Top Funds' Activity in Q1 2017
Several big-name hedge fund investors trimmed their stakes in financial companies in the first quarter as hopes for immediate tax cuts and loosening of regulations after President Donald Trump’s victory in November began to fade.Brandon Kochkodin and Sabrina Willmer also report, Here's Where Hedge Funds Invested in the First Quarter:
Boston-based Adage Capital Management cut its position in Wells Fargo & Co, which has come under fire for its sales practices, by 3.9 million shares, according to regulatory filings, while John Burbank’s Passport Capital cut its stake in the company by 947,000 shares.
Third Point cut its stake in JPMorgan Chase & Co by 28 percent, to 3.75 million shares, while Suvretta Capital Management sold all of its shares of Morgan Stanley, JPMorgan Chase and Citigroup Inc.
Overall, financial companies in the S&P 500 were up 2.1 percent in the first quarter, compared with 5.5 percent for the index as a whole. Financials significantly outperformed the broad market following Trump's Nov. 8 election.
Trump had pledged to do a "big number" on the landmark Dodd-Frank financial reform law, which raised banks’ capital requirements and restricted their ability to make speculative bets with customers’ money. The Treasury Department is still filling vacancies and will not be able to complete a review of the law by Trump’s June deadline, sources told Reuters.
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 tracking 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 out 45 days after the end of each quarter and may not reflect current positions.
Bank of America Corp was one of the few large banks to gain favor among hedge fund investors in the first quarter. David Tepper’s Appaloosa Management took a new stake in the company, buying 8.7 million shares, while Dan Och’s Och-Ziff Capital Management added 12.78 million shares, increasing its position by 156 percent.
Separately, several hedge fund managers added new positions in media companies. Tiger Global bought 429,000 shares of Netflix Inc. Shares of Netflix are up 29.2 percent for the year. Omega Advisors, which is facing a U.S. Securities Exchange Commission insider trading case, added positions in Netflix, AMC Networks Inc and Sinclair Broadcast Group Inc.
Tiger did, however, halve its position in Google parent Alphabet Inc, whose shares are up 21 percent since Jan. 1.
The favorite new bets by hedge funds ranged from the predictable Facebook Inc. to the less known VCA Inc., a pet-service provider.Jeff Cox of CNBC also reports, Hedge funds have been selling big winners this year:
Many companies attracting the most hedge fund money in the first quarter have either agreed to deals or closed them. Dow Chemical’s $78 billion merger with DuPont Co. is expected to close in August. Liberty Media Corp. purchased Formula 1 in January, Mead Johnson Nutrition Co. agreed to buy Reckitt Benckiser Group during the first quarter, and T-Mobile US Inc. has been in preliminary talks to merge with Sprint Corp.
Hedge funds also showered love on new media, Snap Inc., whose shares have been on a roller coaster, and the old, Time Warner Inc. What’s more, managers applauded the planned shakeup at railroad CSX Corp., and are relieved that the Trump administration’s efforts to build a wall at the border with Mexico, from where Constellation Brands Inc. imports much of its beer, has stalled (click on image).
Hedge fund managers' most popular stock to start the year has been a familiar name that is falling short in terms of performance, while the least popular companies all have been crushing the market.You can read more articles on 13-F filings on Barron's, Reuters, Bloomberg, CNBC, Forbes and other sites like Insider Monkey, Holdings Channel, and whale wisdom.
Procter & Gamble pulled in nearly $2.7 billion in hedge fund cash during the first quarter, nearly double the next most popular stock, according to figures released this week from S&P Global Market Intelligence.
Nelson Peltz's Trian Management was solely responsible for the gush of interest thanks to the $3.5 billion stake it took in the company back in February. Otherwise, P&G actually saw outflows.
The huge flows came even though the company has fallen short compared with the broader market. P&G shares are up just 2.9 percent year to date. The stock did outperform in the first quarter, gaining 6.4 percent to the S&P 500's 4.6 percent, but has fallen off lately.
Shares also outperformed the broader consumer staples sector in Q1 but have fallen behind in that regard as well.
Other hedge fund favorites during the first quarter were Praxair and Marriott International ($1.4 billion each combined in increases and new positions), both of which have been stellar performers, as well as Constellation Brands ($859 million) and Formula One ($765 million).
Among the stocks that had fallen the most out of favor in terms of outflows, the top two are head-scratchers: Microsoft and Amazon, which have seen declines in hedge fund investments of $1.6 billion apiece. The former is up more than 9 percent year to date, easily beating the market, while Amazon has roared more than 23 percent higher.
Other big exits came from Autodesk (-$913 million), Safran (-$898 million) and Charter Communications (-$732 million). Each company has beaten the S&P 500 easily this year.
Hedge funds broadly this year are up 3.1 percent, as gauged by the HFRI Fund Weighted Composite Index. That compares with the 7.2 percent total return for the S&P 500 through April.
Due to Peltz's P&G investment, the first quarter was stellar for consumer staples, which easily outdistanced the other S&P 500 sectors.
Interestingly, Insider Monkey now compiles a list of top 100 hedge funds based on tracking their long positions on each quarterly 13-F filing. This list can be found here.
Below, a small sample of articles covering Q1 activity (click on the links to read articles):
- Here are the biggest bets made by top hedge funds in the first quarter
- Hedge Funds Creep Into Valeant Seeing Rebound That Eluded Ackman
- Warren Buffett's Two Best Q1 Bets Include One He Didn't Make
- Paulson holds SPDR Gold holdings steady as bullion rallies (but Soros dissolved his stake)
- Hedge funds that bet on Silicon Valley are crushing it
It really is a brutal environment for a lot of top hedge funds. For example, John Burbank's fund Passport Capital is nursing fresh losses as assets shrink. And he's not the only one struggling in this environment.
Bill Ackman who got killed on Valeant Pharmaceuticals just came out to say 2-and-20 doesn’t work anymore for hedge funds. In an effort to garner support from institutional investors fed up with his lousy performance, his fund adjusted its fee structure last year so that clients only pay on profits in excess of 5 percent (a noble move but pretty much a marketing ploy after suffering terrible losses).
The only hedge funds that are delivering consistent returns in these markets are quant funds taking over this world. This is why they're once again at the very top of alpha's rich list.
Anyway, below I provide you with a list of top funds, not just hedge funds, and you can take your time to carefully go over their Q1 holdings.
How do you do this? Just click on the link to the fund and it will take you to the NASDAQ site which covers their latest holding.
For example, earlier this week I went over why Bridgewater's Ray Dalio is worried about the big picture and finished that comment by looking at his fund's stock holdings as of the end of March:
By the way, since I'm talking about Bridgewater, I can share with you that fund's top positions as of the end of March (click on image):Again, the data are lagged, we don't know whether these funds dumped shares, especially large quant funds which churn their portfolios many times throughout the quarter, but it gives you an idea of what to look for when trying to figure out which stocks to buy and sell.
And where the fund significantly upped its stakes in Q1 (click on image, you need to click on the column heading, Change % )
As always, please remember this data is lagged and unless you're a professional trader and investor, don't bother buying or selling any stock based on top funds' 13-F filings. If you don't know what you're doing, you will get burned, and even these top funds get burned in these markets.
Case in point, check out shares of Express Scripts Holding Company (ESRX), a top holding of Bridgewater and many other top quantitative hedge funds which increased their position in Q1 as the shares declined (click on image):
Now, when you have Bridgewater, Blackrock, Renaissance Technologies and Two Sigma all significantly increasing their stake in a company as shares drop in price, it's typically a good sign but it doesn't mean the pain has ended as they all lost money on this trade (we don't know if they're adding now or dumped it).
In the hands of expert traders and top hedge funds and long-only active managers, this information is very useful, especially when seeing funds take concentrated positions in stocks that have declined significantly and continue to decline.
But in these markets, anyone can get burned including top funds, so you need to manage risk 100 times more carefully, or accept huge volatility if you're going to take concentrated positions in stocks.
Still, there is a lot of great information here if you know how to use it to take intelligent stock specific risk. Let me show you what I mean. One of the tech stocks I have been tracking is Akamai Technologies (AKAM).
Shares of Akamai have been hit hard this year and the stock is at a very interesting level in terms of its weekly chart (click on image):
Here you will notice the price of Akamai hit its 400-week moving average this week, which tells me shares are extremely oversold on a weekly basis. Typically, this is a beautiful buy-the-dip setup for this company (in the past, that's when you needed to load up).
I went and looked at the top holders of Akamai and saw the familiar asset manager and mutual fund giants (Blackrock, Fidelity, Wellington, Capital Research, etc.) but also well-respected alpha shops like AQR Capital Management which increased its stake in Q1 as shares declined (click on image):
I then clicked on the column heading (Change %) to see who increased their holdings significantly in Q1 (click on image):
Here you will notice two well-known hedge funds -- Highbridge Capital Management and Citadel -- significantly increased their stake in Q1 as shares declined.
Now, I'm not telling you to go out and buy shares of Akamai Technologies (AKAM) based on the little information I provided you above, but from a risk-reward perspective, these are the setups I love to swing trade and this is why I keep telling you, smart funds know how to take smart risks.
What else? From looking at the top holdings of Soros Fund Management, I noticed his fund significantly increased its stake in Trip Advsiror (TRIP) as shares declined. I then looked at the top holders of Trip Advisor, and clicked on the Change % column to see who else signifcantly added as shares delined (click on image):
Lo and behold, Two Sigma, a top quantitative hedge fund run by John Overdeck and David Siegel, also increased its stake in Trip Advisor as shares declined (click on image):
Now, that is not a bullish chart by any means and I don't know what is going on with this compamy but I'm bringing it to your attention to demonstrate 1) top funds aren't always right and/ or 2) top funds might see a turnaround before others do so keep it on your watch list as a possible turnaround candidate.
What else? I love the biotech sector, especially small to mid size biotech shares (XBI) and regularly track top biotech funds for individual company ideas. However, it's a very volatile sector and definitely not for the faint of heart, especially when investing in individual biotech shares.
Still, volatility presents opportunities for swing trades and some of the top biotech funds like Perceptive Advisors really made great moves in Q1 adding to shares of Alnylam Pharmaceuticals (ALNY) and La Jolla Pharmaceutical (LJPC) and as shares declined (click on images):
Other top biotech funds you will find below also made some excellent and some not so excellent moves in Q1. Again, this sector is very volatile (biotech is binary), so it has its share of hits and blowups.
I can show you other interesting opportunities but it takes a lot of time for me to write these long comments and painstakingly go through each setup and why it makes sense to take stock specific risks in one case and not in another (don't buy every dip blindly, most of the times you will get killed!).
What I can tell you is analyzing 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.
Lastly, in a recent comment of mine on the pension storm, I provided you with my macro thoughts:
[...] given my views on the reflation chimera and a potential US dollar crisis later this year or next year despite the recent selloff, I would be actively shorting emerging markets (EEM), Chinese (FXI), Industrials (XLI), Metal & Mining (XME), Energy (XLE) and Financial (XLF) shares. The only sector I like and trade now, and it's very volatile, is biotech (XBI) but technology (XLK) is also doing well, for now.These are crazy markets but I see plenty of opportunities out there if you know how to take intelligent risks. The good news is that as this bull market matures, top stock pickers will be in high demand.
But as I stated plenty of times before, if you want to sleep well, buy US long bonds (TLT) and thank me later this year. In this environment, US bonds are still the ultimate diversifier and will save your portfolio from huge losses.
Despite the James Comey selloff today, I foresee very choppy markets this summer. Still, the risks of a reversal are high, so be prepared for a downturn and hedge your portfolio accordingly.
Of course, if quant funds have their way, we will see another melt-up like 1999-2000 where stock prices go parabolic. If that happens, the risks of a bigger downturn down the road will be magnified.
On that note, have fun going through the holdings of top funds below but be careful, things are constantly changing and even the best of breed managers find it tough making money in these schizoid markets.
I added a few funds to the list below, including hedge funds that are crushing it.
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) 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
18) Venator Capital Management
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, CNBC's Leslie Picker reports on what hedge funds have been buying and selling. Mark Spellman, Alpine Funds, weighs in. And is tech too crowded? The "Fast Money" traders weigh in on hedge funds betting big on tech stocks.
As always, if you enjoy reading my comments, please remember to kindly contribute to this blog on the top right-hand side (under my picture) using PayPal. I thank all of you who take the time to contribute to this blog, it's greatly appreciated.
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