This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.
Next up is David Stemerman's hedge fund Conatus Capital. This is just the third time we've covered their portfolio because this is literally only their third 13F filing. They are obviously a newer fund, but their manager and analysts certainly have quite the pedigree. Conatus raised $2.3 billion and began trading last year after David Stemerman left Lone Pine Capital to start his own hedge fund. Conatus is an interesting story to follow because, as we all know, Stemerman's old employer, Lone Pine Capital, is a prominent 'Tiger Cub' hedge fund. And now many years later, Lone Pine is seeing its own progeny spin off their own funds. Matt Iorio also left Lone Pine to start his own firm, White Elm Capital, who we will also track for the first time in the coming days. We find it appropriate to track these two gentlemen because they are well-versed in the successful bottom-up 'Tiger' investing style and have contributed to Lone Pine's solid track record.
The following were Conatus' long equity, note, and options holdings as of June 30th, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.
Some New Positions (Brand new positions that they initiated in the last quarter):
Walter Energy (WLT)
Mastercard (MA)
Amazon (AMZN)
Itau Unibanco (ITUB)
Google (GOOG)
Urban Outfitters (URBN)
Ctrip (CTRP)
Priceline (PCLN)
Some Increased Positions (A few positions they already owned but added shares to)
SBA Communications (SBAC): Increased by 56.6%
Crown Castle (CCI): Increased by 38.9%
MedcoHealth (MHS): Increased by 32.5%
Baxter (BAX): Increased by 20.8%
Range Resources (RRC): Increased by 19.9%
Apple (AAPL): Increased by 16.7%
Some Reduced Positions (Some positions they sold some shares of)
Qualcomm (QCOM): Reduced by 46.8%
Cisco Systems (CSCO): Reduced by 45.4%
Petrohawk Energy (HK): Reduced by 41.4%
Goldman Sachs (GS): Reduced by 40.2%
Discovery Communications (DISCA): Reduced by 39.2%
Southwestern Energy (SWN): Reduced by 38%
Visa (V): Reduced by 34.9%
Teradata (TDC): Reduced by 28%
JPMorgan Chase (JPM): Reduced by 26.9%
Cognizant Tech (CTSH): Reduced by 21.9%
Removed Positions (Positions they sold out of completely)
People's United Financial (PBCT)
Walmart (WMT)
Activision Blizzard (ATVI)
Bed Bath & Beyond (BBBY)
Carnival (CCL)
Discovery Communications (DISCK)
Top 15 Holdings by percentage of long portfolio *(see note below regarding calculations)
- Apple (AAPL): 6.46% of portfolio
- MedcoHealth (MHS): 6.33% of portfolio
- Apollo Group (APOL): 5.63% of portfolio
- Range Resources (RRC): 5.62% of portfolio
- Express Scripts (ESRX): 4.94% of portfolio
- Cognizant Technology (CTSH): 4.3% of portfolio
- JPMorgan Chase (JPM): 4.23% of portfolio
- Walter Energy (WLT): 4.22% of portfolio
- Baxter (BAX): 3.62% of portfolio
- Mastercard (MA): 3.57% of portfolio
- Visa (V): 3.52% of portfolio
- American Tower (AMT): 3.44% of portfolio
- Amazon (AMZN): 2.97% of portfolio
- Itau Unibanco (ITUB): 2.93% of portfolio
- Strayer Education (STRA): 2.92% of portfolio
Like Lee Ainslie's Maverick Capital, David Stemerman's Conatus has Apple (AAPL) as their top holding. While a majority of this can be attributed to AAPL's share price appreciation over the past quarter, Conatus did add 16.7% to their position. Also like Maverick, Conatus has a large stake in Cognizant Technology (CTSH). We've mentioned it numerous times before that the 'Tiger Cub' hedge fund portfolios are often very similar and this is no different.
However, Conatus is not technically a Tiger Cub, but rather a 'Grandcub' if you want to get ridiculous with the terminology. Lone Pine Capital is a Tiger Cub in the true sense of the definition. So, since Stemerman left a 'Cub' fund to form his own fund, that technically makes Conatus a 'Grandcub'. We only highlight this to showcase the true extent and reach of the Tiger investing style. The Tiger Family Tree is quite expansive and has a reach far and wide in the hedge fund industry. We track them for their bottom-up focus on equities. Since SEC filings only require the disclosure of US equities, options, and note positions, we need funds that do the bulk of their investing in that realm in order to accurately track them.
One of Lone Pine's favorite positions is Strayer Education (STRA) as Stephen Mandel presented the bullish case for the name at the Ira Sohn conference. (At the conference, numerous hedge fund managers outlined investment ideas). Due to his Lone Pine background, it is unsurprising that Stemerman has added Lone Pine portfolio plays to his arsenal. He too holds shares of STRA at their 15th largest position.
Stemerman trimmed positions in QCOM, CSCO, HK, and GS by a significant margin. The only positions he really added to in size were SBAC and CCI. He brought on brand new positions in WLT, MA, and AMZN and added them with enough size to land them in their top 15 holdings.
*Note regarding portfolio percentages: Assets from the collective holdings reported to the SEC via 13F filing were $1.2 billion this quarter compared to $1.1 billion last quarter. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. In reality, the percentages are more watered down in their actual hedge fund portfolio. If you were to calculate percentage weightings in the actual hedge fund portfolio, they would obviously be different since you would divide position sizes by their total assets under management.
This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. So far, we've already covered the holdings of Bill Ackman's Pershing Square Capital Management, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Dan Loeb's Third Point LLC, and Stephen Mandel's Lone Pine Capital, George Soros (Soros Fund Management), Lee Ainslie's Maverick Capital, and Philip Falcone's Harbinger Capital Partners. Check back each day as we cover prominent hedge fund portfolios.
*image courtesy of NewYorkSocialDiary
