Investors, a top L/S hedge fund, more than doubled its stake. Will be interesting to see Q1 activity once it becomes publicly available in mid-May.
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Let's have a look at another Nasdaq stock on my radar, Zynga (ZNGA). As you can see below, Zynga got crushed last year and is showing signs of life recently, bouncing off lows on huge volume (click on image).
Now, let's look at the top holders of Zynga (ZNGA). Among them, you will see elite hedge funds like Citadel Advisors and D.E. Shaw which respectively increased their stake by 53% and 331%. You will also see Tiger Global Management and Lonestar Capital Management both initiated sizable new positions (click on image):
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Now, Zynga is highly speculative but this stock can rise significantly from these levels. Will be interesting to track it and see who added to their positions in Q1 2013 once that information becomes available in mid-May.
Interestingly, Nathan Vardi of Forbes reports, Chase Coleman's Tiger Global Management Generated $1 Billion From Its Facebook Trade. Not surprisingly, top hedge funds are also very good traders.
Will leave it up to you to go over some of the 13F articles from Reuters, Bloomberg and Google news. ValueWalk did a good roundup going over notable 13F changes for large hedge funds.
One story that caught my attention was a Bloomberg article, NYSE Asks SEC to Shorten 13F Filing Period to 2 Days From 45:
Institutional investors should be required to publicly disclose equity holdings within two days after the quarter ends, instead of 45 days, NYSE Euronext said in a petition to U.S. regulators.
A shortened time frame will help investors and public companies receive timely information and technological advances make it possible, NYSE and corporate governance and investor relations groups wrote in a letter dated Feb. 1 to the U.S. Securities and Exchange Commission. The rule applies to pension funds, investment advisers and other investors with at least $100 million that currently must file a 13-F form.
The time frame is “unnecessarily long, and to that extent the current delay period runs contrary to the interests of investors and public companies,” according to the petition, which was written by NYSE, the Society of Corporate Secretaries and Governance Professionals and the National Investor Relations Institute.
While institutions owned the majority of the U.S. shares outstanding in 2009, the delay means that individuals and public companies will get “little meaningful information” from the 13F filings, the letter said. The 45-day period has been in existence for more than three decades, the groups said.
John Nester, an SEC spokesman, said the commission would seek public comment on the petition. The agency isn’t required to respond to petitions for rulemaking or take action on them, although they are studied by the SEC staff.
Petition ReviewedI'm all for shortening the time period of filing 13F forms. In this day and age of mega million computers, it's simply indefensible to delay this information by 45 days. Of course, there will be pushback from mutual funds and hedge funds who want to keep their activity secret.
“Staff reviews the petitions as appropriate and they can and do inform our work,” Nester said, declining to comment specifically on the NYSE’s request.
Investors would benefit from seeing holdings sooner and companies would be better able to identify shareholders and communicate with them, according to the letter. Reducing the time period would be in line with the purpose of the 13F filing, which is to inform other shareholders and companies when large investment managers accumulate shares, it said.
“Investors are denied the ability to track institutional investor holdings in their investments because by the time the reporting deadline occurs, the investor would have no way of knowing whether the information reported in the Form 13F remains current,” the groups said in the petition.
Below, will leave it up to you to explore the activity of top funds listed below. It's time consuming but you will learn a lot by going through their activity, focusing on where they added to existing holdings or initiated new positions.
Use this information wisely and just remember, most of you are not professional traders or money managers so don't pretend to be or else you'll get crushed.
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
These are among the top long-only funds that everyone tracks. They include funds run by billionaires Warren Buffet, Seth Klarman, and Ken Fisher.
1) Berkshire Hathaway
2) Fisher Asset Management
3) Baupost Group
4) Fairfax Financial Holdings
5) Fairholme Capital
6) Trian Fund Management
7) Gotham Asset Management
8) Sasco Capital
9) Schneider Capital Management
10) ValueAct Capital
11) Highfields Capital Management
12) Eminence Capital
13) Vulcan Value Partners
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) Tiger Global Management
2) Third Point
3) Greenlight Capital
4) Maverick Capital
5) Pointstate Capital Partners
6) New Mountain Vantage Advisers
7) Marathon Asset Management
8) JAT Capital Management
9) Coatue Management
10) Jana Partners
11) Leon Cooperman's Omega Advisors
12) Artis Capital Management
13) Fox Point Capital Management
14) Jabre Capital Partners
15) Lone Pine Capital
16) Paulson & Co.
17) Pershing Square Capital Management
18) Brigade Capital Management
19) Discovery Capital Management
20) Appaloosa Capital Management
21) LSV Asset Management
22) Hussman Strategic Advisors
23) Cantillon Capital Management
24) Icahn Associates
25) Brookside Capital Management
26) Blue Ridge Capital
27) Iridian Asset Management
28) Eminence Capital
29) Clough Capital Partners
30) GLG Partners LP
31) Cadence Capital Management
32) Scout Capital Management
33) Karsh Capital Management
34) Brahman Capital
35) Diamondback Capital Management
36) Glenview Capital Management
37) Perry Corp
38) Silver Point Capital
39) Steadfast Capital Management
40) T2 Partners Management
41) PAR Capital Capital Management
42) Gilder, Gagnon, Howe & Co
43) Brahman Capital
44) Bridger Management
45) Kensico Capital Management
46) Kynikos Associates
47) Soroban Capital Partners
48) Passport Capital
49) Pennant Capital Management
50) Mason Capital Management
51) New Mountain Vantage Advisers
52) SAB Capital Management
53) Sirios Capital Management
54) Highside Capital Management
55) Tremblant Capital Group
56) Decade Capital Management
57) T. Boone Pickens BP Capital
58) TPG-Axon Management
59) Viking Global Investors
60) Vinik Asset Management
61) Zweig-Dimenna Associates
Top Sector and Specialized Funds
I like tracking activity funds that specialize in real estate, healthcare/biotech, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.
1) Cohen & Steers
2) Baker Brothers Advisors
3) Orbimed Advisors
4) Deerfield Management
5) Sectoral Asset Management
6) Visium Asset Management
7) Bridger Capital Management
8) Southeastern Asset Management
9) Bridgeway Capital Management
10) Cardinal Capital Management
11) Munder Capital Management
12) Diamondhill Capital Management
13) Tiger Consumer Management
14) Geneva Capital Management
15) Criterion 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
11) 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
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. Investors looking for more in-depth coverage of 13F filings should contact me directly (LKolivakis@gmail.com) and we can discuss in more detail.
Once again, please support this blog through your subscriptions, donations or by clicking on the ads above and below my comments. If you're looking for my investment thoughts, just go back to read my comment on a lump of coal for Christmas (many top funds added significantly to coal shares in Q4 after the US elections).
Below, Bloomberg Businessweek's Sheelah Kolhatkar discusses redemptions at SAC Capital. She speaks on Bloomberg Television's "Money Moves."
Bloomberg reports that clients pulled out $1.68 billion amid insider probe. I doubt the perfect hedge fund predator is losing any sleep over these redemptions.
And Bloomberg's Dominic Chu runs down the 13-F filings of major investors and discusses some surprises found in the 13-F filings of Warren Bufett, David Einhorn and John Paulson.