(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)
Next up is David Stemerman's hedge fund Conatus Capital. Conatus raised $2.3 billion and began trading last year after Stemerman left Stephen Mandel's Lone Pine Capital to start his own hedge fund. Like many of the hedge funds we focus on, Stemerman places emphasis on bottom-up individual stockpicking with a long-term time horizon and a long/short equity strategy. In evaluating stocks, they like to focus on the quality of the business and quality of management. And on the short side of their portfolio specifically, they like to focus on companies that are seeing increased competition from lower-cost alternatives or are being displaced by new technology. We've previously taken a look at their investment process in their latest investor letter. For 2009, Conatus finished the fourth quarter up 2.86% and the year up 19.16% as listed in our post on 2009 hedge fund performances.
Brand New Positions
Visa (V)
Estee Lauder (EL)
Schlumberger (SLB)
Discovery Communications (DISCA)
Salesforce.com (CRM)
Polo Ralph Lauren (RL)
Netapp (NTAP)
VMWare (VMW)
Abercrombie & Fitch (ANF)
Credicorp (BAP)
Increased Positions
CH Robinson (CHRW): Increased by 61.6%
Teradata (TDC): Increased by 59%
Covidien (COV): Increased by 55.6%
Priceline.com (PCLN): Increased by 30%
Cognizant Technology (CTSH): Increased by 18%
Citrix (CTXS): Increased by 12%
Express Scripts (ESRX): Increased by 10%
Reduced Positions
Range Resources (RRC): Reduced by 46%
Wells Fargo (WFC): Reduced by 40.6%
BHP Billiton (BHP): Reduced by 39.4%
Walter Energy (WLT): Reduced by 28%
Freeport McMoran (FCX): Reduced by 28%
SBA Communications (SBAC): Reduced by 28%
Urban Outfitters (URBN): Reduced by 27%
Crown Castle (CCI): Reduced by 23.5%
Goldman Sachs (GS): Reduced by 15%
Removed Positions (Sold out completely):
Apollo Group (APOL)
Weatherford (WFT)
DR Horton (DHI)
Toll Brothers (TOL)
Monsanto (MON)
Baxter (BAX)
Petrohawk (HK)
Strayer Education (STRA)
Mindray Medical (MR)
Carnival (CCL)
Baidu (BIDU)
Qualcomm (QCOM)
Top 15 Holdings by percentage of assets reported on 13F filing
- Apple (AAPL): 6.33%
- Express Scripts (ESRX): 5.52%
- Medco Health (MHS): 4.85%
- Google (GOOG): 4.52%
- Cognizant Technology (CTSH): 4.45%
- Cisco Systems (CSCO): 4.35%
- Covidien (COV): 4.30%
- JPMorgan Chase (JPM): 3.61%
- Walter Energy (WLT): 3.48%
- Amazon (AMZN): 2.98%
- Visa (V): 2.95%
- Estee Lauder (EL): 2.90%
- Schlumberger (SLB): 2.87%
- CH Robinson (CHRW): 2.86%
- Itau Unibanco (ITUB): 2.85%
Technology definitely plays a big role in Conatus' portfolio. However, pharmacy benefit management (PBM) companies Express Scripts (ESRX) and Medco Health (MHS) are their 2nd and 3rd largest US equity long stakes and immediately drew our attention. While we've seen many other hedgies play the PBM theme via Express Scripts, CVS, and related companies, Conatus definitely has the most noteworthy exposure as their positions garner the highest placement in their portfolio.
Regarding positions they no longer own, we already knew that Stemerman's hedge fund had sold out of for-profit education plays Apollo Group and Strayer Education as they mentioned this in their investor letter. They also sold completely out of various homebuilders along with Monsanto and Weatherford. While they still own natural resource stocks, they sold shares in practically all of their basic materials plays. Over the fourth quarter, Conatus Capital started sizable new positions in Visa, Estee Lauder, and Schlumberger. Overall, we can sum up their portfolio maneuvers by reduced exposure to basic materials and increased technology exposure.
Data used for this article comes from Alphaclone, our source for backtesting strategies and sorting through all the hedge fund portfolio maneuvers with ease. Assets reported on the 13F filing were $1.8 billion this quarter compared to $1.9 billion last quarter. Remember that these filings are not representative of the hedge fund's entire base of AUM.
We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, Dan Loeb's Third Point, Eddie Lampert's RBS Partners, David Ott's Viking Global, and Chris Shumway's hedge fund Shumway Capital Partners, Chase Coleman's Tiger Global, Philip Falcone's Harbinger Capital Partners, Roberto Mignone's Bridger Management, Thomas Steyer's Farallon Capital, John Burbank's Passport Capital, Brett Barakett's Tremblant Capital, George Soros' hedge fund Soros Fund Management, and Philippe Laffont's Coatue Management Charles Anderson's Fox Point Capital, Bill Ackman's Pershing Square Capital Management, Jonathan Auerbach's Hound Partners, and Lee Hobson's Highside Capital. Check back daily for our new updates.
