Top Funds' Activity in Q1 2018

Julia La Roche reports, Here's what the biggest hedge funds have been buying and selling:

The stock trades that the biggest hedge fund managers made in the first quarter have been revealed.

Hedge funds of a certain minimum size are required to disclose their long stock holdings in filings to the SEC known as 13-Fs. Of course, the filings only provide a partial picture since they do not show short positions or wagers on commodities and currencies. What’s more is these filings come out 45 days after the end of each quarter, so it’s possible they could have traded in and out of the positions.

Still, it does provide a partial look into where some of the top money managers have been placing money in the stock market.

Facebook gains friends

Facebook’s stock was featured prominently in the news during the first quarter after the Cambridge Analytica data breach scandal came to light and CEO Mark Zuckerberg was grilled on Capitol Hill. Still, many hedge funds grabbed shares of the social network.

Tiger Global, led by Chase Coleman, added 2,545,238 more shares of Facebook (FB). Coleman’s fund is a “Tiger cub,” or a hedge fund that was seeded by legendary hedge fund manager Julian Robertson of Tiger Management.

Billionaire “Tiger cub” Andreas Halvorsen’s Viking Global also loaded up on Facebook during the first quarter, adding 5.5 million more shares, bringing the entire stake north of 9.3 million shares. Fellow “Tiger cub” billionaire Rob Citrone of Discovery Capital also added to his Facebook stake, buying 806,600 more shares, bringing the fund’s position to 1.37 million shares. Citrone’s Discover Capital also bought calls on 2.3 million Facebook shares. Facebook remained the No. 1 position for Viking and Discovery.

Daniel Loeb, the activist hedge fund manager and CEO of Third Point, added another 600,000 shares to his existing Facebook stake, bringing the total position to 4 million shares at the end of the quarter. David Tepper, the founder of Appaloosa, also boosted his Facebook stake, adding 680,559 more shares to last hold just over 6.2 million at the end of the quarter.

Activist hedge fund manager Barry Rosenstein’s JANA Partners sold its entire stake in Facebook, dropping 473,526 shares in the quarter. Billionaire Stanley Druckenmiller’s family-office hedge fund Duquesne Capital sold its entire Facebook stake of 1.08 million shares.

Dropping Apple

Tepper’s Appaloosa and Larry Robbins’s Glenview Capital both exited their Apple (AAPL) stakes in the first quarter. Philippe Laffont’s Coatue sold just over half of its Apple stake during the quarter.

Bloomberg noted that institutional investors abandoned Apple at a rate not seen since 2008.

Meanwhile, Warren Buffett’s Berkshire Hathaway added nearly 75 million shares of Apple during the first quarter, bringing the entire stake to just over 239.5 million shares, a position valued at more than $44.6 billion as of Tuesday’s close.

Out of Amazon and into Alibaba

E-commerce was another area that saw a bunch of moves among the hedge funds.

Discovery Capital ditched all of its Amazon (AMZN) shares during the first quarter. Viking Global also shed most of its Amazon stake, selling 482,469, or about 93% of the position. Viking last held 35,751 shares of the e-commerce giant.

Meanwhile, Viking initiated a new position in Chinese e-commerce giant Alibaba (BABA), snapping up 2.2 million shares. Citrone’s Discovery Capital also boosted its Alibaba stake.

Lee Ainslie, another “Tiger cub and the founder of Maverick Capital, also added to Alibaba.

Loeb’s Third Point trimmed its Alibaba stake, selling 2 million shares to last hold 4 million of the e-commerce giant. Tepper’s Appaloosa also slightly pared back its Alibaba stake. The position remained a top 5 long equity holding for both Loeb and Tepper.

Cutting cable

Cable providers also saw some action. Laffont’s Coatue and Halvorsen’s Viking Global both bailed on Time Warner (TWX), dumping their entire positions during the first quarter. Loeb’s Third Point sold 2 million shares of Time Warner and instead purchased call options on 2 million shares.

Rosenstein’s JANA Partners, Julian Robertson’s Tiger Management, and Tiger Global closed their stakes in Comcast (CMCSA).

Healthcare moves

And lastly, healthcare stocks, which have been in the news frequently during the first quarter, gained favor among the hedge funds.

Billionaire Leon Cooperman’s Omega Advisors and Julian Robertson’s Tiger Management disclosed new positions in UnitedHealth Group (UNH). Rosenstein’s JANA Partners also snapped up a new position in Anthem (ANTM), while Robertson’s Tiger Management trimmed its stake by about half.

Billionaire Larry Robbins, the founder of Glenview Capital, disclosed a new stake in Express Scripts (ESRX). Robbins pitched Express Scripts as a long idea at the Sohn Conference earlier this month while downplaying the threat that Amazon poses to the healthcare industry, specifically the pharmaceutical sector.

Loeb’s Third Point exited its position in health insurer Aetna (AET), selling 1.85 million shares.

Below is a roundup of the biggest funds’ first quarter moves:

Appaloosa Management (David Tepper)
New: Wells Fargo (WFC)
Boosted: Micron Technologies (MU), Facebook (FB), Allergan (AGN)
Exited: Apple (AAPL)

Baupost Group (Seth Klarman)
New: PG&E (PCG), Tesla (TSLA) (PRN)
Boosted: Pioneer Natural Resources (PXD), 21st Century Fox (FOXA)
Trimmed: Amerisource Bergen (ABC)
Exited: Express Scripts (ESRX)

Coatue Management (Philippe Laffont)
New: Micron Technologies (MU), TAL Education (TAL)
Boosted: Twitter (TWTR)
Trimmed: Apple (AAPL), Nvidia (NVDA), Netflix (NFLX), Snap Inc. (SNAP)
Exited: Bank of America (BAC), Time Warner (TWX), Alphabet (GOOGL)

Discovery Capital (Rob Citrone)
New: iShares MSCI Emerging Markets ETF (EEM)
Boosted: Alibaba (BABA), Facebook (FB)
Exited: Amazon(AMZN), Bank of America (BAC)

Duquesne Capital (Stanley Druckenmiller)
New: Micron Technologies, Alibaba, Netflix
Exited: Facebook, Wells Fargo

Glenview Capital (Larry Robbins)
New: Express Scripts (ESRX), FedEx (FDX), Facebook
Trimmed: Anthem
Exited: Apple (AAPL)

JANA Partners (Barry Rosenstein)
New: Anthem (ANTM), AutoDesk (ADSK)
Boosted: Pinnacle Foods (PF), Jack In The Box (JACK)
Exited: Facebook (FB), Comcast (CMCSA)

Maverick Capital (Lee Ainslie)
New: Mohawk Industries (MHK)
Boosted: Alphabet (GOOG), Alibaba (BABA), Intel, Lowe’s (LOW)
Trimmed: Molson Coors (TAP)

Marcato Capital (Mick McGuire)
New: Univar (UNVR), Astec Industries (ASTE)
Boosted: InterActiveCorp (IAC)
Exited: Sotheby’s (BID)

Omega Advisors (Leon Cooperman)
New: Thermo Fisher (TMO), UnitedHealth
Boosted: United Continental (UAL), Citigroup (C)
Trimmed: Shire (SHPG)
Exited: Zynga (ZNGA)

Pershing Square Capital (Bill Ackman)
New: United Technologies (UTX)
Trimmed: Restaurant Brands (QSR), Mondelez (MDLZ), ADP (ADP), Howard Hughes (HHC)
Exited: Nike (NKE)

Third Point LLC (Daniel Loeb)
New: United Technologies, Wynn Resorts (WYNN)
Boosted: Facebook, TimeWarner (TWX) (CALL)
Exited: Aetna (AET), TimeWarner (TWX)

Tiger Global (Chase Coleman)
New: Twitter (TWTR)
Boosted: Facebook, Netflix (NFLX)
Exited: Comcast (CMCSA), Alphabet (GOOGL) (GOOG)

Tiger Management (Julian Robertson)
New: Royal Caribbean Cruises (RCL) (CALL), UnitedHealth Group (UNH), Workday (WDAY), eBay (EBAY)
Boosted: JPMorgan Chase (JPM)
Trimmed: Anthem (ANTM)
Exited: Comcast (CMCSA), S&P500 SPDR ETF (SPY) (PUT)

Viking Global (Andreas Halvorsen)
New: Alibaba (BABA)
Boosted: Facebook (FB), Wells Fargo (WFC), Anthem
Trimmed: Amazon (AMZN)
Exited: TimeWarner (TWX)

This week, I will focus on what top funds bought and sold in the first quarter.

Before I begin, please take the time to read some of my recent market comments:

I want you to start thinking macro, macro, macro because in my opinion there are some interesting macro trends going on right now and you really need to pay attention or else you risk losing a lot of money.

In particular, pay attention to the US dollar (UUP) and emerging market equities (EEM) which have been selling off strongly this year and have been volatile (click on images):

As shown above, the US dollar ETF is at its 200-week moving average and it might rally a bit more here but I think it will pull back before resuming its uptrend. If I'm right, this will give some breathing room for emerging market stocks to rally off their 50-week moving average, but use any rally to go underweight or initiate a short position.

The sell-off in US long bonds (TLT) has also hit emerging market stocks hard as the yield on the 10-year Treasury note hit 3.1% this week, a five-month high (click on image):

Now, I realize some people are convinced yields on the 10-year are headed to 4% or higher. I'm not one of them and still maintain this is nothing more than a bond teddy bear market and going forward US long bonds (TLT) will offer the best risk-adjusted returns of all asset classes.

One of my blog readers out in Vancouver who tracks me closely shared this with me earlier today: "I hope you don’t mind me saying that sometimes I think you’re crazy in pounding the table for TLT in the face of its declines; but then I remember that you did the same with biotech a couple of years ago, arguing that we should buy as it continued to decline, and you were proven to be exactly right."

He's right, I was pounding the table on biotech stocks (XBI) right before the US elections when I covered America's Brexit or biotech moment, but nobody was paying attention to me back then, much to their demise (click on chart):

I still like biotech shares but my focus is on individual names which swing both ways, not the ETFs.

All this to say, call me crazy for liking US long bonds but in the end, I will be proven right as we head into year-end. Yields on the 10-year Treasury note will be considerably lower, especially if we get some crisis in emerging markets or Europe.

Even if we don't, the US and global economy are cooling, and this will weigh on inflation expectations, propelling US long bond prices (TLT) higher.

Anyway, enough macro, let's get into what top funds bought and sold during the first quarter. You will notice from the article above, a lot of these big hedge funds buy and sell the same stocks, namely, large-cap tech stocks.

Why is that? Well, because they're too big, they need liquidity, and consequently, their biggest positions are by definition going to be concentrated in big tech stocks that swing.

Go back to read my comment at the end of Q1 when I wondered whether a quant style crash finally arrived. In that comment, I looked at daily and weekly charts of Amazon (AMZN), Facebook (FB), Twitter (TWTR) and Tesla (TSLA) using very simple 50, 100 and 200-day and week moving averages.

I had a strong suspicion that big hedge funds were buying the dip on Facebook, Amazon, and Twitter back then and I was right. Seth Klarman even surprised me. adding to his Tesla (TSLA) shares.

Good for them, they made money but let me show you something else. Go to barchart.com and click on stocks at the top of the page and then on percent change. Your screen should look like this (click on image):

Once you click on percent change, change the setting from "today" to "year to date" and your screen should look like this (click on image):

If you're a stock junkie like me, you're scrolling on this site every single day, trying to see what are the biggest gainers, losers and which stocks are making new 52-week highs and lows.

One thing you will notice, a lot of these stocks aren't well-known and none of the big hedge funds are buying them either because they're too small in terms of capitalization or they don't have the expertise in a certain sector (like biotech). [Note: To be fair, Farallon Capital Management did put CRISPR Therapeutics (CRSP) on my watch list back in Q4].

I bring this to your attention because a) the data is free b) the best-performing stocks aren't FANG stocks and c) there is so much more to the stock market than ETFs (it's not the stock market, for me, it's always a market of stocks).

But picking stocks, especially no-name stocks, isn't for everyone, that's why everyone wants to know what David Tepper, Warren Buffett and the billionaire "big boys" are buying.

I get it, I look at their portfolios too but unlike you, I can screen each of their positions rigorously and tell you what I like and don't like going forward.

For example, a couple of weeks ago, I told you not to sell in May and go away, and told you that Buffett bought 75 million shares of Apple in Q1 but I was pounding the table to buy those shares right before earnings when the stock fell below its 200-day moving average (click on image):

But I also told you not to follow Buffett blindly and to wait for another nice buying opportunity. Shares of Apple have since sold off a bit and that's normal as traders sell the Buffett news.

I also told you about another big holding of Buffett's, Kraft Heinz (KHC), a stock which has been clobbered this year (click on image):

It's not the only consumer staple stock to get whipped hard this year. Check out shares of Campbell Soup Company (CPB) which are down 12% today and just getting killed thus far this year (click on image):

I remember a day back at the height of the crisis in 2008 when every single stock in the S&P 500 was down except for Campbell Soup. It's not getting any love now but if markets go haywire, I'm sure it and Kraft Heinz will benefit.

Anyway, back to Buffett and Berkshire. If you go to Berkshire Hathaway's top holdings and then click twice on the fourth column (Change (%)), you will see Berkshire has a concentrated portfolio of 48 positions and see where it increased its stakes (click on image):

Yes, Buffett bought 75 million shares of Apple but he also doubled his stake in Teva Pharmaceuticals (TEVA), one of my core longs which had nothing to do with Buffett and everything to do with David Abrams who bought 20 millions shares before Buffett's lieutenants bought stakes (click on image):

Now, Abrams got hurt when the stock flushed and hit a 52-week low of $10.85 in November and that's when Buffett's lieutenants initiated a position (and so did yours truly).

What I find interesting is if you look at Teva's top institutional holders, you will see Berkshire and Abrams but also J.P. Morgan which significantly increased its stake (and so did Bill Miller but he's not a top holder).

Why am I bringing this up? Because Buffett, Bezos and Diamond are trying to reduce healthcare costs in America and I think they're cooking something up here.

Now, don't go buying shares of Teva based on a hunch or because Berkshire and J.P. Morgan increased their stake in Q1, I'm just telling you from all of Buffett's top picks, this is the one I find most interesting going forward (and it wasn't Buffett but his lieutenant Todd Combs who bought it).

The other reason I'm bringing this up is that I remember "BOOYAH" Jim Cramer, CNBC's resident claptrap, telling his Mad Money viewers "Don't touch it! I'd rather you own Teva sandals":

Shares of Teva were trading near their low at the time, and when I heard Jimbo spew his wisdom, I doubled my position. He was totally wrong! (he's gotten better but still stinks and I can't watch his show without getting highly irritated)

People really need to learn to trade on their own. Stop watching Mad Money and just go out there and risk your own capital. Learn how to look at charts using stockcharts.com, plotting one-year daily charts and 5-year weekly charts and start by using 50, 100, and 200 day and week moving averages and look for MACD crossovers (you can do this for free on stockcharts.com).

Then you can look at the portfolios of gurus or any stock Jim Cramer or others are recommending and make a more informed decision.

At the top of this comment, you'll see a picture of David Tepper. Zero Hedge had a comment on Friday on how Tepper trounced his competition, gaining 7% YTD.

I always thought Tepper's Appaloosa was a L/S Equity fund but apparently it's a multi-strategy fund and he made money shorting bonds this year (I put a link to his fund under multi-strategy funds below).

Anyway, have look at Appaloosa's top holdings and you'll see he increased his stakes in Micron Technology (MU), Facebook (FB) and Alphabet-Google (GOOG) but he also did a lot of other under the radar moves (click on image):

Now, I don't have time to go over every single position but let's look at Micron Technology (MU) because Coatue also bought a new stake in the company and is one of the top institutional holders (click on image):

When I look at the daily chart, I'm hardly enthused but the weekly chart doesn't convince me either even though it’s still bullish (click on images):

I would need to see shares hit a new 52-week high to believe a sustained rally is possible.

However, in my recent comment on whether we're setting up for a summer rally, I ended by stating: "I'm not willing to bet on chip stocks (SMH) at this time and fear that a global slowdown will crush a lot of them going into year-end."

I would be shorting chip stocks going into year-end but I'm not the one charging 2 and 25 on billions like David Tepper and other hedge fund gurus. Just be careful, never follow anyone blindly based on what they supposedly bought and sold last quarter.

Are there any other things I saw going over some top funds? I noticed quant superstar Two Sigma made a great call increasing its stake on Best Buy (BBY) while Citadel lost big increasing its stake on Esperion Therapeutics (ESPR) right before the stock got crushed (click on images):

You might be tempted to "sell the rip" on Best Buy shares and "buy the dip" on Esperion Therapeutics but there is no secret sauce to making money trading stocks. Sometimes you have to buy the dips, other times the rips, and sometimes you need to stay put and do nothing.

I hope you enjoyed this comment, it's a bit long but the scary thing is I only scratched the surface. For a stock junkie like me, I love going over stocks, charts and peeking into portfolios of top funds to see if they added on weakness or sold on strength.

Those of you who want to track my current market ideas on stocks can do so by following me on StockTwits here. I try to post daily but sometimes I just don't post at all because I'm way too busy trading, reading and blogging.

Here are some of the stocks moving up and down on my watch list on Friday, May 18th 2018 (click on images):

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Top Funds' Activity in Q1 2018

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