Top Funds' Activity in Q4 2018
Hedge fund managers were busy protecting performance and taking risk off the table in the fourth quarter, according to regulatory filings Thursday.It's that time of the year again when we get to peek into the portfolios of the world's top
Many saw the value of their U.S. equity holdings drop in the period, as the industry careened toward its worst year since 2011. Some came from losses amid market volatility while others resulted from stock sales to reduce risk or meet client redemptions. Investors pulled $42.3 billion from hedge funds, the most in at least five years, industry tracker BarclayHedge said in a report.
Billionaire David Tepper’s hedge fund greatly reduced its holdings of U.S.-listed stocks in the fourth quarter. The value of Appaloosa’s stakes fell 64 percent to $2.02 billion. That compares with a 14 percent decline in the S&P 500 index. Dan Loeb’s Third Point saw the value of its equity holdings fall by about half, or $6 billion, in the quarter.
Here are some other key takeaways from the latest 13F filings, which show the U.S. stock holdings of money managers with more than $100 million:
- One surprise was hedge fund managers’ interest in timeshares. David Einhorn built a position in Hilton Grand Vacations Inc., along with Highfields Capital Management, Davidson Kempner and Senvest Management.
- Two stocks in focus last quarter were embattled General Electric Co. and PG&E Corp. Viking Global Investors exited its stake in GE, worth about $1.5 billion. Hedge funds were mixed on PG&E. Baupost pared its holding in the California utility, Viking exited and BlueMountain Capital Management boosted. Appaloosa added marginally, leaving the hedge fund with a position worth $153.6 million as of Dec. 31.
- When it comes to the FAANG stocks, one of the most notable moves was by Chase Coleman’s Tiger Global Management, which cut its Amazon.com Inc. stake by more than a Third. Steve Mandel’s Lone Pine Capital sold its $1 billion stake in Alphabet Inc., the parent of Google.
- Alibaba was a popular tech stock for some. Viking and Coatue Management each added to their positions in the Chinese e-commerce company. But Tepper’s Appaloosa axed its entire position, selling 1.5 million shares worth about $247 million.
- Managers streamed out of Spotify Technology SA. Steve Cohen’s Point72 Asset Management, Moore Capital Management and Wexford Capital reduced their positions while Lee Ainslie’s Maverick Capital exited completely. But Spotify was Tiger Global’s largest U.S. equity position.
- A new darling: Anaplan Inc., a business-planning software company that went public in October after hiring former Tesla Inc. executive Dave Morton as its chief financial officer. It was a favorite of Baillie Gifford, TIAA, Coatue Management and Alkeon Capital Management.
- While not a hedge fund, Warren Buffett’s Berkshire Hathaway reported one of the biggest surprises. It exited its $2 billion stake in Oracle. The news sent the software company’s shares lower.
- Buffett Doubles Down on Banks as Berkshire Trims Apple Stake
- Chase Coleman’s Tiger Global Hedge Fund Slashes Amazon Stake
- Viking Global Exits Its $1.5 Billion Stake in General Electric
- Managers Turn to Anaplan as Market Looks for Hot New Things
- Blue Harbour Adds Madison Square Garden, Boyd, Zynga, MGM
- See a full list of money managers’ holdings here
Before I go over what top funds bought and sold in Q4 2018, it's worth noting a few things:
- First, it was another brutal year for hedge funds last year. Redemptions came in fast and furious at the end of the year, exacerbating the bad Santa selloff of 2018. It's critically important for small and large investors to understand market dynamics, including hedge fund and mutual fund redemptions, and big pension and sovereign wealth funds rebalancing at the end of a terrible quarter for stocks. Those of you looking for more details can read my Boxing Day 2018 comment on making stocks great again.
- Second, even top hedge funds and other top funds got clobbered in stocks last year. If you go over 2018's winners and losers, you'll see the top funds were global macro funds like Bridgewater which took top spot and quant funds like Citadel and Renaissance Technologies which performed well in a very difficult market. Importantly, most Long/ Short hedge funds got killed last year because they're is way too much beta in their portfolios and to be frank, most are terrible at managing downside risk which is why they typically perform better in a rising market (just like most mutual funds).
- Most L/S equity hedge funds trade large cap stocks because they're liquid and they can enjoy nice swings in some sectors, like technology, a favorite of hedge funds.
- The last point I wanted to make is investors may have already missed out on the bulk of the market's gains this year, so you really need to be careful interpreting 13-F filings which are lagged by 45 days and tell you absolutely nothing about what top funds are currently buying and selling.
How rough is it out there for L/S equity funds? Just ask Stephen Mandel, founder of Lone Pine Capital and a hedge fund manager who boasts one the best long-term track records in the industry. He decided to step down in January but the fund will continue to operate under the direction of David Craver, Mala Gaonkar and Kelly Granat.
What about following Warren Buffett blindly? Even that is foolish. Buffett's public stock picks suffered a terrible year last year. He obviously has a great long-term track record but unlike you or me, Buffett has very deep pockets and he can add to his holdings when they get clobbered, sit and wait for them to recover.
He also has access to preferred shares and other goodies that most investors can only dream of (like his private market holdings which are doing well and his ability to take massive derivatives bets on the S&P if things don't go well), so don't follow Berkshire's portfolio blindly but definitely look at it every quarter (also, because of his age, Buffett has given his lieutenants more power to make decisions at Berkshire; for example, the fund trimmed its stake in Apple but it wasn't his idea).
Anyway, you get the gist of what I'm saying, it's fun looking at portfolio moves of the word's top fund managers but you need to be aware of what is happening in markets real time and manage your downside risk to become a great money manager, so use this information as part of a toolkit, never blindly following their moves.
To track stocks in real time, at the end of the day, I visit barchart.com and look at several things:
- Which stocks registered the biggest advances and declines today?
- Which were the biggest large cap gainers and losers today? (I can change settings to see the same for small cap gainers and losers for the day and even change to see YTD and other periods).
- Which are the 5-day gainers and decliners?
- What are the top and bottom 100 stocks?
- Which stocks are up the most year-to-date and which have declined the most year-to-date?
- Which stocks are making new 52-week highs and lows?
- What is the performance of the major market sectors year-to-date?
- How are the major market indices performing?
Lastly, I also look at what top funds are buying and selling every quarter to get ideas of stocks worth looking at.
Below, I will share a few examples but please do your own due diligence and don't take this as investment advice.
First, let's look at eBay (EBAY) which a number of hedge fund activists loaded up on. You can easily see which are the top institutional holders by going to Nasdaq.com, typing in EBAY in the box where it says enter the ticker symbol and then scrolling down the left-hand side all the way close to the bottom and click on the link which says institutional holdings. Once there, you will see the following (click on image):
You'll notice the regular big funds, Vanguard, Blackrock, etc., but you will also see Seth Klarman's Baupost initiated a new position and top quant fund D.E. Shaw increased its stake by 40%.
Then, if you click on the fourth column, Change (%), you will see which funds increased their stake in Q4 (click on image):
Here I see a couple of other hedge funds I know, like Paloma and Adage Capital.
I then go to stockcharts.com and look at the daily one-year chart and weekly five-year chart of eBay (click on images, you get these charts for free on stockcharts, just play with settings):
As shown, eBay's shares already experienced a huge move from the December lows, just like many stocks, but the weekly MACD just crossed into positive territory which is postive and suggests momentum will continue.
Does this guarantee upward momentum will continue and eBay's shares will continue higher and make new highs? Of course not but it's worth tracking going forward. Just keep in mind the big money was gained by buying the big dip in Q4 which top funds did (you have to know when to pull the trigger!).
Next, let's look at another one, Electronic Arts (EA), a top holding of Steve Cohen's Point72 Asset Management for quite some time now (see his top holdings here and below). The top institutional holders are well-known large asset managers, but when I click on the fourth column, Change (%), I see two top quant hedge funds, Two Sigma and Renaissance Technologies, increased their stake in Q4 (click on image):
When I look at the 5-year weekly chart of Electronic Arts, I see it's coming up to resistance at its 50-week moving average but it also made a nice move since the December lows and is worth tracking (click on image):
But you will notice the weekly MACD is still negative, which tells me the signal isn't as strong as it is with eBay's shares.
Let's go over one last one, a core long of mine, Teva Pharmaceuticals (TEVA). It reported earnings earlier this week, got hit on Wednesday and I used that pullback to add to my position at the open.
When you look at the top institutional holders of Teva, you will see familiar big funds like Fidelity which increased its stake by 43% in Q4, Berkshire which maintained its 43 million-share stake (not Buffett's idea to buy this one), and less well-known names like Abrams Capital run by David Abrams, a disciple of Seth Klarman and one of the best value managers (click on image):
You will also see top quant fund, Renaissance Technologies, doubled its stake in Q4 to just under 7 million shares.
Now, let's look at the 5-year weekly chart of Teva (click on image):
It's nothing exciting, the stock remains below its 50-week moving average, the weekly MACD signal isn't strong but I like the company on a fundamental basis and think it has more room to run higher over the next couple of years as global growth slows.
And by fundamental, I'm not just talking price-to-sales, which is extremely low, I'm talking about the macro environment too, which is why I continue to like healthcare stocks as we enter the last stage of the cycle (see my latest macro comment here).
Let's look at a fourth example, Goldman Sachs (GS), one of the easiest swing trades from the December lows in my opinion. First, the top institutional holders of the stock (click on image):
Again, well-known names, Vanguard, BlackRock, State Street (index providers) and Buffett's Berkshire.
Now, let's look at who increased their stake the most in Goldman in Q4 2018. Here, it gets interesting, you see Ontario Teachers' Pension Plan and Bridgewater Associates, the top-performing large hedge fund last year, both increased their stake in Goldman quite markedly in Q4 (click on image):
Next, let's look at the five-year weekly chart of Goldman (click on image):
I've shown this chart before. Do you see how it fell below its 400-week moving average in late December? In my opinion, it was way, way oversold and that was the time to buy the big dip and sit and wait for it to recover.
But you will also notice, shares are unable to break above the 200-week moving average, which tells me there's still some weakness to contend with here. In order to resume an uptrend, the stock has to break above this level or else it remains in a bear market.
Let me go over a fifth and last example, Ellie Mae (ELLI), the mortgage software company which was recently acquired by private equity fund Thoma Bravo in a $3.7 billion deal, sending the shares soaring over 20% after the announcement and capping a spectacular recovery from the December lows (click on image):
If you look at the top institutional holders of Ellie Mae, you will find some well-known hedge funds like Eminence Capital but less well-known asset managers like Brown Capital Management based in Baltimore and Van Berkom and Associates based here in Montreal, a firm that specializes in global small-cap stocks (click on image):
I looked into the top holdings of Black Capital Management and Van Berkom and Associates and was very impressed which tells you sometimes it's worth looking at the smaller shops for the best ideas.
In this comment, I gave you five examples of stocks I track, I can give you 100 more but it's up to you to do your own homework to find stocks you like in whatever industry and do your own screening.
I'll end it there. I hope you enjoyed reading this comment and all the others I posted this week. As always, I ask all my readers to please donate or subscribe via PayPal on the right-hand side, under my picture. I thank all of you who take the time to donate, it's greatly appreciated.
Have fun looking at the fourth quarter activity of top funds listed below. The links take you straight to their top holdings and then click on the fourth column head to see where they increased and decreased their holdings (click once to see decreased and sold out twice on Chg % column head to see where they increased; sometimes it's the opposite so pay around by clicking in the 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) Hudson Bay Capital Management
13) Pentwater Capital Management
14) Och-Ziff Capital Management
15) Pine River Capital Capital Management
16) Carlson Capital Management
17) Magnetar Capital
18) Mount Kellett Capital Management
19) Whitebox Advisors
20) QVT Financial
21) Paloma Partners
22) Weiss Multi-Strategy Advisors
23) 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
44) Van Berkom and Associates
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.
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
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
21) Van Berkom and Associates
22) Formula Growth
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, it's the time of the season when investors are awaiting the SEC 13F filings from major hedge funds. CNBC's Leslie Picker reports on how some of the biggest hedge funds handled the fourth quarter volatility.
And Bloomberg’s Alix Steel and David Westin report on how much hedge fund titans made in 2018. You can read the Bloomberg article on the best-paid hedge fund managers of 2018 here.