Bankers Versus Consultants

Great Stuff.

Credit Crisis Explained in Plain English

I posted here about a great article that explains the credit crisis in layman's terms. Well, last week, I came across yet another piece that articulates our economic situation in plain English. The way I see it, the more people who understand our situation, the better. That's why I keep posting these links. Please share these reads with anyone and everyone who either is disillusioned or doesn't quite understand what is going on. Here is the piece in the New York Times, written by Tyler Cowen, a professor of Economics at George Mason University.

Merrill Lynch is a Trainwreck

Found some interesting information today. Taken from the Financial Times:

"Merrill Lynch's losses in the past 18 months amount to about a quarter of the profits it has made in its 36 years as a listed company, according to Financial Times research that highlights the extent of the global banking crisis.

Since the onset of the credit crunch last year, Merrill has suffered after-tax losses of more than $14bn as its balance sheet has been savaged by almost $52bn in writedowns and credit-related losses.

Merrill’s total inflation-adjusted profits between its 1971 listing and 2006 were about $56bn, according to figures from Thomson Reuters Fundamentals and an FT analysis of reported earnings.

The $14bn in losses for 2007 and the first two quarters of 2008 equal half of Merrill’s profits since the beginning of the ­decade."

Just goes to show how bad all of this really is.

Source: FT

Investing in Wine (Even Wine Funds Are Popping Up Now?!)

I always have my eye out for interesting investment opportunities. And, this idea would definitely diversify your portfolio. Invest in wine. That's right, wine. I'm not really sure if this is just a temporary phenomenom or a secular trend building. But, I've certainly noticed a lot of hype and interest surrounding wine these days. Do note that I'm not necessarily recommending investing in wine, but I'm certainly paying attention to the trend. Are palettes around the world swapping beer for wine? It looks that way to me (albeit slowly but surely). And, I'm sure the consumer slump/recession in the U.S. will have something to say about that. But, over the past few months, I've seen more and more information popping up regarding investing in some choice wines. And, as I noticed recently in a WSJ Deal Journal article, a former UBS banker has even started up a $50 million 'wine fund' named The Bottled Asset Fund.

And, this next video is slightly older but I wanted to include it because it plays right into the investing in wine theme. If you missed it, Jim Cramer and Gary Vaynerchuk (wine guru) got together to discuss investing in wine, as seen on Vaynerchuk's Wine Library TV Show.


Lots of media attention around wine investing lately! We'll check back in a year to see if this was just a fad or if this actually has staying power.

Mutual Funds Getting Killed

The Stock Market is kicking ass and taking names (of fund managers everywhere).

"Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc."

Source: MarketWatch

The Economy Sucks, the Housing Market Sucks, and the Consumer Sucks Too

Okay, I know the title seems pretty morbid. But, it's more realistic than you might want to believe. I want to point readers to a well-written piece that assembles some great data regarding the state of the American Economy. The article is aptly titled The Great Consumer Crash of 2009. It is written by James Quinn, a senior director of strategic planning at the Wharton School, University of Pennsylvania (one of the most respected business schools in the country). I originally tried to pick out select parts of the article to present to you here. But, after re-reading his work, I've decided that you simply have to read the entire article. Check it out: The Great Consumer Crash of 2009.

And, if you find the article remotely intriguing, I highly suggest checking out some of Quinn's other articles found on his author's page on the same site.

Checking In On Daniel Loeb's Third Point LLC

As I mentioned earlier, I like to track a variety of hedge funds with different strategies just to see what everyone is up to each quarter. And, while I don't necessarily go in-depth on each fund, I do like to monitor major changes to their portfolios. In addition to tracking activist fund Greenlight Capital managed by David Einhorn (which I wrote about here), I also like to track the activist exploits of Daniel Loeb. Loeb runs Third Point LLC, a $4.5 billion activist hedge fund. While Third Point is technically an activist fund, Loeb often has numerous passive investments as well.

So, after comparing his most recent 13F filing with the one from last quarter, we can see a few major moves that Loeb has made with Third Point's portfolio. Please note that this is by no means a complete summary of changes. I am simply pointing out a few changes of interest.

New Positions:
American Superconductor (AMSC)
Chesapeak Energy (CHK)
Petrohawk Energy (HK)
Petroleo Brasileiro (PBR)
Sandridge Energy (SD)
Starwood Hotels (HOT)
Teradata (TDC)
XTO Energy (XTO)

Added to:
AK Steel (AKS)
American Eagle Outfitters (AEO)
Leap Wireless (LEAP)
Plains Exploration (PXP)

Reduced Positions:
GLG Partners (GLG)
Mastercard (MA)
Safeway (SWY)

Removed Positions (positions Loeb sold out of completely):
Applied Biosystems (ABI)
Chipotle (CMG)
Cypress Semiconductor (CY)
Mylan (MYL)


Some of Third Point's top holdings (in no particular order) include: Plains Exporation (PXP), Questar (STR), Mastercard (MA), Clear Channel (CCU), and Microsoft (MSFT).

Again, please note that this is merely some highlights of their portfolio and does not detail all of the changes made. If you're interested in more in-depth analysis of some hedge fund portfolios, check out some of the write-ups I've done on the blog (Blue Ridge Capital, Lone Pine Capital, & many more). And, if you're interested in every position Loeb held as of June 30th, you can view Third Point's entire recent 13F as filed with the SEC here.

Hedge Fund Tracking: Maverick Capital's 13F (Lee Ainslie)

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

Here we are with another week of the Hedge Fund tracking series. If you've missed them, I've already covered Jeffrey Gendell's Tontine Partners here, Bret Barakett's Tremblant Capital here, Peter Thiel's Clarium Capital here, Stephen Mandel's Lone Pine Capital here, and John Griffin's Blue Ridge Capital here. Next up, we have Lee Ainslie's Maverick Capital. Lee Ainslie started Maverick Capital back in 1993 with $38 million. Nowadays, the fund is worth $10 billion. Ainslie, like many of the other fund managers I've profiled, has a background rooted in learning from legendary great Julian Robertson at Tiger Management. So, due to the fact that these proteges learned from the best and have had great success running their own funds, I continually try to find a reason not to follow these funds. And, needless to say I'm never successful. Some contacts over at Maverick have explained that their strategy is straight up stock picking, both long and short. They made it clear though, that they do not employ pairs trades. Although, some of their long/short setups might be in the same sector. They try to hedge their positions like a true hedge fund by picking out the shining stars in certain sectors, as well as identifying the pieces of garbage. Now, of course, this presents us with a problem in that the 13F filings only show long positions (unless they're holding puts on a name, we can see those). So, a good amount of Maverick's portfolio (the entire short side) is unbeknownst to us, because they have reported zero put positions. But, let's look on the bright side in that we can see all their long positions. Maverick uses a value approach (obviously learned from Julian) and one of their most popular metrics is finding companies and comparing their enterprise value to sustainable free cash flow.

So, now that we've got a little background on Maverick, let's see what they were up to. Once again, I'd like to give thanks to Alex Prywes for helping me gather and sort through the data of numerous hedge funds (including the one below). Thanks to Alex's help, we can now cover even more funds. And, on that note.... onto the 13F! The following are Maverick Capital's current holdings as of June 30th 2008, as released in their most recent 13F filing with the SEC. The positions in this most recent 13F were compared to last quarter's 13F and here are the changes made to their portfolio:

New Positions:
First Solar (FSLR): 1,202,118 shares. This position is 2.93% of Maverick's portfolio.
Lorillard (LO): 3,820,856 shares. This position is 2.36% of Maverick's portfolio.
CVS Caremark (CVS): 5,912,073 shares. This position is 2.09% of Maverick's portfolio.
Netapp (NTAP): 9,331,862 shares. This position is 1.81% of Maverick's portfolio.
ITT Educational Services (ESI): 2,422,090 shares. This position is 1.79% of Maverick's portfolio.
Macy's (M): 9,008,174 shares. This position is 1.56% of Maverick's portfolio.
Hansen Natural (HANS): 5,712,952 shares. This position is 1.47% of Maverick's portfolio.
Polo Ralph Lauren (RL): 2,431,244 shares. This position is 1.36% of Maverick's portfolio.
Dicks Sporting Goods (DKS): 7,589,473 shares. This position is 1.20% of Maverick's portfolio.
Cigna Corp (CI): 2,931,045 shares. This position is 0.93% of Maverick's portfolio.
Digital River Inc (DRIV): 1,974,144 shares. This position is 0.68% of Maverick's portfolio.
Viacom Inc (VIA): 2,442,500 shares. This position is 0.67% of Maverick's portfolio.
Forest Labs (FRX): 1,789,900 shares. This position is 0.56% of Maverick's portfolio.
Lamar Advertising (LAMR): 1,542,918 shares. This position is 0.50% of Maverick's portfolio.
Visa (V): 565,005 shares. This position is 0.41% of Maverick's portfolio.
South Financial Group (TSFG): 50,000 shares. This position is 0.38% of Maverick's portfolio.
Athena Health (ATHN): 1,245,819 shares. This position is 0.34% of Maverick's portfolio.
National City Corp (NCC): 6,625,176 shares. This position is 0.28% of Maverick's portfolio.
Sohu.com Inc (SOHU): 170,485 shares. This position is 0.11% of Maverick's portfolio.
MSCI Inc (MXB): 287,186 shares. This position is 0.09% of Maverick's portfolio.
Universal American (UAM): 1,004,391 shares. This position is 0.09% of Maverick's portfolio.
Comscore (SCOR): 436,640 shares. This position is 0.09% of Maverick's portfolio.
Citizens Republic Bancorp (CRBC): 937,500 shares. This position is 0.02% of Maverick's portfolio.


Added to:
Berkshire Hathaway (BRK.B): Increased position by 1412%. Position is now 0.45% of their portfolio.
Gmarket (GMKT): Increased position by 317%. Position is now 0.19% of their portfolio.
Infinera (INFN): Increased position by 171%. Position is now 0.54% of their portfolio.
American Capital (ACAS): Increased position by 141%. Position is now 0.30% of their portfolio.
Nordstrom (JWN): Increased position by 136.61%. Position is now 2.79% of their portfolio.
America Movil (AMX): Increased position by 129.88%. Position is now 3.91% of their portfolio.
Lexmark (LXK): Increased position by 109.39%. Position is now 1.42% of their portfolio.
Citrix (CTXS): Increased position by 109.36%. Position is now 2.20% of their portfolio.
Bank of New York Mellon (BK): Increased position by 55.42%. Position is now 3.15% of their portfolio.
Baxter Intl (BAX): Increased position by 51.69%. Position is now 2.90% of their portfolio.
Advanced Micro Devices (AMD): Increased position by 45.89%. Position is now 2.87% of their portfolio.
Raytheon (RTN): Increased position by 41.72%. Position is now 2.58% of their portfolio.
Fidelity National Info (FIS): Increased position by 40.56%. Position is now 2.05% of their portfolio.
Covidien (COV): Increased position by 32.99%. Position is now 2.32% of their portfolio.
Liberty Media Corp (LMDIA): Increased position by 28.09%. Position is now 1.59% of their portfolio.
Resmed (RMD): Increased position by 26.46%. Position is now 0.74% of their portfolio.
Burlington Northern (BNI): Increased position by 22.73%. Position is now 1.83% of their portfolio.
Google (GOOG): Increased position by 22.27%. Position is now 1.72% of their portfolio.
Genentech (DNA): Increased position by 21.38%. Position is now 1.40% of their portfolio.
Zimmer Holdings (ZMH): Increased position by 20.28%. Position is now 1.73% of their portfolio.
Cypress Bioscience (CYPB): Increased position by 19.98%. Position is now 0.20% of their portfolio.
Apple (AAPL): Increased position by 19.45%. Position is now 4.09% of their portfolio.
Research in Motion (RIMM): Increased position by 15.41%. Position is now 4.08% of their portfolio.
MetroPCS Comm (PCS): Increased position by 13.6%. Position is now 0.77% of their portfolio.
Home Inns & Hotels (HMIN): Increased position by 7.72%. Position is now 0.54% of their portfolio.
Gilead Sciences (GILD): Increased position by 6.66%. Position is now 2.37% of their portfolio.
Marvell Technology (MRVL): Increased position by 5.24%. Position is now 3.08% of their portfolio.
Newstar Financial (NEWS): Increased position by 5.21%. Position is now 0.14% of their portfolio.
Cardinal Health (CAH): Increased position by 3.33%. Position is now 1.56% of their portfolio.
Amylin Pharma (AMLN): Increased position by 2.84%. Position is now 0.58% of their portfolio.
Discovery Holding (DISCA): Increased position by 1.74%. Position is now 1.21% of their portfolio.
Palm (PALM): Increased position by 1.40%. Position is now 0.51% of their portfolio.
Lumber Liquidators (LL): Increased position by 1.14%. Position is now 0.26% of their portfolio.
China Nepstar (NPD): Increased position by 0.75%. Position is now 0.18% of their portfolio.
First Advantage (FADV): Increased position by 0.65%. Position is now 0.15% of their portfolio.
Under Armour (UA): Increased position by 0.17%. Position is now 0.83% of their portfolio.
Mylan Inc (MYL): Increased position by 0.06%. Position is now 1.09% of their portfolio.
Monsanto (MON): Increased position by 0.04%. Position is now 1.68% of their portfolio.
Potash (POT): Increased position by 0.03%. Position is now 2% of their portfolio.


Reduced positions:
Thermo Fisher (TMO): Reduced their position by 4.91%. Position is now 1.68% of their portfolio.
Western Union (WU): Reduced their position by 10.2%. Position is now 2.08% of their portfolio.
Marsh & Mclennan (MMC): Reduced their position by 12%. Position is now 1.55% of their portfolio.
Textron Inc (TXT): Reduced their position by 18.93%. Position is now 1.44% of their portfolio.
Wyeth (WYE): Reduced their position by 20.6%. Position is now 1.46% of their portfolio.
Leap Wireless (LEAP): Reduced their position by 23.40%. Position is now 0.39% of their portfolio.
Trubion Pharma (TRBN): Reduced their position by 24.38%. Position is now 0.04% of their portfolio.
Dish Network (DISH): Reduced their position by 27.75%. Position is now 1.13% of their portfolio.
Avon Products (AVP): Reduced their position by 33.23%. Position is now 1.36% of their portfolio.
JP Morgan Chase (JPM): Reduced their position by 38.68%. Position is now 0.89% of their portfolio.
Cognizant (CTSH): Reduced their position by 42.97%. Position is now 0.85% of their portfolio.
DirecTV (DTV): Reduced their position by 49.69%. Position is now 0.83% of their portfolio.
Suntrust Banks (STI): Reduced their position by 50%. Position is now 0.16% of their portfolio.
Gamestop (GME): Reduced their position by 51.64%. Position is now 0.81% of their portfolio.
Corcept (CORT): Reduced their position by 57.49%. Position is now 0.01% of their portfolio.
Bluefly (BFLY): Reduced their position by 90%. Position is now 0.11% of their portfolio.
Berkshire Hathaway (BRK.A): Reduced their position by 95%. Position is now 0.66% of their portfolio.


Removed Positions (Positions Maverick sold out of completely):
Hanesbrands (HBI)
Autozone (AZO)
Bankrate (RATE)
CNET (CNET)
Crocs (CROX)
Cumulus Media (CMLS)
Harmonic (HLIT)
Loews (L)
Move Inc (MOVE)
Nucor (NUE)
OfficeMax (OMX)
Qualcomm (QCOM)
Salesforce (CRM)
Sandisk (SNDK)
Sears (SHLD)
Starbucks (SBUX)
UnitedHealth (UNH)


Positions with no change:
VMWare (VMW). Position is 0.59% of their portfolio.
BPW Acquisition (BPW). Position is 0.18% of their portfolio.
FIrst Marblehead (FMD). Position is 0.05% of their portfolio.
Ultra Clean Holdings (UCTT). Position is 0.01% of their portfolio.
Vivus (VVUS). Position is 0.01% of their portfolio.


Top 20 holdings by % of portfolio:
1. Apple (AAPL): 4.09% of the portfolio
2. Research in Motion (RIMM): 4.08% of the portfolio
3. America Movil (AMX): 3.91% of the portfolio
4. Bank of New York Mellon (BK): 3.15% of the portfolio
5. Marvell Tech (MRVL): 3.08% of the portfolio
6. First Solar (FSLR): 2.93% of the portfolio
7. Baxter Intl (BAX): 2.90% of the portfolio
8. Advanced Micro (AMD): 2.87% of the portfolio
9. Nordstrom (JWN): 2.79% of the portfolio
10. Raytheon (RTN): 2.58% of the portfolio
11. Gilead (GILD): 2.37% of the portfolio
12. Lorillard (LO): 2.36% of the portfolio
13. Covidien (COV): 2.32% of the portfolio
14. Citrix (CTXS): 2.20% of the portfolio
15. CVS Caremark (CVS): 2.09% of the portfolio
16. Western Union (WU): 2.08% of the portfolio
17. Fidelity National Info (FIS): 2.05% of the portfolio
18. Potash (POT): 2.00% of the portfolio
19. Burlington Northern (BNI): 1.83% of the portfolio
20. Netapp (NTAP): 1.81% of the portfolio

----------------------------------------------------

Breakdown: Maverick changed up their portfolio a decent amount over the past quarter. Most notable are their changes within their top 10 holdings. Hedge fund favorite Qualcomm (QCOM) was Maverick's 3rd largest holding last filing. This filing, they no longer even hold a position. Additionally, they were selling off chunks of other top 10 holdings from last quarter. They sold off 33% of their position in Avon Products (AVP), which was their 4th largest holding just one quarter ago. They also sold over 51% of their Gamestop (GME) position, which last quarter was their 7th largest holding. With those positions vacating their place in the top 10 holdings of Maverick's portfolio, new holdings obviously took their place. America Movil (AMX), another hedge fund favorite, was Maverick's 9th largest holding last time. This time, they increased their position by 129% and it is now their 3rd largest holding. They obviously used the weakness in this name to add to their position, just like fellow 'Tiger Cub' fund Lone Pine Capital, as I wrote about here. Maverick also added heavily to Nordstrom (JWN), increasing their position by 136% and making it now their 9th largest holding.

Maverick was out adding to tech across the board. Apple (AAPL) and Research in Motion (RIMM) are their top 2 largest holdings respectively, as they boosted their positions in both by over 14% each. Additionally, they added to their Marvell (MRVL) position, bringing it up to the fund's 5th largest position now. Maverick also continues to build a position in Advanced Micro Devices (AMD), as it now is their 8th largest holding.

Among their new positions this quarter are First Solar (FSLR), Lorillard (LO), and CVS Caremark (CVS). I highlight these three in particular because Maverick started large, new positions in all three names. First Solar (FSLR) was brought up all the way to the fund's 6th largest holding after not even owning shares last quarter. They started a new position in CVS Caremark (CVS) and brought it up to the fund's 15th largest holding. Also, they added heavily to Lorillard (LO) as well, making this new position their 12th largest holding. This position is interesting because we also saw Lone Pine Capital (ran by Stephen Mandel Jr.) start a new position in this exact same name, as I wrote about here. And, actually, this is not the only position that both Maverick and Lone Pine both started together. In this 13F filing, we see that Maverick started a position in Hansen Natural (HANS). And, as I wrote about here, Lone Pine recently disclosed that they have a 7.8% stake in HANS. It's definitely common to see many similar positions within the portfolios of various 'Tiger Cub' managers who now run their own funds because they all undoubtedly keep in touch and come from the same school of thought.

One last thing I would like to point out is Maverick selling completely out of various consumer related names. They sold completely out of their positions in Autozone (AZO), Hanesbrands (HBI), Sears (SHLD), Starbucks (SBUX), Crocs (CROX), and OfficeMax (OMX).

You can view their most recent 13F as filed with the SEC here.

Check back each day this week as my 13F tracking series continues. Funds I will be covering this week include: Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management, Boone Pickens' BP Capital, and Timothy Barakett's Atticus Capital.

Checking In On David Einhorn's Greenlight Capital

I like to track a variety of hedge funds with different strategies just to see what everyone is up to each quarter. And, while I don't necessarily go in-depth on each fund, I do like to monitor major changes to their portfolios. One main activist fund I follow is Greenlight Capital. Greenlight is a $6 billion fund ran by David Einhorn and has had an annual return of over 25%. Greenlight specializes in spin-offs and value investing. Einhorn's name has been popping up in the media a lot in recent months as he talked about his well documented short position in Lehman Brothers (LEH).

So, after comparing his most recent 13F filing with the one from last quarter, we can see a few major moves that Einhorn has made with Greenlight's portfolio. Please note that this is by no means a complete summary of changes. I am simply pointing out a few changes of interest.

New Positions:
UnitedHealth Group (UNH)
Dr. Pepper Snapple (DPS) - a spinoff from Cadbury
Teradata (TDC)

Added to:
Helix Energy (HLX) - increased position by 12%

Reduced Positions:
Microsoft (MSFT) - reduced position by 33.1%
Target (TGT) - reduced position by 16.6%

Removed Positions (positions Greenlight sold completely out of):
Discover Financial (DFS)

Some of Greenlight's Top Holdings (in no particular order) include: Ameriprise Financial (AMP), Helix Energy (HLX), Microsoft (MSFT), Target (TGT), Health Management Associates (HMA), and M.D.C. Holdings (MDC).

Again, please note that this is merely the highlights of their portfolio and does not detail all of the changes made. If you're interested in more in-depth analysis of some hedge fund portfolios, check out some of the write-ups I've done on the blog (Blue Ridge Capital, Lone Pine Capital, & many more). And, you can view their Greenlight's recent 13F as filed with the SEC here.

Also, I wanted to point out that David Einhorn has a recent book out, Fooling Some of the People All of the Time: A Long Short Story. In it, he details the saga between his hedge fund (Greenlight Capital) and a company he shorted (private financer Allied Capital). I'm currently reading the book and will be posting a review of it on this blog once I finish. So far, it's a good read. It gives you an inside perspective as to how Greenlight goes about constructing and researching their investment theses. Check it out if you're interested.

Paul Tudor Jones & Tudor Investment Corp Update

Just came across some information regarding our macro pal Paul Tudor Jones. According to the NY Post, Tudor has gone quantitative, opening a new fund with nearly $1 billion called the Tensor fund, run by Steve Evans. This, of course, in addition to their macro and equity funds. And, apparently, their quant fund is kicking ass and taking names. Currently returning 18.9% year to date, their Tensor fund is besting the likes of quant legends Goldman Sachs' Global Equities Opportunities fund (up less than 1% year to date) and Jim Simons' Renaissance Institutional Equities Fund (down 4% year to date).

Also, as reported earlier this month, Paul Tudor Jones and his sidekick James Pallotta will be parting company come the end of the year, with Pallotta off to start his own equities fund (which I will be keeping my eye on when he spins off).

Lastly, we now know that Tudor Investment Corp's main fund, the $11 billion B.V.I. Fund, is up 2.3% year to date. Check back later this week, as I will be detailing the changes to Tudor's portfolio as I analyze their quarterly 13F filing.

Source: NY Post

Running a Hedge Fund is Tough in This Environment

If any of you have ever watched CNBC, you've undoubtedly seen Ron Insana on there at some point. He was one of their big anchors and had been with the channel for a long time. What you might not know, though, is that he eventually left CNBC to start a Hedge Fund of Funds. And, as we see from this article, running a hedge fund, or a fund of funds for that matter, is tough in this environment (duh).