Friday, January 2, 2009

What We're Reading (1/2/2009)

- Why low oil prices are bad (Chris Nelder, via getreallist.com)

- 2009 Global Economic Outlook (Morgan Stanley)

- Basically bankrupt companies: 5 stocks that look completely worthless (Morningstar)

- 1929 Crash Comparison (CNBC, hat tip to reader jegan)

- US Dollar deleverage (Paul Kedrosky) and (Dash of Insight)

- Deflation (Morgan Stanley)


Posted by market folly at 8:01 AM View Comments
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Peter Schiff Comments: 2008 Video of the Year?

Back in November, the PE Wire had mentioned that the following Peter Schiff Video could very well be the video of the year. Why you ask? Well, Schiff was one of the first people to 'predict' the crisis so clearly.

Now, the only problem with this, is the fact that some of his investment decisions were not the best and he did not profit from the crisis like he truly should of. Pretty ironic. But, we're mainly here to give him props for calling things so early and correctly. Call him what you may: a perma-bear, a self-promoter. He is what he is. But, this video definitely deserves some credit.


Posted by market folly at 7:47 AM View Comments
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Thursday, January 1, 2009

2009: Happy New Year from Market Folly

We at Market Folly just wanted to wish everyone a Happy New Year. Hopefully this year will be slightly less volatile than 2008! Cheers!


Posted by market folly at 10:45 AM View Comments
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Wednesday, December 31, 2008

Eminence Capital (Ricky Sandler): Hedge Fund Tracking - 13F Filing Q3 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.


Next up, we have Eminence Capital. Eminence is a New York hedge fund ran by Ricky Sandler. As of this last quarter's filing, they held $4 billion in long US equity exposure. Sandler attended the University of Wisconsin and holds a CFA designation. Prior to Eminence, Sandler started his career as a research analyst for Mark Asset Management and then went on to start Fusion Partners at the age of 25 with Wayne Cooperman. As their investment styles started to differ, Sandler went on to start Eminence. Sandler employs a 'quality value' approach to running his portfolio, spending equal time on both the long and short sides of his portfolio. In the past, he has said they employ gross leverage and are typically around 120% long and 70% short.


The following were their long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
Sunpower (SPWRB)
Lockheed Martin (LMT)
Rockwell Collins (COL)
Goldman Sachs (GS)
Ebay (EBAY)
Chipotle Class B (CMG-B)


Some Increased Positions (A few positions they already owned but added shares to)
Nike (NKE): Increased position by 2,954%
Agilent Technologies (A): Increased position by 105%
Eaton (ETN): Increased position by 83%
Charles Schwab (SCHW): Increased position by 50%
Qualcomm (QCOM): Increased position by 40%
Abbott Labs (ABT): Increased position by 37%
Cisco (CSCO): Increased position by 35%
Microsoft (MSFT): Increased position by 24%
Google (GOOG): Increased position by 23%
International Game Technology (IGT): Increased position by 16%
Oracle (ORCL): Increased position by 15%
Applied Materials (AMAT): Increased position by 12%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Koninklijke Philips Electronics (PHG): Reduced position by 43%
Laboratory Corp of America (LH): Reduced position by 42%
Quest Diagnostics (DGX): Reduced position by 38%
American Express (AXP): Reduced position by 34%
Ross Stores (ROST): Reduced position by 20%
Fiserv (FISV): Reduced position by 15%
America Movil (AMX): Reduced position by 12%
Grupo Televisa (TV): Reduced position by 9%


Removed Positions (Positions they sold out of completely)
Napster (inactive)
Herbalife (HLF)
SRA International (SRX)
Arbitron (ARB)
Staples (SPLS)
Western Union (WU)
Viacom (VIA-B)


Top 20 Holdings (by % of portfolio)

  1. Oracle (ORCL): 5.7% of portfolio
  2. Microsoft (MSFT): 4.8% of portfolio
  3. Cisco (CSCO): 4.5% of portfolio
  4. Sunpower (SPWRB): 4% of portfolio
  5. Fiserv (FISV): 3.9% of portfolio
  6. SAIC (SAI): 3.7% of portfolio
  7. Eaton (ETN): 3.7% of portfolio
  8. Abbott Labs (ABT): 3.5% of portfolio
  9. United Technologies (UTX): 3.5% of portfolio
  10. American Express (AXP): 3.3% of portfolio
  11. 3M (MMM): 3.2% of portfolio
  12. Qualcomm (QCOM): 3.1% of portfolio
  13. International Game Technology (IGT): 2.9% of portfolio
  14. Quest Diagnostics (DGX): 2.7% of portfolio
  15. Cintas (CTAS): 2.6% of portfolio
  16. Monster (MNST): 2.5% of portfolio
  17. Nike (NKE): 2.5% of portfolio
  18. Bed Bath & Beyond (BBBY): 2.5% of portfolio
  19. Zebra Technologies (ZBRA): 2.5% of portfolio
  20. Google (GOOG): 2.4% of portfolio


Assets from the collective long US equity, options, and note holdings were $4.45 billion last quarter and were $4 billion this quarter. As you can see, Eminence is heavily weighted in technology as a percentage of assets, based on their top 3 holdings. Oracle, Microsoft, and Cisco together account for around 15% of Eminence's portfolio. Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect their cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, etc). This is just one of many funds in our hedge fund tracking series in which we're tracking 35+ prominent funds. The other funds we've already covered include:


Overall, its been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Sandler, Eminence, & hedge funds:
- Prominent Hedge Fund manager interviews
- Hedge Fund investor letters
- Hedge Fund Rankings
- November hedge fund performance numbers
- October hedge fund performance numbers


Posted by market folly at 8:01 AM View Comments
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Consumer Spending During Recessions

Todd Sullivan over at Value Plays takes a quick look at consumer spending from the 1990-91 and 2001-02 recessions. Surprisingly, Tobacco spending was down. We only point this one because in recessionary times, people are quick to point out plays like Altria (MO) and Philip Morris International (PM). When, in reality, the spending in their product category is down. The increase in education spending has already played out again this recession, as the number of MBA program applicants has been very high, if not at historical highs. Lastly, we want to highlight the massive decrease in the category: food away from home. This illustrates perfectly our thesis for shorting casualty dining restaurants in a deteriorating consumer environment and going long McDonald's (MCD) as a hedge. Because, after all, if people do go out to eat, they are going to the cheapest place out there, the golden arches.

(click to enlarge)



Posted by market folly at 7:50 AM View Comments
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Tuesday, December 30, 2008

Pequot Capital Management (Art Samberg): Hedge Fund Tracking - 13F Filing Q3 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.


Next up is Pequot Capital Management ran by Art Samberg. Pequot was founded by Art in 1986 with $3 million in assets and peaked with $15 billion in assets around the tech bubble. Today, he manages over $4 billion. They have 150 employees and employ multiple strategies, including private equity and venture capital, as Art believes equity returns will decline over time. Art holds a S.B. from Massachusetts Institute of Technology, an M.S. from Stanford University, and he received his MBA from Columbia University. Pequot Capital Management was recently ranked 93rd in Alpha's hedge fund rankings.


The following were their long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
XTO Energy (XTO) Calls
Chesapeake Energy (CHK) Calls
Wells Fargo (WFC)
Microsoft (MSFT)
Ishares emerging markets (EEM)
Exxon Mobil (XOM)
Petrohawk (HK)
Nasdaq (NDAQ)
Bank of NY Mellon (BK)
Union Pacific (UNP)
Lender Processing (LPS)
Moody (MCO)
State Street (STT)
CSX (CSX)
McGraw Hill (MHP)
Mohawk Industries (MHK)
Amgen (AMGN)
Burlington Northern (BNI)
XTO Energy (XTO)
Spdr S&P500 (SPY)
Ishares Russell 2000 (IWM)
JPMorgan Chase (JPM)
NYSE Euronext (NYX)
Intercontinental Exchange (ICE)
Schering Plough (SGP)
Chesapeake Energy (CHK)
St Jude (STJ)
CME Group (CME)
Chipotle (CMG)
Halozyme Therapeutics (HALO)


Some Increased Positions (A few positions they already owned but added shares to)
Spdr Gold Trust (GLD): Increased position by 997%
Ishares Emerging Markets (EEM) Puts: Increased position by 477%
Onyx Pharma (ONXX): Increased position by 179%
Bank of America (BAC): Increased position by 150%
Alexion Pharma (ALXN): Increased position by 100%
Apollo Group (APOL): Increased position by 36%
Cigna Corp (CI) Puts: Increased position by 30%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Petroleo Brasileiro (PBR): Increased position by 72%
Freeport McMoran (FCX): Increased position by 70%
Qualcomm (QCOM): Increased position by 33%
Occidental Petroleum (OXY): Increased position by 31%
Jack in the Box (JBX): Increased position by 29%
Helmerich & Payne (HP): Increased position by 29%
Southwestern Energy (SWN): Increased position by 23%
Halliburton (HAL): Increased position by 20%
JC Penney (JCP): Increased position by 11%


Removed Positions (Positions they sold out of completely)
Insulet (PODD)
SPDR S&P500 (SPY) Puts
Schering Plough (SGP) Calls
Cree (CREE)
New Oriental Education (EDU)
Companhia Vale (RIO) Calls
Netflix (NFLX) Calls
Elan (ELN) Puts
Burger King (BKC)
Akamai (AKAM) Calls
Spirit Aerosystems (SPR)
Wells Fargo (WFC) Puts
Broadcom (BRCM) Calls
First Solar (FSLR)
Focus Media (FMCN)
Energy Conversion Devices (ENER)
Map Pharma (MAPP)
Career Education(CECO)
Focus Media (FMCN) Calls
Google (GOOG)
Baidu (BIDU) Calls
First Advantage (FADV)
Apple (AAPL) Calls
Juniper Networks (JNPR) Calls
Intuitive Surgical (ISRG) Puts
Research in Motion (RIMM)
Sandisk (SNDK) Calls
Barrick Gold (ABX)
Arcelor Mittal (MT)
Powershares QQQ (QQQQ) Puts


Top 20 Holdings (by % of portfolio)

  1. Ishares Emerging Markets (EEM) Puts: 10.2% of portfolio
  2. Spdr Gold Trust (GLD): 9.9% of portfolio
  3. XTO Energy (XTO) Calls: 6.2% of portfolio
  4. Chesapeake Energy (CHK) Calls: 4.8% of portfolio
  5. Akorn (AKRX): 3.9% of portfolio
  6. Ultra Petroleum (UPL): 2.7% of portfolio
  7. Qualcomm (QCOM) Calls: 2.5% of portfolio
  8. JC Penney (JCP): 2.1% of portfolio
  9. Onyx Pharma (ONXX): 1.9% of portfolio
  10. McDonalds (MCD): 1.8% of portfolio
  11. Southwestern Energy (SWN): 1.8% of portfolio
  12. Wells Fargo (WFC): 1.6% of portfolio
  13. Chipotle Class-B (CMG-B): 1.5% of portfolio
  14. Healthcare Services (HCSG): 1.5% of portfolio
  15. Qualcomm (QCOM): 1.5% of portfolio
  16. Walmart (WMT): 1.5% of portfolio
  17. Microsoft (MSFT): 1.4% of portfolio
  18. Ishares Emerging Markets (EEM): 1.4% of portfolio
  19. Weatherford International (WFT): 1.3% of portfolio
  20. Exxon Mobil (XOM): 1.2% of portfolio


Assets from the collective long US equity, options, and note holdings were $4 billion last quarter and were $3 billion this quarter. Its interesting to see that Pequot started two new Call option positions in XTO and Chesapeake and brought them both up to very large positions, the 3rd and 4th largest fund positions respectively. Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect their cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, etc). This is just one of many funds in our hedge fund tracking series in which we're tracking 35+ prominent funds. The other funds we've already covered include:


Overall, its been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Samberg, Pequot, & hedge funds:
- Prominent Hedge Fund manager interviews
- Hedge Fund investor letters
- Hedge Fund Rankings
- November hedge fund performance numbers
- October hedge fund performance numbers


Posted by market folly at 8:01 AM View Comments
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Quick Technical Analysis: S&P 500

Barry Ritholtz has posted up an excellent quick technical analysis overview of the S&P500, courtesy of his research firm Fusion Analytics and Kevin Lane. Kevin is one of the founding partners of Fusion and is the director of Quantitative Research.

Take a quick look at this snapshot of the S&P 500

(click to enlarge)


And here is their commentary that follows:

"The market is still is well off the lows yet it has remained rather lethargic of late with many rally attempts fading pretty easily. While we have had some interesting days on the upside over the last several months the market still has not been able to display any consistency on the upside. There is a minor, yet significant, short-term downtrend (red line) that comes into play near 900.

A close above 900 could lead to a move back towards the 1,000 level (a nice move from present levels) where the market peaked in early November (next serious upside resistance level). For the S&P to make any headway higher it needs to eclipse that level. Minor trading supports exist below the marker near 850 (green line) and 820 (lower red line). If we break these levels we can expect a retest of the mid November lows.

Given volume was so anemic leading up to the Christmas holiday we can’t really say whether that last two days were good or bad since there just was no volume and the “C” teams were in control of the trading desks. So we will just have to see this week if the “A” teams are back or larger firms are content to call 2008 closed and leave the substitutes at the controls. Our guess is we can expect the market to be volatile since trading should likely be thin (typical this time of year) with this being a shortened trading week and staff at major investment houses thinned for the holidays. That said we would continue to be to play small here until the market unfurls it next directional move a little better vis-à-vis better internals."


We wholeheartedly agree with their analysis, as we noted very similar thoughts ourselves earlier in our most recent quick view of some charts. We are slightly positioned to the short-side as we expect resistance to hold and trigger another sell-off. However, we are not 'anticipating' this move as much as we normally would, due to overall market conditions (weak volume, new year, etc). If we breach 900 on the S&P, we would expect the market to then rip higher and we would quickly relinquish our slight bias to the short-side.

The main thing to take away here is to play it safe and wait for the market to give you a clear direction and then play it. There's nothing wrong with 'doing nothing' and being patient.


Posted by market folly at 7:57 AM View Comments
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Monday, December 29, 2008

Seth Klarman & Baupost Group: Hedge Fund Tracking - 13F Filing Q3 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.


Next up is Baupost Group ran by Seth Klarman. Klarman received his MBA from Harvard Business School and started working at Baupost at age 25. Over the past 25 years, Baupost has seen an annual compound return of 20% and is ranked 49th in Alpha's hedge fund rankings. Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his recent interview with Harvard Business School. For more information about Klarman, check out our post on hedge fund manager interviews.


The following were their long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated in the last quarter):
IAC Interactive (IACI)
RHI Entertainment (RHIE)
News Corp (NWS)
Acergy (ACGY)


Some Increased Positions (A few positions they already owned but added shares to)
Breitburn Energy (BBEP): Increased position by 838%
Linn Energy (LINE): Increased position by 140%
Alliance One (AOI): Increased position by 105%
Liberty Media (LMDIA): Increased position by 50%
Ituran (ITRN): Increased position by 34%
Exterran Holdings (EXH): Increased position by 28%
Centerplate (CVP): Increased position by 13%
Viasat (VSAT): Increased position by 10%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
UnitedHealth (UNH): Reduced position by 83%
Claimsnet.com (CLA): Reduced position by 79%
Borders (BGP): Reduced position by 68%
Wellpoint (WLP): Reduced position by 63%
Horizon Lines (HRZ): Reduced position by 45%
NRDC Acquisition (NAQ): Reduced position by 35%
Prepaid Legal (PPD): Reduced position by 23%
Audiovox (VOXX): Reduced position by 12%
Triplecrown Acquisition (TCW): Reduced position by 10%


Removed Positions (Positions they sold out of completely)
Clearpoint Business (CPBR)
Overture Acquisition (NLX)
2020 ChinaCap (TTY)
Tremisis (TGY)
Seanergy Maritime (SHIP)
KBL Healthcare (KHA)
Victory Acquisition (VRY)
Interatlantic Financial (IAN)
TM Entertainment (TMI)
Golden Pond Healthcare (GPH)
Highlands Acquisition (HIA)
BPW Acquisition (BPW)
School Specialty (SCHS)
Coremark Holding (CORE)
Global BPO Services (OOO.U)
GSC Acquisition (GGA)
Liberty Acquisition (LIA)
Alternative Asset Management (AMV)
Hicks Acquisition (TOH)
Marathon Acquisition (inactive)
CapitalSource (CSE)
Global Consumer (GHC)


Top 20 Holdings (by % of portfolio)

  1. Linn Energy (LINE): 11.8% of portfolio
  2. Liberty Media (LMDIA): 9.2% of portfolio
  3. Domtar (UFS): 7.9% of portfolio
  4. Wellpoint (WLP): 7.3% of portfolio
  5. Exterran (EXH): 7.1% of portfolio
  6. Breitburn Energy (BBEP): 7.1% of portfolio
  7. Theravance (THRX): 6% of portfolio
  8. IAC Interactive (IACI): 4.7% of portfolio
  9. RHI Entertainment (RHIE): 4% of portfolio
  10. Sapphire Industrials (FYR): 3.7% of portfolio
  11. Syneron Medical (ELOS): 3.4% of portfolio
  12. Atlas Pipeline Partners (APL): 3.3% of portfolio
  13. Horizon Lines (HRZ): 2.9% of portfolio
  14. Viasat (VSAT): 2.2% of portfolio
  15. Alliance One (AOI): 1.8% of portfolio
  16. GHL Acquisition (GHQ): 1.6% of portfolio
  17. UnitedHealth (UNH): 1.5% of portfolio
  18. News Corp (NWS): 1.5% of portfolio
  19. Ituran (ITRN): 1.4% of portfolio
  20. Audiovox (VOXX): 1.4% of portfolio


Assets from the collective long US equity, options, and note holdings were $1.6 billion last quarter and were $1.3 billion this quarter. Baupost was selling out of nearly all of their acquisition holding company positions, which was interesting. Also, the additions they made to their positions in Linn Energy and Breitburn Energy were pretty substantial. Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect their cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, etc). This is just one of many funds in our hedge fund tracking series in which we're tracking 35+ prominent funds. The other funds we've already covered include:


Overall, its been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Klarman / Baupost:
- Seth Klarman's book: Margin of Safety
- Prominent Hedge Fund manager interviews
- Klarman's interview with Harvard business school
- Hedge Fund investor letters
- Hedge Fund Rankings
- November hedge fund performance numbers
- October hedge fund performance numbers


Posted by market folly at 8:01 AM View Comments
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Jim Rogers on Long Term Bonds

"I was shorting the long bond in October and in November but I had to cover. I plan to sell them short again along the line. Bonds are the last bubble, its clearly a bubble. Everybody is pumping bonds like crazy." - Jim Rogers

Repeatedly, Rogers has said he is looking to buy Agriculture, to short U.S. long-term bonds, to short the US Dollar after its rise fully secedes, and to buy Japanese Yen. (See our rationale behind shorting long-dated treasuries)


Posted by market folly at 7:51 AM View Comments
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100 Year Chart of the Dow

Barry Ritholtz has got another great chart up depicting the 100 Year Dow. Take a gander:

(click to enlarge)



Posted by market folly at 7:50 AM View Comments
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