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Where Are Hedge Funds Placing Their Bets?

Leo Kolivakis's picture




 

Via Pension Pulse.

Quarterly filings were released on Monday and all eyes are on star hedge fund managers. The WSJ reports, Paulson Adds Goldman Sachs, Other Financial Stakes:

Hedge
fund manager John Paulson continued to add to his holdings in the U.S.
financial services industry with new stakes in Goldman Sachs Group
Inc. (GS), mortgage insurer PMI Group Inc. (PMI) and regional bank
Popular Inc. (BPOP).

 

Paulson, who runs Paulson & Co., reported
in a quarterly filing with the Securities and Exchange Commission that
he added a new position with 30 million Bank of America Corp. (BAC)
warrants, increased his holdings in common stock of Wells Fargo &
Co. (WFC) by 4.5 million shares to 17.5 million, and raised his
holdings in Hartford Financial Services Group Inc. (HIG) by more than
31 million shares to 44 million.

 

But Paulson reported reducing its stake in CIT Group Inc. (CIT) by just over one million shares, to 3.3 million.

 

Paulson was among the first big hedge fund managers to build a stake
in banks late last year, reversing course after winning big in betting
against subprime mortgages during the financial meltdown. Last year,
for example, he bought Citigroup Inc. (C) stock and continues to hold
more than 500 million shares.

 

Over
the last three months, Paulson bought 1.1 million Goldman Sachs
shares, more than 66 million shares in Puerto Rico bank Popular, and 5
million shares in PMI.

 

Paulson maintained his holdings
in gold companies, and added a variety of sectors to his portfolio,
including 5 million shares in McClatchy Co. (MNI) and 8 million shares
in Strategic Hotels & Resorts Inc. (BEE). He increased his stake in
large drug maker Pfizer Inc. (PFE) by 7.2 million shares, to 22.8
million, but reduced his holdings in Boston Scientific Corp. (BSX) by
more than 19 million shares, to 80 million.

 

Paulson added
several other companies in healthcare and technology, including stakes
in inVentiv Health Inc. (VTIV), Mylan Inc. (MYL) and Odyssey Healthcare
Inc. (ODSY).

But not everyone is bullish on financials. Reuters reports Lampert fund trims stakes in financials:

Billionaire
hedge fund manager Edward Lampert further trimmed stakes he owned in
major U.S. financial companies during the second quarter, a securities
filing showed on Monday.

 

As of June 30, Lampert's ESL Investments' RBS Partners fund reduced the stakes it owned in Capital One Financial Corp, Citigroup Inc and CIT Group Inc, the filing showed, compared with holdings on March 31.

 

The filings also showed no holdings in two financial companies in which RBS previously listed stakes -- Wells Fargo & Co and student lender SLM Corp.

 

ESL tends to take concentrated positions in a few stocks and, in the
first quarter, had already trimmed shares in Wells Fargo and Bank of
America Corp.

 

Lampert himself is best-known for putting together retailers Sears Holdings Corp and Kmart five years ago. He remains chairman of Sears.

 

The RBS filing showed it had 3.6 million shares in CIT Group as of June
30, down from 4.5 million shares as of March 31. It had 24.6 million
shares of Citigroup, down from 31 million in March. And it had 7.1
million shares of Capital One, down from 9.1 million.

 

RBS did raise its stake in Genworth Financial Inc to 9.1 million shares from 8.1 million shares, however.

 

Large investors such as Lampert are required to report their holdings of U.S.-listed securities at the end of each quarter.

 

They
are not required to show short positions or holdings of other
securities such as bonds and over-the-counter derivatives contracts.
Investors may also exclude stocks they are trading or have moved to
other funds.

 

The filing also showed lower stakes held by RBS in Sears and two other companies in which ESL is involved, AutoZone Inc and AutoNation Inc , compared with the previous quarter.

 

Recent regulatory filings show RBS distributed shares of those
companies to various general and limited partners during the quarter.

In other activity, Bloomberg reports that billionaire Nelson Peltz disclosed that his hedge-fund group sold a $132 million stake in Kraft Foods Inc. that it bought earlier this year:

Trian
Fund Management LP’s investment funds held no Kraft shares as of June
30, compared with 4.47 million shares on March 31, according to filings
with the U.S. Securities and Exchange Commission on Friday. The New
York-based hedge-fund group had owned as many as 34.6 million Kraft
shares at the end of 2008.

New Zealand's Stuff reports from Reuters, Hedge funds find oil bargains:

 

Top
hedge fund managers went bargain hunting in the oil patch in the
second quarter, buying shares whose prices had fallen because of BP's
Gulf of Mexico well disaster and lower oil prices.

 

Top managers including billionaire Carl Icahn, Eric Mindich and Dinakar
Singh, whose stock picks are closely watched in investment circles,
added energy stocks to their holdings as billions of gallons of oil
gushed into the Gulf, according to quarterly securities reports filed
on Monday.

 

Others
buying energy shares included David Einhorn, former Fidelity
Investments star Jeff Vinik and the US$22 billion ($31 billlion)
Boston-based fund Adage Capital.

 

Fund managers must say what US listed equities they owned within 45 days after the quarter ends.

 

While energy stocks ranked among the worst performers during a
quarter that also featured a still unexplained flash-crash and fresh
fears that the US economy would recover more slowly, hedge fund managers
staked out the sector much like they had with financial firms earlier
in the year.

 

After building his energy holdings
slowly at the beginning of the year, Icahn picked up the pace in April,
May and June by committing nearly US$1 billion to the sector after the
Deepwater Horizon drilling platform at BP's Macondo well exploded and
sank in the Gulf of Mexico.

 

The purchases included 2
million shares of oil and gas producer Anadarko Petroleum and 240,000
shares of offshore drilling specialist Ensco PLC's sponsored American
Depository Receipts, according to documents submitted to the Securities
and Exchange Commission on Monday.

 

Icahn also added 2.4 million shares of NRG Energy, a big power utility.

 

Dinakar Singh's hedge fund TPG-Axon bought 1.4 million shares of
Anadarko, while adding 2.1 million shares of drilling services
specialist Baker Hughes and 3.5 million shares of Halliburton, another
major oil services player.

 

Mindich, whose skills at
Goldman Sachs helped him raise a record US$3 billion when he started
his fund in 2004, bought 1.3 million shares of BP and call options to
buy 1 million more.

 

Mindich's US$13 billion Eton Park
Capital also bought 168,000 shares of Baker Hughes, 165,000 shares of
Diamond Offshore Drilling, 300,000 shares of Forest Oil, 256,000 shares
of Marathon Oil, 420,000 shares of Plains Exploration & Production
and 237,000 shares of Suncor Energy.

 

Vinik
added 3.1 million shares of Exxon Mobil, 11,000 shares of Ensco and 2
million shares of the Oil Services HOLDRS Trust, which owns a basket of
15 stocks in the sector.

 

Einhorn's Greenlight
Capital bought 7.4 million shares of Ensco, just over 5 percent of the
company's shares. Ensco "was not involved in the horrible accident,
which should not materially impact the company's long-term potential,"
Einhorn wrote in a letter to his investors last month.

 

Adage, run by former managers from Harvard University's endowment,
owned 3.4 million shares of BP at the end of the quarter, up from
124,000 three months earlier. The firm added to existing positions in
Anadarko, Ensco and Halliburton.

 

The bets mark a
dramatic change in their portfolios, coming as many other investors
pulled their money out. BP's stock price fell over weeks until its
value had fallen by half.

 

Even
prominent mutual fund manager Fidelity Investments, where millions of
Americans hold their college savings and retirement accounts, appears
to have joined the trend.

 

Fidelity managers
added 24.2 million shares of Exxon, leaving it with 74.9 million
shares, making it the fifth biggest holding for Fidelity. It also added
10.9 million shares of BP.

 

The forms managers filed
on Monday include only US-listed equity securities and related
derivatives. Bonds, other securities and short positions are typically
not disclosed. Managers may also omit US-listed equities under certain
circumstances or file some holdings on confidential filings.

Earlier this month, FINalternatives reported that hedge funds opened the first half with modest gains, but some of the industry’s biggest players did substantially better:

Citadel
Investment Group’s flagship hedge funds roared back into the black in
July. The Kensington and Wellington funds each rose about 4% on the
month, Dow Jones Newswires reports. The funds are now up about 1% on
the year.

 

Kenneth Griffin wasn’t the
only hedge fund mogul smiling in July. Lone Pine Capital added 5.5% on
the month and is up 2% on the year, while SAC Capital Advisors’
flagship added 3.7% last month, Reuters reports.

 

Bridgewater
Associates’ eponymous fund rose 3.5% in July to bring its year-to-date
return to nearly 20%, according to The Wall Street Journal. Ellington
Management’s mortgage funds rose 2% in July and are up about 11% on the
year. Och-Ziff Capital Management’s flagship added 1.46%.

 

The
(somewhat) rising tide even lifted one perennially-battered boat:
Clarium Capital Management, which had been down as much as 10% this
year, rose 5% in July, one month after it decided to shut down its New
York office and relocate back to the San Francisco Bay Area. And
Harbinger Capital Partners, whose flagship dropped nearly 11% in the
first two weeks of last month, saw its newly-launched Credit Distressed
Blue Line Fund edge up 0.5% on the month.

 

Of course, where there
are winners, there are losers. RAB Capital’s flagship Special
Situations Fund hit a serious bump in its road to recovery, plummeting
12.1% in July to leave it down 8.2% on the year. D.E. Shaw Group’s
flagship dropped 2.7% on the month, while Brevan Howard Asset
Management fell 2.3%.

Finally, FINalternatives also reported that Goldman added Millennium, Citadel High Frequency Trader:

Goldman
Sachs may announce plans to shutter its proprietary trading operations
any day. But in the mean time, the Wall Street giant is bolstering the
business with the hire of a young algorithmic trader.

 

Asita
Anche has been named a managing director on Goldman’s fixed-income,
currency and commodities prop. desk, Financial News reports. She joins
the firm from Millennium Capital Partners and formerly worked at
Citadel Investment Group.

 

Anche, who specializes in
high-frequency trading, will design algorithms for trading fixed-income
products at Goldman. She spent more than four years working on HFT at
Citadel before joining Millennium as a managing partner a year ago.

You can learn more on "high frequency trading" and how it distorts market prices and volume by reading this article and especially by reading Zero Hedge's excellent comments on high-frequency trading
(they were the first to cover this activity in detail). Alpha is a
tough business and the top hedge funds are always looking for an "edge"
to compete with each other.

I
track hedge funds' quarterly filings
very closely and pay particular
attention to small and mid cap holdings. But I'm also cognizant
that these big hedge funds can churn their portfolios many times in
quarter, and if you're not careful, you can be left holding the bag.

 

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Tue, 08/17/2010 - 09:50 | 525751 SheepDog-One
SheepDog-One's picture

'You can learn more on this so-called 'high frequency trading' over there'...

Or you can read on Zerohedge where hundreds of articles have been written on it. Not cut n pasted like your articles Leo, but actually written.

Tue, 08/17/2010 - 10:36 | 525868 Leo Kolivakis
Leo Kolivakis's picture

Sheep,

Don't get your panties tied up in a knot, I edited my comment to include ZH's excellent analysis. Now, for all of you who were laughing at Chinese solars, check out the latest quarterly filings on Jinko Solar (JKS):

http://www.nasdaq.com/asp/holdings.asp?symbol=JKS&selected=JKS&FormType=Institutional

Big players in that one. Stock has doubled in the last 30 days and earnings were excellent. I still think the solar sector has room to run a lot higher. Keep buying the dips in this sector.

 

Tue, 08/17/2010 - 04:04 | 525495 Number 156
Number 156's picture

Theres a strong reason that the SEC has exemption from the FOI act. A document dump on the SEC and financial markets would make Wiki-leaks look like a 5th grade book report.

Tue, 08/17/2010 - 09:08 | 525639 SheepDog-One
SheepDog-One's picture

What? Oh I think I get your point, the SEC couldn't actually handle doing their job and looking at all those icky documents showing fraud and corruption all over the place...after all they've got lots of internet porn to be viewed!

Tue, 08/17/2010 - 03:13 | 525483 Kreditanstalt
Kreditanstalt's picture

What is this massive concentration of shares and indeed whole sectors in so few, and such large, hands likely to do for returns in future?

Tue, 08/17/2010 - 02:18 | 525462 AVP
AVP's picture

Tyler, does seem like a stab in the back?

 

"You can learn more on "high frequency trading" and how it distorts market prices and volume by reading this article. Alpha is a tough business and the top hedge funds are always looking for an "edge" to compete with each other."

 

Leo, ZH has covered this extensively (as you know) and I doubt anything new (or reused from ZH) would be insightful from the the link above.

 

Tue, 08/17/2010 - 00:41 | 525429 Assetman
Assetman's picture

I do find it somewhat interesting... Ichan's interest in oil/ng -related names.

I wonder what Paolo Pelligrini is doing with his money these days...

Tue, 08/17/2010 - 09:02 | 525629 chrisd
chrisd's picture

I agree, I think it is becoming increasingly clearer that P^2 was the real brains behind the Paulson funds.

Mon, 08/16/2010 - 23:40 | 525385 whatsinaname
whatsinaname's picture

hard earned money ? you must be kidding..

Mon, 08/16/2010 - 23:10 | 525345 Tyler Durden
Tyler Durden's picture

We certainly hope that after a year long crusade against hft on zero hedge, spanning over 100 articles, that it is more than clear to our readers what high frequency trading is

http://www.zerohedge.com/taxonomy_vtn/term/8356

Mon, 08/16/2010 - 23:16 | 525351 Leo Kolivakis
Leo Kolivakis's picture

Yeah, it's a legal way for the crooks to steal our hard earned money!

Tue, 08/17/2010 - 09:05 | 525634 SheepDog-One
SheepDog-One's picture

'Hard earned money' LMAO Leo you're a hoot! You mean the free lunch borrowed funny money from aunt Mabel's pension to slush around the Ponzi scheme, trying to find a greater fool?

Tue, 08/17/2010 - 00:39 | 525428 vs18
vs18's picture

I think what Tyler is trying to indirectly say is . . . . don't link outside the family.

Tue, 08/17/2010 - 07:58 | 525570 Leo Kolivakis
Leo Kolivakis's picture

Umm, we are not "family" but I did edit my post to acknowledge ZH's excellent work on the subject.

Mon, 08/16/2010 - 22:58 | 525331 Bruce Krasting
Bruce Krasting's picture

The positions described are just bets. Nothing interesting other than they all own gold. Not the P/L numbers. Some up some down. Nothing knocks me out in these holdings.

Tue, 08/17/2010 - 09:11 | 525647 ZackAttack
ZackAttack's picture

With you on that, Bruce. I count 5 definite losers for the quarter, 4 pushes, 2 definite winners (one was a buyout), a bunch of little penny-stock roach motels. That inVentive thing, I show trading 600 shares per day on Frankfurt.

 

Tue, 08/17/2010 - 09:55 | 525765 aerojet
aerojet's picture

Reading that list makes me believe the article is disinformation.  Pfizer?  Citigroup?  Really?

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