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Don Coxe Basic Points June 2009 Newsletter

After posting up market strategist Don Coxe's 'Basic Points' newsletter for April, and for March as well, we're back with his June edition. If you're unfamiliar with Coxe, he's a noted market commentator and has a very large following due to the many good points he often brings up. Coxe is an agricultural bull and has additionally focused a lot on commodities. In fact, Coxe shares a lot of views with noted investor Jim Rogers (whose portfolio we've also covered). For more of Coxe's thoughts, you can check out his question & answer session here.

Here's the slidedeck (RSS & Email readers will need to come to the blog to view it):

Publish at Scribd or explore others: Finance Non-fiction money bush

Whitney Tilson's T2 Partners Hedge Fund Portfolio Tracking (13F)

Hey everyone, just wanted to let you know that we penned a guest post over at Barel Karsan today. Since we don't track Whitney Tilson's T2 Partners in our hedge fund series anymore, we figured that we would post it up over there for those interested.

So, go check out our portfolio tracking post on Whitney Tilson's T2 Partners.

What We're Reading 6/12/09

Why gold is headed for bubble territory [TheDailyCrux]

Pershing Square misleads about General Growth's equity value [The Deal Sleuth]

A two part credit crisis [The Pragmatic Capitalist]

Warren Buffett's buying municipal bonds [Reuters - Felix Salmon]

How to fix financial television [The Big Picture]

How Harvard almost Destroyed Itself [The Atlantic]

One math geek's plan to reform Wall Street [Newsweek]

_________________________________________________

Also, a special thanks to our numerous anonymous donators. Thank you for your generosity & donations. If you wish to support Market Folly, you can (via PayPal or credit card) make a donation here.

Thanks for your support!

Boone Pickens' Hedge Fund BP Capital: Licking Wounds (13F Filing Q1 2009)

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up, we have BP Capital. With all the commotion surrounding energy these days, it never hurts to track an energy focused hedge fund ran by none other than Boone Pickens. If you are unfamiliar with Pickens, he is an energy maverick and his fund returned 300% in 2005. He is a big advocate of Peak Oil Theory and runs an energy-centric hedge fund based in Dallas, Texas. Although he typically holds numerous positions in oil, he is also big on alternative energy (except ethanol).

We haven't covered Boone in our last few portfolio tracking series because his fund had been facing major problems and moved pretty much to cash. In fact, he was one of the top hedge fund losers of 2008. His energy/commodity fund was down around 60-80% at various times as he continually mistepped in the oil markets. Back in October, we noted that Boone was seeing massive investor redemption requests. This came after our report in September of last year noting that his funds were down huge for that year. Needless to say, 2009 will be a rebuilding year for Boone and his BP Capital Management.

Amazingly, Boone did still manage to land himself on Forbes' billionaire list though. To see what BP's portfolio would normally look like when fully invested, then check out their past holdings here. Over the course of last year, he advocated a large natural gas position and additionally made a big bet on wind energy as America's future. Outside of investing in it, he also has been a big proponent for energy change as America looks for new alternatives. He's pushing for energy independence with his Pickens Plan which initially picked up a lot of steam around the Presidential election, but has slowly tapered off and we haven't heard a whole lot from it recently. In terms of more recent energy prophecies, Boone has said he could see oil settling around $75 in the intermediate-term as the economy tries to recover.

The following were BP's long equity, note, and options holdings as of March 31st, 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):
Transocean (RIG)
Cabot Oil & Gas (COG)
Questar (STR)
Alpha Natural Resources (ANR)
Consol Energy (CNX)
Massey Energy (MEE)
Halliburton (HAL)
Schlumberger (SLB)
Foster Wheeler (FWLT)
Fluor (FLR)
Anadarko (APC)
Weatherford (WFT)


Some Increased Positions (A few positions they already owned but added shares to)
Suncor (SU): Increased by 200%
Occidental (OXY): Increased by 100%
Chesapeake Energy (CHK): Increased by 100%
Devon (DVN): Increased by 67%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
n/a


Removed Positions (Positions they sold out of completely)
Peabody (BTU)
Denbury Resources (DNR)


All Holdings (by % of portfolio)

1. Transocean (RIG): 28.2% of portfolio
2. Devon Energy (DVN): 11.9% of portfolio
3. Occidental Petroleum (OXY): 11.85% of portfolio
4. Suncor Energy (SU): 7.1% of portfolio
5. Cabot Oil & Gas (COG): 5% of portfolio
6. Questar (STR): 5% of portfolio
7. Alpha Natural Resources (ANR): 4.4% of portfolio
8. Consol Energy (CNX): 4% of portfolio
9. Chesapeake Energy (CHK): 3.6% of portfolio
10. Massey Energy (MEE): 3.5% of portfolio
11. Halliburton (HAL): 3.3% of portfolio
12. Schlumberger (SLB): 3.2% of portfolio
13. Foster Wheeler (FWLT): 2.5% of portfolio
14. Fluor (FLR): 2.2% of portfolio
15. Anadarko Petroleum (APC): 2.1% of portfolio
16. Weatherford (WFT): 1.2% of portfolio
17. McMoran Exploration (MMR): 1% of portfolio

Pickens holds his typical plays, as his portfolio really hasn't changed. The equity holdings above were pretty much the same ones he held before facing massive redemptions at his hedge fund. So, even though there a bunch of names listed under the 'new' category, they aren't really new holdings. They are, for the most part, the same plays that he had before his liquidity crunch.

Keep in mind too that Pickens' portfolio is pretty small these days. Assets from the collective holdings reported to the SEC via 13F filing were a little over $93 million this quarter compared to $40 million last quarter. He's definitely started to put some money back to work, but it is nowhere near the asset levels he used to have (around $2 billion). As we said before, it will be a re-building year and we've started tracking him again because, let's face it, he'll be back. Investors always flock back to fallen fund managers and we really have no clue why. If anything, we can at least chronicle any shenanigans that might ensue. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, John Paulson's hedge fund Paulson & Co, Stephen Mandel's Lone Pine Capital, Eric Mindich's Eton Park Capital, John Griffin's Blue Ridge Capital, and David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Timothy Barakett's Atticus Capital, Lee Ainslie's Maverick Capital, Raj Rajaratnam's Galleon Group, Shumway Capital Partners (Chris Shumway), and Bret Barakett's Tremblant Capital Group.

The Prominent Investor Stamp of Approval: Boosting Company Image & Market Perception

Just this morning we posted up a quick piece about John Paulson's latest investment into CB Richard Ellis Group. We touched on how Paulson was getting constructive on real estate as he has now bought into both CBG and started his own real estate recovery fund. But, our piece on Paulson & Co got us thinking about something else. His investment is all fine and dandy, but we want to turn the focus to a certain phenomenon in financial markets.

Today we want to address the continuing theme of a prominent investor's 'stamp of approval.' What do we mean by that? Think of it as enhancing your company's image as it pertains to financial markets; the market's perception of you. Because, as we've begun to see, there is quite an effect a firm's 'approval' can have on a stock. After all, the news of Paulson's investment caused a stir amongst the investing world. Additionally, shares of CBG were up 15% yesterday. Sure, one can easily argue that the stock was up due to CBG issuing guidance, rather than the news of Paulson's stake. However, we still think this phenomenon exists and want to look at it a bit closer.

Right now, commercial real estate has a problem. (Well, they've got a lot of problems if you boil it down... but, for sake of our piece, they've got 1 major problem). Right now, the general investing public doesn't want to invest in their sector. Everyone is citing horrible fundamentals for the industry as a main reason to avoid it like the plague. Commercial real estate is the next 'toxic' sector, if you will. Things are so bad there that CommRE companies have had to dilute shareholders with massive equity offerings in order to handle their current debt load. Even after massive short covering and a rally in the sector, they still most definitely have an image problem. Investors are still wary. So, how do you fix that image problem? You bring in one of the most respected investors in this current market and have them give you a 'stamp of approval.' And, that is exactly what Paulson has done for CBG. Their stamp of approval has caused everyone at the very least to pause and say 'hmm.'

"Hmm, maybe commercial real estate isn't all that bad if Paulson is investing in it."

And, that's exactly what the CRE sector needs (or any troubled industry for that matter). The interesting thing here is that this is nothing new; this phenomenon has been going on for a while now. Back in late 2008 when the financials were 'toxic' and everything was imploding, no one wanted to touch them. They had an image problem in the markets and no one wanted to just dive right in. So, what did they do? Goldman Sachs (GS) got Warren Buffett to invest and give them the golden 'stamp of approval.' Sure, Buffett got ridiculously good terms on his deal, so he of course had additional incentive. Heck, he even got better terms than the government could. And that right there is what we want to focus on. Companies are willing to bend over backwards to gain approval of that well-respected investor. It only takes one stamp, and poof, their image is revamped and a tiny sense of confidence is restored. That's the power a prominent investor can have on a company's market image. They can turn heads, begin to sway market sentiment, and start to change the negative perception.

Now, don't get us wrong. It's not all 'easy peasy' and these investors/hedge funds aren't just doing these deals for sh*ts. They're obviously doing the due diligence and putting in a lot of time and effort into the deal. At the same time, there is often incentive on their end to do these deals. Companies are providing opportunities to these investors in exchange for the prominent investor's golden stamp of approval. It's essentially a tradeoff and it seems to be working. The main goal here is to restore confidence and that's one easy way to go about doing it.

Buffett made out like a bandit with his deal and Goldman Sachs and the other financials recovered from the abyss (well, temporarily, at least). The company began to restore its image and it became 'safe' to invest in them again (at least for the time being). That's exactly what they needed and that's exactly what the market needed to reverse such bad perceptions. Troubled companies/sectors need to boost investor confidence. Here is an opportunity to do so.

With that in mind, we're left wondering one thing: why haven't more companies done this?

Hedge Fund Paulson & Co Buys $100 Million Worth of CB Richard Ellis (CBG)

John Paulson's hedge fund firm Paulson & Co has made another bet. And, this time around, they're focusing again on the real estate recovery theme. After recently announcing their real estate recovery fund, Paulson has now announced that they will buy $100 million worth of CB Richard Ellis Group (CBG) stock. The company is raising $550 million ($400 million in 10 year notes & $150 million in equity) and Paulson looks to fill the bulk of the equity offering.

Paulson's purchase equates to buying 13.4 million shares of CBG. For a multi-billion dollar firm like Paulson, this investment is just a drip in the overall bucket. But, it fits right along with his current theme of slowly dipping into real estate as he wagers it will eventually recover. The water may not be warm, but the payoffs could be huge for jumping in early. So, while he may not have made a huge splash quite yet, Paulson has definitely started to get constructive (even if he still remains bearish on the economy near-term). And, as we all know, picking the exact bottom is damn near impossible.

So far though, Paulson has had a good year. Through the end of May, Paulson's main fund was up 8.75% for the year as noted in our May 2009 hedge fund performance numbers post. Besides his real estate entrance, Paulson has also made a large entrance into Gold, buying $4.3 billion worth of gold related entities. Paulson's massive success through this crisis has made him a 'must-follow' and as such we'll continue to keep an eye on his movements. In the mean time, you can check out the rest of his portfolio here.

Best Way to Predict Inflation (Video)

Came across another great video from the guys at MarketClub where they're looking at the best way to predict inflation. And, no, it's not Gold. In the past, we've posted up some of their technical analysis videos on Gold which have been really helpful. This time around, they look at the commodities index chart and they think it is pointing to inflation. Check out their technical analysis by watching the video here.

Free SkyGrid Invitations For MarketFolly Readers

Hey everyone, we've got some great news. MarketFolly readers now have the opportunity to get a free SkyGrid login. Right now, they are in invitation-only beta and have been nice enough to give our readers some logins. So, here's your chance to get an invite.

We've been checking it out recently and have found it really useful. Simply put, it's a free real-time aggregator for financial news. If you want to know more about SkyGrid beforehand, here's a post TechCrunch did on it.

Here is the link for the free invitation: http://www.skygrid.com/reg/?id=98v89ad3

Enjoy the free invitation and be sure to let SkyGrid know what you think!

Lenovo Discount: 35-50% Off (Friends & Family Promotion)

Sorry for the offtopic post, but we wanted to mention this deal that was forwarded to us. Lenovo is running their Friends & Family promotion where you can get 35-50% off their computers until June 12th. The only 'rules' are that you can't buy over 5 systems at once and you can't resell them. No, this is not spam or an ad; we're just passing along the discount we received.

Just go to: http://www.lenovo.com/cpp
Passcode: familyandfriends

And you're good to go.

Also, if you want to get on their list for other promotions/discounts/deals then just send an email to: epp@lenovo.com and you'll be set. Sorry for the random tangent but just wanted to pass along the discount.

Bret Barakett's Tremblant Capital Group Bets On Technology: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up, we have Tremblant Capital Group. Tremblant is a $3 billion hedge fund based in New York and is run by Bret Barakett, who is a former portfolio manager at Moore Capital Management (the hedge fund run by the great Louis Bacon, whom we also track). If the last name of 'Barakett' sounds familiar, its because his brother, Timothy Barakett, manages fellow hedge fund Atticus Capital, whose portfolio we recently covered. Taken from their site, Tremblant Capital Group's objective is "to achieve superior risk adjust returns for our investors through our focused and disciplined investment process." Barakett has worked with some of the best in the macro game and obviously is quite knowledgeable himself. But, as we noted back in September, Tremblant had a rough 2008.

In recent action, Tremblant filed a 13G on Eclipsys (ECLP) in mid April. Over the course of last year, they disclosed a 5.2% stake in Advanced Medical Optics (EYE). Additionally, they previously filed a 13G filing on Chipotle (CMG), where they had been adding to their large position. We'll check out how their portfolio looks nowadays below.

The following were Tremblant's long equity, note, and options holdings as of March 31st, 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):
Procter & Gamble (PG), Apple (AAPL) Calls, Visa (V) Puts, Apple (AAPL) Puts, Mastercard (MA) Puts, Qualcomm (QCOM) Puts, J Crew (JCG), Icon (ICLR), Canadian Natural Resources (CNQ). Amerisource Bergen (ABC), Charles Schwab (SCHW), Research in Motion (RIMM) Puts, Omnicare (OCR) Calls, Intuitive Surgical (ISRG) Calls, Las Vegas Sands (LVS) Calls, Visa (V) Calls, Green Mountain Coffee (GMCR) Puts, Sohu (SOHU) Calls, Sina (SINA) Calls, Fred (FRED) Calls, Red Hat (RHT) Puts, Baidu (BIDU) Puts, Covance (CVD), Bankrate (RATE), Bankrate (RATE) Puts, Factset (FDS) Calls, Cheesecake Factory (CAKE) Calls, Equinix (EQIX), MGM Mirage (MGM) Calls, Liberty Media (LMDIA)


Some Increased Positions (A few positions they already owned but added shares to)
Pharmaceutical Product Development (PPDI): Increased by 2,358% - position was tiny before and still is small relative to their overall portfolio
Google (GOOG): Increased by 338%
Union Pacific (UNP): Increased by 231%
Hologic (HOLX): Increased by 145%
DirecTV (DTV): Increased by 127%
Hologic (HOLX) Calls: Increased by 100%
Costco (COST): Increased by 95.7%
ThermoFisher Scientific (TMO): Increased by 83%
Mckesson (MCK) Calls: Increased by 78%
Research in Motion (RIMM) Calls: Increased by 65.9%
Molson Coors (TAP): Increased by 63%
Cheesecake Factory (CAKE): Increased by 63%
Eclipsys (ECLP): Increased by 41%
Chipotle (CMG-B): Increased by 33.8%
Walmart (WMT): Increased by 28.7%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Green Mountain Coffee Roasters (GMCR): Reduced by 60%
Apple (AAPL): Reduced by 35%
Mastercard (MA): Reduced by 28%
CVS Caremark (CVS) Calls: Reduced by 24%
Red Hat (RHT): Reduced by 23%
Visa (V): Reduced by 22%
Research in Motion (RIMM): Reduced by 18%


Removed Positions (Positions they sold out of completely)
Qualcomm (QCOM) Calls, Mckesson (MCK), Corning (GLW) Calls, NYSE Euronext (NYX) Calls, Life Tech (LIFE), Energizer (ENR) Calls, TW Telecom (TWTC), Calls, Advanced Medical Optics (EYE) Calls, Dell (DELL), United Health (UNH) Calls, CVS Caremark (CVS), Pharmanet (PDGI)


Top 15 Holdings (by % of portfolio)

1. Visa (V): 5.11% of portfolio
2. Apple (AAPL): 4.59% of portfolio
3. Research in Motion (RIMM): 4.57% of portfolio
4. Procter & Gamble (PG): 4.51% of portfolio
5. Qualcomm (QCOM): 4.13% of portfolio
6. Red Hat (RHT): 3.95% of portfolio
7. Baidu (BIDU): 3.64% of portfolio
8. Research in Motion (RIM) Calls: 3.64% of portfolio
9. Chipotle (CMG-B): 3.42% of portfolio
10. Apple (AAPL) Calls: 3.32% of portfolio
11. Walmart (WMT): 3.23% of portfolio
12. Mastercard (MA): 2.73% of portfolio
13. Melco Crown (MPEL): 2.69% of portfolio
14. Google (GOOG): 2.66% of portfolio
15. Hologic (HOLX): 2.63% of portfolio

If we had to give this portfolio a label, we'd call it the quintessential hedge fund portfolio. Why, you ask? Well, because it has numerous commonly held hedge fund positions all in their top 15 holdings. Tremblant has the radically popular Visa as their largest stake and has large stakes in the three tech titans: Apple, Research in Motion, and Google. Not to mention, they also hold other tech plays Baidu, Redhat, and long-time hedge fund darling Qualcomm. It seems like people never sell out of QCOM and it is always in the portfolios of numerous hedge funds we track. So, Tremblant's portfolio is the quintessential hedge fund portfolio because they have all of the hedge-fund-favorite names.

As we've covered previously, tons of the 'Tiger Cub' hedge funds are in the Mastercard (MA) and Visa (V) trade, and Tremblant is no different. But, while Tremblant has a large play on the payment processing duopoly, their bigger bet lies in the positions mentioned in the paragraph above. Collectively, it looks like Tremblant is betting on tech to be the sector that outperforms on the long side.

One other holding that we wanted to point out in particular is that of Green Mountain Coffee Roasters (GMCR). This is their 16th largest position at 2.66% of their portfolio and undoubtedly has generated huge gains for Tremblant, even after they sold 60% of their position. After all, shares of GMCR are up 165% over the last 6 months. Over on Twitter, we called this big move as we posted updates on this short squeeze play. 30-40% of the float was short going into an earnings release and GMCR knocked the cover off the ball. All of our channel checks had indicated strong numbers. And, when you combined that with the technical setup on the chart and the short float numbers, it was an easy play. So, if you're not already, definitely follow us on Twitter for unique insight in addition to what we post on the blog.

Assets from the collective holdings reported to the SEC via 13F filing were $1.8 billion this quarter compared to $1.6 billion last quarter, so a slight uptick in their long positions. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, John Paulson's hedge fund Paulson & Co, Stephen Mandel's Lone Pine Capital, Eric Mindich's Eton Park Capital, John Griffin's Blue Ridge Capital, and David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Timothy Barakett's Atticus Capital, Lee Ainslie's Maverick Capital, Raj Rajaratnam's Galleon Group, and Shumway Capital Partners (Chris Shumway).

Atticus Capital (Timothy Barakett) Files 13G on Transatlantic Holdings (TRH)

In a 13G filed with the SEC yesterday, hedge fund Atticus Capital has disclosed a 5.6% ownership stake in Transatlantic Holdings (TRH) due to activity on June 8th, 2009. They now hold 3,689,600 shares. This is a brand new position for them, as we previously did not see it in their portfolio per their 13F filing. Timothy Barakett's hedge fund has been on a rollercoaster ride lately, to say the least. And it finally appears that they are getting back to business and establishing positions. When we checked their entire portfolio out last week, we saw that they only held 5 positions as of March 31st, 2009. So, this TRH position is a new addition for them.

Atticus had a rough year last year, as they were subject to liquidation rumors (which were later proven untrue) amidst poor performance. They were ranked #2 on the Top 10 Asset Losers for 2008 in hedge fund land. As such, their portfolio has been all over the place, loading up on options positions one quarter and then just recently only reporting 5 material long equity positions. So, this stake in TRH makes it seem like they are ready to get back to investing after stabilizing their ship.

Background on Atticus: Barakett received both his BA in Economics and his MBA from Harvard. 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. A fun fact about Barakett is that he was a Harvard hockey teammates with Philip Falcone of Harbinger Capital Partners, whom we also cover. Check back each day as we cover a new hedge fund in our portfolio tracking series.

Taken from Google Finance,

Transatlantic Holdings "conducts its operations principally through its three operating subsidiaries: Transatlantic Reinsurance Company (TRC), Trans Re Zurich (TRZ) and Putnam Reinsurance Company (Putnam). The Company offers reinsurance capacity for a range of property and casualty products on both a treaty and facultative basis. These products are offered directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets."

Barry Rosenstein's Jana Partners Files 13G on Immucor (BLUD)

In a recent 13G filed with the SEC, hedge fund Jana Partners has disclosed a 5.5% ownership stake in Immucor (BLUD). They now own 3,865,413 shares and this is a brand new position for them, as they previously did not hold it as of March 31st, 2009 (per their last 13F filing). So, after all this time, Jana appears to be alive and well and buying stocks. This all comes after Barry Rosenstein's hedge fund had a rough 2008 and apparently received redemption requests for a significant amount of their capital (20-30%). They were forced to set aside illiquid positions in an attempt to meet all the requests. But, it appears as if they have survived. We'll be checking in on the rest of their portfolio in our hedge fund portfolio tracking series after skipping them last go-round due to the uncertainty swirling around the fund.

In the past, we had covered some of Jana's other SEC filings as well as their activist stake in Convergys. Jana was founded in 2001 by Barry Rosenstein and typically employs activist, market neutral, and long/short equity strategies in public equity markets. Rosenstein received his BS from Lehigh University and his MBA from the Wharton School of Business at the University of Pennsylvania. Jana has returned 20.9% each year annualized from 2001 til 2007. Rosenstein sees Jana's future in a strategy that uses management adjustments to force change at companies, which in turn can send shares higher. And, hopefully that strategy changes things for the better, as 2008 was a rough year for them.

Taken from Google Finance,

Immucor "develops, manufactures and sells a complete line of reagents and automated systems used primarily by hospitals, clinical laboratories and blood banks in a number of tests performed to detect and identify certain properties of the cell and serum components of human blood prior to blood transfusion."

Steven Cohen's SAC Capital Files 13G on Vanda Pharma (VNDA)

In a 13G filed recently with the SEC, hedge fund SAC Capital has disclosed an 8.6% ownership stake in Vanda Pharmaceuticals (VNDA). They now own 2,279,423 shares. You may be familiar with this stock as it has recently surged huge after their schizophrenia drug got FDA approval.

In our May 2009 post on hedge fund performance numbers, we saw that SAC Capital is up 13.93% for the year thus far. Recently, they were ranked #17 in Barron's hedge fund top 100 rankings. Taken from their website, “SAC is a multi-strategy, private asset management firm founded by Steven A. Cohen in 1992 with 9 employees and $25 million in assets under management. As of July 2008, the firm has grown to over 800 employees with approximately $14 billion in assets under management. SAC's initial investment style was "trading" oriented. However, we have evolved into a multi-strategy, multi-disciplinary, investment management firm emphasizing rigorous research and risk management practices. SAC's investment strategies include, but are not limited to: Fundamental and Technical Long/Short Equity Portfolios, Global Quantitative Strategies, Fixed Income and Credit, Global Macro Strategies, Convertible Bonds, and Emerging Markets.”

Since inception, their funds have returned on average 40% annually, which explains how they can charge a 50% performance fee to investors, compared to the normal 20% that most hedge funds charge. Stevie Cohen was recently on Forbes' billionaire list, as well as the top hedge fund manager losers of 2008, due to the rough year they had. And, for those curious as to how hedge fund managers live, you can see a picture of Cohen's house here.

Stay tuned in the coming week as we'll check in on the rest of SAC's portfolio in our hedge fund portfolio tracking series.

Taken from Google Finance,

Vanda Pharmaceuticals is "a biopharmaceutical company focused on the development and commercialization of clinical-stage drug candidates for central nervous system disorders, with worldwide commercial rights to two product candidates in clinical development."

Mark Cuban Files 13G on Reading International (RDI)

We don't track Mark Cuban on the blog, but we saw this and thought it was interesting. Cuban has recently disclosed a 10.5% stake in Reading International (RDI) through a 13G filed with the SEC. He now owns 157,411 shares. Cuban of course is well known for his ownership of the NBA franchise Dallas Mavericks. He is also a decently active investor as he sometimes discusses the markets on his blog. And, in the past, Cuban also funded a hedge fund (Precept Capital) based on his tech background which he later sold. For a list of hedge funds that we track on a daily basis, check our portfolio tracking series to get the latest updates.

Taken from Google Finance, Reading International is "an internationally diversified company principally focused on the development, ownership and operation of entertainment and real property assets in the United States, Australia, and New Zealand. The Company operates in two business segments: Cinema Exhibition, through its 58 multiplex theatres, and Real Estate, including real estate development and the rental of retail, commercial and live theatre assets."

Photo courtesy of AP/photo/Todd Breckenridge

Shumway Capital Partners (Chris Shumway) Boosts Teva Pharma (TEVA) & Cisco (CSCO) Stakes: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up is Shumway Capital Partners run by Chris Shumway. Shumway started his own fund after leaving well-known Julian Robertson's Tiger Management. Thus, as a progeny of Robertson, he is a part of what people call the 'Tiger Cubs' (people who have started their own firms after succeeding at Tiger). Shumway became Robertson's right-hand man after former #2 John Griffin left to start Blue Ridge Capital. We've already covered many of the 'Tiger Cub' funds in our series including Stephen Mandel's Lone Pine Capital, Andreas Halvorsen's Viking Global, and Lee Ainslie's Maverick Capital.

Taken from our post on 'Tiger Cub' biographies, "Chris Shumway is the Founding Partner of Shumway Capital Partners (“SCP”), an investment management firm founded in 2001. SCP, which manages a multibillion dollar group of private investment funds, uses a private equity-like research model for public market investment on a global basis. Prior to forming SCP, Mr. Shumway was a Senior Managing Director at Tiger Management (1992-1999), an Analyst at Brentwood Associates (1990-1991), and an Analyst at Morgan Stanley & Co. (1988-1990). He received an M.B.A. from Harvard Business School (1993) and a B.S. from the McIntire School of Commerce at the University of Virginia (1988)." In the past at a 'Tiger Cub' hedge fund manager panel, Shumway suggested that buying stocks that were down largely due to hedge fund liquidations would be a winning strategy longer-term. Lastly, in terms of more recent activity, Shumway has filed a 13G on Equinix (EQIX).

Recently, Shumway Capital Partners was ranked #11 in Barron's top 100 hedge fund rankings for 2009; an impressive feat. Barron's list is ranked according to a rolling 3 year annualized return and Shumway has seen a 28.7% annualized performance by this metric.

Shumway's solid performance and stock picking has landed them in our custom Market Folly portfolio, created with Alphaclone. Our portfolio (which has Shumway's stock picks in it, amongst others) is up 14.4% year-to-date for 2009 and has seen 19.8% annualized returns since mid-2002. The numbers are quite impressive and it speaks to the success Shumway has had since striking out on his own. With that in mind, let's check out their portfolio.

The following were Shumway's long equity, note, and options holdings as of March 31st, 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):
Wyeth (WYE), Microsoft (MSFT), Pfizer (PFE), Walmart (WMT), Walgreens (WAG), Zimmer Holdings (ZMH), Disney (DIS), Costco (COST), Ishares Emerging Markets (EEM), RenaissanceRe (RNR), Arch Capital (ACGL), JPMorgan Chase (JPM), Hudson City Bancorp (HCBK), International Game Technology (IGT), Partnerre (PRE), & Citigroup (C).


Some Increased Positions (A few positions they already owned but added shares to)
Cisco Systems (CSCO): Increased by 15,982% (their position quarter prior was tiny)
EMC (EMC): Increased by 8,821%
Potash (POT): Increased by 968%
SBA Communications (SBAC): Increased by 633%
Teva Pharma (TEVA): Increased by 615%
CVS Caremarkt (CVS): Increased by 533%
Qualcomm (QCOM): Increased by 189%
Equinix (EQIX): Increased by 103%
Union Pacific (UNP): Increased by 91%
Savvis (SVVS) Bonds: Increased by 67%
Mastercard (MA): Increased by 50%
American Tower (AMT): Increased by 43%
St Jude Medical (STJ): Increased by 38%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Qualcomm (QCOM) Calls: Reduced by 41%


Removed Positions (Positions they sold out of completely)
Biogen Idec (BIIB), Waters (WAT), News Corp (NWS-A), Thermo Fisher Scientific (TMO), Stryker (SYK), Hansen Natural (HANS), Celanese (CE), Cogent (CCOI) Calls, & NII Holdings (NIHD).


Top 15 Holdings (by % of portfolio)

1. Teva Pharma (TEVA): 10.2% of portfolio
2. Wyeth (WYE): 7.6% of portfolio
3. Cisco Systems (CSCO): 7.1% of portfolio
4. Mastercard (MA): 7% of portfolio
5. St Jude Medical (STJ): 6.15% of portfolio
6. CVS Caremark (CVS): 5.3% of portfolio
7. Microsoft (MSFT): 4.11% of portfolio
8. EMC (EMC): 4% of portfolio
9. Visa (V): 3.77% of portfolio
10. Equinix (EQIX): 3.76% of portfolio
11. American Tower (AMT): 3.7% of portfolio
12. Pfizer (PFE): 3.65% of portfolio
13. Walmart (WMT): 3.64% of portfolio
14. Walgreens (WAG): 3.6% of portfolio
15. Qualcomm (QCOM) Calls: 3.5% of portfolio

The biggest story here is their massive additions to their Teva Pharma (TEVA) and Cisco Systems (CSCO) positions. They increased their TEVA stake by over 600% and brought it up to their largest holding. Their CSCO stake is now their 3rd largest after boosting their position by almost 16,000%. Like Maverick Capital who we just looked at last week, Shumway has also started a nice sized position in Walgreens (WAG). Maverick has much more conviction in the name though, as they brought it up to their top holding, while Shumway holds it at their #14 slot.

Additionally, we see yet another hedge fund that has entered the Wyeth (WYE) trade to the long side in an effort to game the merger arbitrage/event-driven strategy. Two positions worth noting that they sold completely out of are Biogen Idec (BIIB) and Waters (WAT). Previously, those positions had been 9.6% and 6.7% positions for Shumway, which was pretty substantial. But, they no longer own those names as Shumway's portfolio turnover is somewhat more frequent than other typical fundamental funds we follow. Lastly, we want to highlight that Shumway is obviously bullish on both Mastercard (MA) and Visa (V), along with numerous other hedge funds. In particular, we've noticed a lot of the 'Tiger Cub' funds holding shares of these payment processors.

Assets from the collective holdings reported to the SEC via 13F filing were $3.1 billion this quarter compared to $1 billion last quarter, as they put a substantial amount of capital to work on the long side of their portfolio, tripling their exposure. As you can tell from the 'increased positions category, they were definitely out adding across the board to portfolio names they already owned. And, they started brand new large positions in Wyeth (WYE) and Microsoft (MSFT) as well.

Their purchases will have proved to be very timely as the market has rallied substantially. It will be interesting to see if/when they decide to reduce some long exposure after so heavily beefing it up this past quarter. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, John Paulson's hedge fund Paulson & Co, Stephen Mandel's Lone Pine Capital, Eric Mindich's Eton Park Capital, John Griffin's Blue Ridge Capital, and David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Timothy Barakett's Atticus Capital, Lee Ainslie's Maverick Capital, and Raj Rajaratnam's Galleon Group.

Hedge Fund Performance Numbers: May 2009

Hedge funds gained over 5% in May and are now up over 9% for 2009, according to various hedge fund indices. This means it is the industry's best monthly return in a long while. This of course comes after their general underperformance in March and April. Such lagging led us to pen a piece entitled, 'underperformance angst' in which we examined how fund managers react to the notion of panic to the upside as they are left behind. But, it seems as if May was an equalizer month for many funds; especially those who were playing the commodity trade. Don't forget that we're tracking almost all of the funds listed below in our hedge fund portfolio tracking series.


May 2009 & year-to-date performance numbers:

Hedge Funds in general gained 5.68% in May 2009.

John Paulson's Paulson & Co is up 8.75% year-to-date through the end of May in their flagship fund. We recently covered their portfolio and large investment in gold.

John Burbank's Passport Capital had a massive month, up 24% in May and are now up 33% for the year. This is their largest monthly return in over 2 years as their large stakes in commodities and fertilizer companies helped them. Specifically, their stakes in Mosaic (MOS) and Jordan Phosphate Mines definitely helped as those shares were up 35% and 43% respectively. This of course comes after their first ever loss in 2008 (-51%) after more than tripling the year prior in 2007. They are now seeing 28% annualized returns since inception, which are still some very solid numbers. We had previously covered their portfolio and are getting ready to update it in our portfolio tracking series. Here's their monthly breakdown:


John Burbank's Passport Capital -


Ken Griffin's Citadel Investment Group also had an amazing comeback as their flagship Wellington and Kensington funds were up 6% for May and are now up 21% for 2009. This comes after their horrible 2008 performance in which they lost 46% of their assets and landed a place on the top 10 asset losers of 2008 list. In other recent developments, Citadel hired numerous ex-Merrill Lynch investment bankers to expand their firm's new investment banking arm. Looks like they're searching for more sources of income since their hedge funds won't be garnering any performance fees for a while.

Carl Icahn's Icahn Partners was up 7.3% for May and is now up 16% in 2009. This comes after a horrific 2008 in which he was down 38%. In the current market landscape, Icahn has seen opportunities in distressed corporate debt and is also using such a position to seize control of companies since he often employs an activist approach. We haven't covered Icahn much recently, but we have noted his large position in Biogen Idec (BIIB), among others.

Steven Cohen's SAC Capital is faring well, up 13.93% through May for 2009.

Jim Simons' Renaissance Technologies sees their RIEF fund down over 16% for 2009 as their quant strategies have struggled. Curiously enough, their closed and wildly successful fund Medallion continues to crank out great returns while their outside investor funds (including RIEF) continue to pump out sub-par performance. The root of their poor performance stems from their preference of low volatility. In the recent market rally, 'crap' stocks rallied hard and drove volatility higher, thus hurting their RIEF fund. Here is their May investor letter and performance breakdown courtesy of Dealbreaker.

Publish at Scribd or explore others: Finance Business & Law rentec jim simons

And the breakdown:

(click to enlarge)

Dan Loeb's Third Point LLC is faring decently this year with their Offshore fund up 7.4% for May and now up 5.4% year to date. Their Partners fund was up 6.4% in May and up 4.3% for the year. Below is their monthly investor letter report for May 2009:


Dan Loeb's Third Point May Letter -


Additionally, Third Point has recently seen three top executives leave the firm: Devin Dallaire, Bruce Wilson, and Tom Kratky, the chief risk officer, the chief operating officer, and the head of investor relations respectively. The change is interesting, seeing how investors will always be cautious when you see such widespread management changes at publicly traded companies. So, would that not apply to hedge fund land as well? Loeb doesn't think so, as he has alleviated these concerns with one of his eloquent letters. Additionally, check out how Third Point has defensively positioned their portfolio to weather the storm, as detailed in a previous letter here:

Publish at Scribd or explore others: School Work Non-fiction marketing investment

Jeffrey Gendell's Tontine Associates has seen an amazing turnaround, as their Tontine-25 fund was up 17.5% for May and is now up 72.3% year to date. Their Partners fund was up 15.2% for May and is up 49.8% year to date. This rollercoaster ride comes after Tontine previously closed 2 of their funds after posting massive losses in 2008. Now, Tontine has raised $11 million for its new Total Return fund after launching it in February. Courtesy of Dealbreaker, here is a nice graphic breaking down the month-to-month performance of their 2 remaining main funds:

(click to enlarge)

Larry Robbins' Glenview Capital is faring well this year, up 9.44% for May and up 37.63% for 2009. They had average monthly gross exposure of 197.55%, with 132.17% long and -65.37% short, leaving them net 66.8% long. Glenview was previously listed on our top 10 asset losers of 2008 list, losing 50% of their AUM last year. Here's is their monthly breakdown:


Glenview Capital May Letter -


Bill Ackman's Pershing Square Capital was -0.2% for May and is now up 9.8% year to date. In their investor report, they've detailed that they have a notional exposure of $1 billion to long positions in credit default swaps. They had 7 long equity positions, 2 short equity positions and had an overall long exposure of 68% and short exposure of -10%, with the bulk of each weighting falling in large cap stocks. Ackman has been quite busy lately, as we've covered his thoughts on his positions in Target and General Growth. Additionally, we recently posted up his GGWPQ presentation from the Ira Sohn Conference. And, just yesterday, we learned that Ackman has garnered a seat on General Growth's board as they go through their bankruptcy proceedings.

Louis Bacon's Moore Capital Management is up 6.3% thus far in 2009.

David Einhorn's Greenlight Capital was up 6.4% for May and is up 19% for 2009. You can see where their strong performance is coming from by checking out their portfolio, which we recently examined.

Peter Thiel's Clarium Capital was -1.4% for May. Here is their latest breakdown:

(click to enlarge)

If you enjoyed this article then receive our latest posts daily for free via RSS reader or for free via Email. Also, make sure to check out our current hedge fund portfolio tracking series where we're examining the portfolios of 40+ prominent hedge funds. Definitely a solid month for hedge funds after being caught offguard in March and April. We'll continue to track their performances and you can check out their past April numbers here as well.

WisdomTree Creates Hedge Fund ETFs

Sigh... when will it end? Exchange traded funds (ETFs) that try to imitate hedge funds are all the rage in the investment world these days. Previously, we've covered the release of QAI, a hedge fund ETF. We criticized that vehicle because it merely invested in other exchange traded funds and acted like a fund of funds rather than an individual hedge fund strategy. Then, more recently, we detailed the release of mutual funds using hedge fund strategies. In particular, we focused on the Turner Spectrum Fund which will pursue various long/short equity and market neutral strategies. This time around, a new firm has entered the hedge fund ETF arena.

WisdomTree is known for creating their fundamentally weighted ETFs, typically centered around dividends and profits. Now, however, they are turning to actively managed ETFs in an effort to expand their product line. And, they certainly have quite the consultant on board to help them do so. After all, hedge fund pioneer and legend Michael Steinhardt is WisdomTree's chairman. (We recently covered Steinhardt's thoughts on the markets here). So, we would like to assume/hope that Steinhardt had some say in the creation of these vehicles. But, who knows, as stupider things have happened in this world.

WisdomTree is rolling out three actively managed ETFs including a Real Return fund, a Managed Futures fund, and a Long-Short fund. The Real Return fund will play the inflation thesis by investing in TIPS, other fixed income securities, and commodities. This fund is specifically targeting to outperform the inflation rate going forwards. Their Managed Futures fund will be quantitative in nature and will invest in futures contracts, primarily in commodities. Lastly, the Long-Short fund will use pairs trades derived from their already existing ETF family and will run market neutral.

Overall, it sounds like they are taking a solid approach in their Managed Futures fund, as this could help give retail investors further opportunity to invest in the futures markets. Their Real Return fund will essentially just be a basket of inflation plays and off the cuff doesn't seem like anything particularly special. Lastly, the Long-Short fund is not as enticing to us because they are merely doing pairs trades with their pre-existing ETFs, something we could do on our own without paying the expense ratio. And, speaking of expenses, WisdomTree has yet to reveal the costs of each fund. The other thing to highlight here is that these will be actively managed ETFs, so the allocations of each fund will ultimately be up to the fund manager. And that is where things could get interesting, dependent upon how 'active' they actually are.

Overall though, vehicles like these have not entirely impressed us. Instead of investing in these newer and unproven products, we'd recommend taking a more direct approach and using Alphaclone to clone hedge fund portfolios directly based on equity positions the underlying hedge funds actually hold. After all, we did just that with our custom Market Folly portfolio and we've seen 19.8% annualized returns since mid-2002 and are even up 14.4% year-to-date for 2009. Or, if you want to take an even more do-it-yourself approach, we'd recommend reading Mebane Faber's book, The Ivy Portfolio, where he details how to invest like the top endowments and hedge funds. (Our review of the book here).

Its obvious that these ETFs aren't going anywhere and we're sure that even more are in the pipeline. Once we get enough datapoints to truly track their performance and correlation, we'll do a follow-up post on all the vehicles we've previously covered. On the bright side, at least we've found a new bull market: investment vehicle creation.

Technical Analysis & Trading Ideas: Weekly Watchlist 6/8/09

Here's the OptionAddict's current weekly watchlist video for technical analysis and potential trading setups. You can see last week's watchlist here. Enjoy this week's video (RSS & Email readers may need to come to the blog to view it):

Raj Rajaratnam's Galleon Group Playing the S&P500 Straight Up: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up on our series is Galleon Group. Galleon was founded by Raj Rajaratnam in 1997 and currently manages in excess of $7 billion. Raj previously worked for Needham & Company and when he left was responsible for a compounded rate of return of 37% over 4 years while overseeing $250 million. Raj received a Bsc in Engineering and then an MBA in Finance from the University of Pennsylvania. Galleon Group's Buccaneer fund was up 13.39% as of late February 2009. Additionally, their Diversified fund was up 9.87% through the same time period, as noted in our January & February hedge fund performances (March '09 numbers here). We'll be posting up more recent metrics here soon.

Taken from their website, the Galleon Group “manages a series of funds that specialize in the technology and healthcare industries. Currently The Galleon Group manages five different long/short equity funds: Technology, Healthcare, New Media (Internet), Communications and Life Sciences. Galleon’s philosophy and approach differs from that of other hedge funds in the fundamental belief that it is possible to deliver superior returns to our investors without employing leverage. Combine strong fundamental investment analysis with superior trading capability Galleon places a strong emphasis on both fundamental investment analysis and trading. This enables us to identify companies with superior long-term growth prospects while maintaining the flexibility to profit from short-term market fluctuations.”

We find it ironic that their previous description above says they think they can deliver returns without leverage, yet their portfolio is littered with options positions (which is technically leverage). But, oh well, they have a solid track record nonetheless. Raj's success has also recently landed him on Forbes' billionaire list. His firm's solid track record is very evident as they managed to land 2 of their funds on Barron's top 100 hedge funds rankings list. They were one of the few hedge fund firms who managed to do so, and they are definitely in good company as John Paulson's Paulson & Co was one of the others to have multiple funds on the list. (Barron's tracks on a rolling 3 year annualized return basis).

The following were Galleon's long equity, note, and options holdings as of March 31st, 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):
S&P 500 (SPY) Puts, Ishares Russell 2000 (IWM) Puts, Walmart (WMT), Intel (INTC) Puts, Sun Micro (JAVA), General Electric (GE) Puts, Broadcom (BRCM) Puts, Semiconductor ETF (SMH) Puts, Netease (NTES), SPDR Gold Trust (GLD), Procter & Gamble (PG), Novellus (NVLS), Texas Instruments (TXN) Puts, Eli Lilly (LLY), Strayer Education (STRA), Microsoft (MSFT) Calls, Intel (INTC) Puts, Goldman Sachs (GS), Priceline (PCLN), Petroleo Brasileiro (PBR), Netapp (NTAP) Calls, Baidu (BIDU), HSBC (HBC), Novell (NOVL), Symantec (SYMC), Sohu (SOHU), OSI Pharma (OSIP), NVidia (NVDA),


Some Increased Positions (A few positions they already owned but added shares to)
VMWare (VMW): Increased by 1,501%
Mattel (MAT): Increased by 669%
Hewlett Packard (HPQ): Increased by 680%
Apollo Group (APOL): Increased by 333%
AT&T (T): Increased by 333%
Dell (DELL): Increased by 221%
Linear Tech (LLTC): Increased by 212%
Microchip Tech (MCHP): Increased by 175%
Verigy (VRGY): Increased by 158%
Motorola (MOT): Increased by 127%
Yahoo (YHOO): Increased by 126%
Nokia (NOK): Increased by 90%
Wyeth (WYE): Increased by 83%
SPDR S&P 500 (SPY): Increased by 69%
Schering Plough (SGP): Increased by 52%
First Solar (FSLR): Increased by 51%


Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Semiconductor ETF (SMH): Reduced by 45%
Applied Materials (AMAT): Reduced by 26%
Mylan (MYL): Reduced by 19%
Ultrashort Real Estate (SRS): Reduced by 12%


Removed Positions (Positions they sold out of completely)
SAP AG Walldorf (SAP) Puts, Intel (INTC) Puts (old set), Bank of America (BAC) Calls, PNC Financial (PNC), Atmel Corp (ATML), Semiconductors (SMH) Calls, AMAG Pharma (AMAG), Corning (GLW), SAP (SAP), Genentech (DNA), Western Digital (WDC), Starbucks (SBUX), FTI Consulting (FCN), America Movil (AMX), CIT Group (CIT), Amphenol (APH), NRG Energy (NRG), Navistar (NAV), Exxon Mobil (XOM), Kellogg (K), Compuware (CPWR), US Airways (LCC), Honeywell (HON), BB&T (BBT), Colgate Palmolive (CL), Cerner (CERN), Retail ETF (RTH), Walgreen (WAG), SBA Communications (SBAC)


Top 15 Holdings (by % of portfolio)

1. SPDR S&P 500 (SPY): 17.83% of portfolio
2. SPDR S&P 500 (SPY) Puts: 3.93% of portfolio
3. Ishares Russell 2000 (IWM) Puts: 3.53% of portfolio
4. Walmart (WMT): 2.96% of portfolio
5. Wyeth (WYE): 2.1% of portfolio
6. Intel (INTC) Puts: 1.93% of portfolio
7. Sun Microsystems (JAVA): 1.6% of portfolio
8. Advanced Micro Devices (AMD) Bonds: 1.6% of portfolio
9. Hewlett Packard (HPQ): 1.55% of portfolio
10. General Electric (GE) Puts: 1.47% of portfolio
11. Broadcom (BRCM) Puts: 1.4% of portfolio
12. Semiconductor ETF (SMH) Puts: 1.3% of portfolio
13. Netease (NTES): 1.25% of portfolio
14. First Solar (FSLR): 1.25% of portfolio
15. SPDR Gold Trust (GLD): 1.21% of portfolio

As we've grown accustomed to seeing in our past Galleon portfolio snapshots, they still employ numerous options positions in their portfolio. Even though their SPY position is hedged, it has obviously been a big contributor to Galleon's solid performance thus far this year.

We also noted their large position in Wyeth (WYE) in what seems to be a massive trend in hedge fund land. Nearly all the funds we cover have had a position in WYE as they game the merger arbitrage/event-driven trade. Additionally, Raj's firm has a gold position via GLD, just like a ton of other hedge funds out there. Even though it is a smaller stake at only 1.2% of their portfolio, it is yet another hedge fund to add to the gold trade list. The other notable activity we saw was their bearish stance on semiconductors and chips. They have puts on the semiconductors index, Broadcom, and Intel. Lastly, while they sold out completely of various positions (listed above), they were all smaller positions relative to the overall portfolio, typically under 1% each.

Assets from the collective holdings reported to the SEC via 13F filing were $2 billion this quarter compared to $1.1 billion last quarter, so there was definitely a noticeable tick up in assets invested on the long side of the portfolio. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered John Paulson's hedge fund firm Paulson & Co, Stephen Mandel's Lone Pine Capital, Eric Mindich's Eton Park Capital, John Griffin's Blue Ridge Capital, and David Einhorn's hedge fund Greenlight Capital, Seth Klarman's Baupost Group, Andreas Halvorsen's Viking Global, Timothy Barakett's Atticus Capital, and Lee Ainslie's Maverick Capital.

Hedge Funds Investing In Lawsuits

We came across this interesting piece in Dealbook the other day and thought it was very intriguing. Simply put: hedge funds are now investing in lawsuits now. The premise is pretty simple: they invest in one side of the lawsuit and get a share of the winnings (if, of course, they win the case).

Dealbook specifically cites Juridica Capital Management who made 17 investments out of the 122 different cases they looked at, usually investing $7.5 million each case (they have $200 million AUM). Juridica shares have stair-stepped up 24% since their IPO on the London Stock Exchange in 2007. Additionally, Juris Capital in Chicago executes a similar strategy while Credit Suisse also has a unit dedicated to this type of strategy. Juris invests between $500,000 and $3 million per case and their portfolio is seeing 20% returns a year. Apparently, things are going well for funds executing this strategy.

If you think about it, it makes sense. These investors essentially 'bankroll' a litigation team, thus giving them access to all kinds of different tools. The defendant/prosecutor obviously enjoys knowing that their team has deep pockets and the lawyers themselves will find comfort in the fact that they will have no problem getting paid. (Aside: Do you think this would de-incentivize them from working harder since they know they'll get paid regardless?)

Either way, we kind of equate this to a rich investor coming in and purchasing a sports team in an effort to 'turn them around' and ensure they are competitive by providing whatever resources possible (namely: cash). For baseball fans, think the New York Yankees at their recent peak when they were buying everyone in sight. For soccer/futbol fans, think Roman Abramovich at Chelsea FC in the English Premier League. They both spent large amounts of cash and found reasonable amounts of success. The question here is: can this strategy stand the test of time? If these hedge funds can generate solid returns on an annualized basis, things could get intriguing here.

So, what's the key to this type of investment? Avoiding juries. Those in the field equate jury decisions to coin-flips and spins of the roulette wheel. And, in hedge fund land, that's a bit too much uncertainty. (Well, for most hedge funds at least... there are some crazy ones still out there). Overall, an intriguing concept that seems to be gaining more popularity. We're always on the lookout for interesting opportunities like these, so let us know if you find anymore. In the past, we've highlighted some other unique plays that hedge funds have executed, including investing in art, investing in guitars, and investing in wine. We'll have to see what comes next!

John Paulson's $4.3 Billion Gold Investment Chart

Interesting graphic courtesy of CaseyResearch that illustrates just how many gold-related entities hedge fund Paulson & Co owns. The yellow bars represent his gold positions while the blue bars are their positions in other equities. In total, Paulson had invested $4.3 billion into gold as of March 31st, 2009.

(click to enlarge)

The graphic is a nice touch on visually illustrating just how much gold exposure they now have. As we've mentioned before, Paulson & Co bought a ton of gold via the exchange traded fund GLD to hedge themselves because they have a fund share class denominated in gold. But, we've postulated before that they are doing more than simply hedging. After all, why else would they also be buying stakes in numerous gold miners?

Keep in mind that they have numerous positions in other markets besides equities. So, the percentages on the chart are a bit skewed (they are illustrating it as a percentage of the top 15 equity positions). In reality, it is a slightly smaller piece of the overall Paulson portfolio pie. After all, Paulson did just recently start a real estate recovery fund as well. Also, keep in mind that the vast majority of their equity plays are merger-arbitrage or event driven plays. Lastly, we noted last week that Paulson & Co had been covering their Barclays (BCS) short position as well. You can view Paulson's entire portfolio here.