market folly

(Note: Before reading this update, make sure you check out the preface to the series I'm doing on Hedge Fund 13F's here).

It's time to continue the Hedge Fund tracking series. If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners, Bret Barakett's Tremblant Capital, Peter Thiel's Clarium Capital, Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, John Griffin's Blue Ridge Capital, Boone Pickens' BP Capital, Louis Bacon's Moore Capital Management, Paul Tudor Jones' Tudor Investment Corp, and Bruce Kovner's Caxton Associates. And, if you want to hear some insightful thoughts from many of the hedge fund managers listed above, head over to my post on Hedge Fund manager interviews. This week, I'm taking a slightly different approach to the hedge fund tracking series. I'm doing so because the 13F SEC filings are filed on a quarterly basis, so these materials are time sensitive and the next ones are due out in November. I stated in my series preface that you need to treat these as a lagging indicator, because that's what they are. The holdings discussed below reflect portfolio holdings as of June 30th, 2008. So, since these forms are so tedious to sort through, I've condensed the rest of the hedge funds I track to summarize their major moves and top holdings.

Atticus Capital is a $13 billion hedge fund ran by Timothy Barakett. In 2005, Atticus' funds were up a combined 45%. And, they finished well over 30% for 2006. Barakett founded the firm at age 26 in 1995 and focuses on taking large, concentrated positions in companies. One of Atticus' most famous investments was Phelps Dodge, a miner which was bought out by Freeport McMoran (FCX). At one point, Atticus owned more than 9% of Phelps. And, they continue to hold their position in what is now the combined FCX. Barakett received his BA in Economics from Harvard and his MBA from Harvard as well. Its very evident that Barakett employs macro based investment theses. Once he has decided on what the trend is, he will find the best company within that trend and he will place a big bet. And, when needed, he will step in and take an activist role, ensuring the company is performing to his liking.

You may have heard about Atticus over the past few weeks because they have not been performing well at all this year. In my last hedge fund year-to-date performance update, we noted that Atticus was -25% for the year. And, consequently, Atticus was a victim of liquidation rumors, which have since been denied. We previously analyzed Atticus' portfolio holdings back in June and noticed that they had significant natural resource and mining positions at the time. I'll get into the details below, but you can take a guess as to where a lot of their losses are coming from this year. Overall, it's been one of the worst years for hedge funds in a long time.

So, now that we've got a background on Barakett and Atticus Capital, let's take a quick look at his portfolio highlights. Keep in mind that this is merely a brief summary of Atticus' top holdings. Due to the time sensitive nature of the 13F material, I wanted to get this information posted before the next set of filings come out in November.

Top 20 Holdings by % of portfolio
1. Union Pacific (UNP) - Increased position by 61%
2. Conoco Philips (COP) - Stake rasied by only 0.3%
3. Mastercard (MA) - Decreased position by 13%
4. Burlington Northern (BNI) - Decreased stake by 6%
5. Freeport McMoran (FCX) - Decreased position by nearly 52%
6. NYSE Euronext (NYX) - Sold off 9.3% of their position
7. Occidental Petroleum (OXY) - Decreased stake by 7%
8. Crown Castle (CCI) - Decreased by only 0.4%
9. Peabody Energy (BTU) - New position
10. Baidu (BIDU) - Increased stake by 65%
11. Norfolk Southern (NSC) - Increased position by 36%
12. Canadian Natural Resources (CNQ) - Decreased stake by 16.6%
13. Visa (V) - New position
14. Boeing (BA) - Boosted stake by 440% (no, not a typo)
15. Praxair (PX) - New position
16. Focus Media (FMCN) - New position
17. Unibanco (UBB) - Sold off 36% of position
18. Amerco (UHAL) - Decreased stake by 32%
19. Conseco (CNO) - Sold off 8.8% of position
20. Vale (RIO) - New position

So, if you didn't already notice, Atticus definitely favors positions in the rails. And, you can't blame them. Those investments have paid off significantly over the course of the year. Atticus has large positions in most of the majors: Burlington (BNI), Norfolk (NSC), and Union Pacific (UNP). Atticus also holds a position in CSX Corp (CSX), but it just isn't a top 20 holding. Atticus boosted their stake in UNP by 61%, propelling it all the way up to the fund's top holding. Numerous other hedge funds have very large positions in the rails as I've noted before. Not to mention, Warren Buffett has some pretty large stakes in some of the rails as well.

Next, I noticed that Atticus was selling off a chunk of their Mastercard (MA). This position could potentially be another one that has been causing them some pain lately. Although they sold 13% last quarter when the share price was trading around $270-300, MA has since plumetted, and is currently hovering around $185. And, considering it was/is their 3rd largest holding, it has to be causing them some pain.

Freeport McMoran (FCX) comes in at the fund's 5th largest holding and could equally be responsible for the fund's poor performance this year. As I noted earlier, they gained these FCX shares through their purchase of Phelps Dodge (who was acquired by FCX). And, up until now, they had pretty much held onto the shares of the new company. But, this past quarter, we saw Barakett unload nearly half his position. At the time of this sale, FCX was trading anywhere from $100-120. But, recently, FCX has traded way down to $63. This name has seen brutal selling over the past few months and you have to think that either Atticus was getting mauled by the sell-off, or they were partly responsible for it. We'll see what the verdict is come November when the next 13F filings are released.

Atticus also added some new holdings this past quarter, and they were adding with conviction. They initiated a position in Peabody (BTU) and brought it up to the fund's 9th largest holding. Additionally, they initiated Visa (V) as their 13th largest holding, Praxair (PX) as their 15th, and Focus Media (FMCN) as their 16th largest. Also, although they already owned Boeing (BA), they boosted their stake by a whopping 440%, bringing it way up to the fund's 14th biggest position.

Overall, it's easy to see where some of Atticus' pain may be coming from this year. Barakett runs a smaller, highly concentrated portfolio. And, when it wins, it wins big. But, as you're seeing now, it can also lose big as well. To see all of Atticus Capital's holdings, you can view their entire 13F filing with the SEC.