Bruce Berkowitz's Fairholme Buys Bank of America, Sells Pfizer: 13F Filing Q1 2010

(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 filings.)

Next up in our series is Bruce Berkowitz's Fairholme Capital Management. While not a hedge fund, we track Berkowitz because despite managing over $10 billion, he runs quite a concentrated portfolio. Not to mention, he was named fund manager of the decade by Morningstar. In activity that was reported after this most recent 13F filing, we see that Berkowitz has actually boosted his AIG holdings. Additionally, he recently revealed a brand new stake in Goldman Sachs (GS) at the Value Investing Congress (see detailed notes from the event here). Also, you'll remember that Fairholme has a large debt position in General Growth Properties (GGP) as they've been an integral part of the winning bid (along with Bill Ackman's Pershing Square and Brookfield) that will help to restructure the company. Lastly, note that Berkowitz typically discloses his positions for his Fairholme Fund (mutual fund: FAIRX) on an individual basis, but we are examining the holdings of his entire firm, Fairholme Capital Management. With that in mind, let's take a look at the rest of Fairholme's portfolio.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Bank of America (BAC)
American International Group (AIG)


Increased Positions
Berkshire Hathaway (BRK.B): Increased position by 1,458% ~ mainly due to Berkshire's 50/1 stock split
Regions Financial (RF): Increased by 74.8%
Comcast (CMCSK): Increased by 46.1%
Citigroup (C): Increased by 5.94%


Reduced Positions
Daily Journal (DJCO): Reduced position by 26.6%
Spirit AeroSystems (SPR): Reduced by 15.9%
CIT Group (CIT): Reduced by 14.5%
Americredit (ACF): Reduced by 13.2%


Positions They Sold Out of Completely
Pfizer (PFE)
WellPoint (WLP)
Burlington Northern Santa Fe (BNI) ~ bought out by Warren Buffett's Berkshire Hathaway
United Rentals (URI)
White Mountains Insurance (WTM)
Penn West Energy (PWE)
Forest Laboratories (FRX)
Coca Cola (KO)
Bristol Myers Squibb (BMY)
Marshall & Ilsley


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. Sears Holdings (SHLD): 14.91%
2. Citigroup (C): 8.61%
3. St. Joe (JOE): 8.1%
4. Humana (HUM): 6.9%
5. Americredit (ACF): 6.81%
6. Bank of America (BAC): 6.56%
7. Regions Financial (RF): 5.57%
8. Hertz Global (HTZ): 5.24%
9. Spirit AeroSystems (SPR): 5.04%
10. American International Group (AIG): 4.8%
11. Leucadia (LUK): 4.71%
12. CIT Group (CIT): 4.46%
13. Berkshire Hathaway (BRK.A): 4.21%
14. Comcast (CMCSK): 3.56%
15. Berkshire Hathaway (BRK.B): 2.86%


Overall, it appears as though Berkowitz is sticking with his 'recovery' play on financials. He added new stakes in Bank of America and AIG (the latter of which we already knew about) and increased holdings in Regions Financial. Additionally, as we mentioned at the very beginning of this article, Berkowitz has just started a new stake in Goldman Sachs and he has been since adding to his AIG position as well.

In the past we detailed how Berkowitz liked health plays but it appears he is now less fond of some of them. After previously holding a massive stake in Pfizer (PFE), he has now completely sold out. This is the exact opposite of what we've seen David Einhorn do, as he's been building a Pfizer stake. Sticking with the Berkowitz/Einhorn dichotomy, we see that Berkowitz was selling some shares of CIT Group while Einhorn was buying. That said, they both own sizable positions.

We also highlight Berkowitz's sale of WellPoint (WLP) as Warren Buffett's Berkshire Hathaway also completely sold out of this position. While these two notable investors have sold out, we've seen various other hedge funds still owning this name. And speaking of Warren Buffett, you'll note that Fairholme Fund drastically increased their position in the B shares of Berkshire Hathaway (BRK.B).

Lastly, we want to bring to your attention that Fairholme also recently filed an amended 13D on shares of TAL International (TAL) due to activity on May 17th. Per the filing, Fairholme now shows a 6.2% ownership stake in the company with 1,890,453 shares. This is a decrease in their position as they've been selling shares throughout the month of May. Those interested in the specifics of the sales can view the SEC filing here. So, keep in mind that the data posted up in the 13F analysis article above is already stale.

Assets reported on Fairholme Fund's 13F filing were $10.7 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, and Lee Ainslie's Maverick Capital. Be sure to check back daily for new hedge fund updates.

David Gallo's Valinor Management Increases Cardtronics Position (CATM)

David Gallo's hedge fund Valinor Management recently filed a 13G with the SEC regarding shares of Cardtronics (CATM). In the disclosure, we see that as of May 10th, they own 2,377,037 shares of CATM, a 5.7% ownership stake in the company. This is an increase in their position. In Valinor's recently filed 13F which details positions as of March 31st, 2010, we see that they owned 1,513,846 shares. This means they've increased their position size by 57% over the past month and a half. We'll be detailing Valinor's portfolio in our hedge fund portfolio tracking series so stay tuned for that.

Prior to founding Valinor, Gallo worked at Roberto Mignone's Bridger Management. He received his MBA from Harvard Business School and the hedge fund is named after lands often inhabited by immortal souls from the books of J.R.R. Tolkien. We've just started tracking Valinor's portfolio in recent quarters and in the past have detailed some of their position adjustments.

Taken from Google Finance, Cardtronics is "a provider of automated consumer financial services through its network of automated teller machines (ATMs) and multi-function financial services kiosks."

Oaktree Capital's Howard Marks Is Cautious: Market Commentary

Chairman of Oaktree Capital Howard Marks is out with his latest commentary entitled, 'Warning Flags.' You'll remember that last time we checked in with Marks he was frustrated with the government and openly voiced it in his missive. This time around, he revisits some of the predictions he made in his previous commentary where he wrote, "the uncertainties discussed above tell me today's distribution of possibilities has a substantial left-hand (i.e. negative) tail, probably greater than at most times in the past. The proper response should be to discount asset prices, allowing a substantial margin for error. Forecasts should be conservative, yield spreads should incorporate ample risk premiums, valuation parameters should be below the long-term norms, and investor behavior should be prudent."

Needless to say, he was prudent in his warning. He points out that regardless of the situation in Greece, investors had reason to be cautious as, "the recovery of 2009 in the face of significant fundamental uncertainty meant that the markets were reincorporating optimism and thus vulnerable to surprise and disappointment. This in itself should be sufficient to induce caution." The rest of his commentary focuses on how market sentiment is currently reminding him of pre-crisis levels. He wisely proclaims that it's time to be skeptical when optimism is omnipresent. Marks' cautionary stance is shared by investing legend Seth Klarman of Baupost Group who we highlighted recently stated that he is worried about the markets.

Marks' commentary is eleven pages worth of insight and quotable gems. As such, we recommend you read it in its entirety. Embedded below is the full commentary from Oaktree Capital's Howard Marks:




You can download a .pdf here.

Maybe the most valuable insight Marks shares is his reiteration that there are two risks in investing: the risk of missed opportunity and the risk of losing money. He says you can compromise between them, avoid one or the other, but you can't eliminate them both. People buy when they should be selling and sell when they should be buying because of emotion. Words of wisdom indeed.

For past commentary from Marks, be sure to check out his 2009 annual review for some great insight. Additionally, those interested in the topic of inflation would be wise to view Marks' ways to play inflation. Lastly, for more of our coverage of prominent investment managers, head to our collection of recent hedge fund investor letters.

A 13F Filing Disclosing Short Positions?

Well, there's a first time for everything. We were just randomly perusing through some of the latest 13F forms filed with the SEC and we came across one that was very peculiar because it actually disclosed some (all?) of the firm's short positions. This is the first time we've ever seen this so we wanted to share.

As you're aware from our hedge fund portfolio tracking series and our preface on 13F filings, investment firms are required to disclose their long positions in US equities, stock options, or notes/convertibles. That's it. They are not required to disclose their cash, shorts, or positions in other markets such as currencies and commodities. We've been lucky that some managers have revealed short positions in their investor letters, but that's about it. Unless they volunteer this information, we typically can't see it. That is, until you find a firm who discloses it to the SEC for no reason.

Behold Exhibit A: Intrepid Capital Management, an investment firm in Florida that mainly manages separate accounts. They've disclosed two short positions in their latest 13F filed with the SEC. As you can see from the picture below, the top two positions of Jacksonville Bancorp and Web Com Group are listed as "com" positions in the second column, referring to common stock. The bottom two companies, Energy Conversion Devices and Arbitron, are listed as 'ss'. This is the first time we've seen this annotation and presume it stands for 'short sale'.

The fourth column is the 'value' column, detailing how much each position is worth. As you can see, their stake in Energy Conversion Devices (ENER) is worth $-246,645 and their stake in Arbitron (ARB) is worth $-639,840. The fifth column then shows how many shares the firm owns in each company. The share count for the first two companies is positive (i.e. long) and the share count for the bottom two is negative (i.e. short).

Here's a picture:

(click to enlarge)

Wild, huh? We just took a small screenshot, but you can view their entire 13F filing here. Intrepid Capital Management clearly isn't afraid to disclose its short positions and is living up to its name. After all, 'intrepid' means fearless. Maybe they're proud of their accomplishment? After all, shares of ENER have been hitting new 52-week lows repeatedly. Shares of ARB, on the other hand, are currently trading much higher than any level the firm could have shorted at in the first quarter. Either way, we applaud their extensive (non-required) transparency and hold out hope that other firms will follow suit for no reason.

As always, for the latest investment moves from some of the most prominent managers out there, check back daily for our hedge fund portfolio tracking series. And if you want to learn more about hedge fund filings and SEC disclosures, head to our preface on 13F filings.

What We're Reading ~ 5/21/10

Richard Russell says sell anything [Pragmatic Capitalism]

New leadership for a new normal [Abnormal Returns]

Hedge funds Highbridge & York Capital have been taking risk off the table [Dealbreaker]

A hedge fund manager says 'we are done with financials' [FT Alphaville]

PIMCO's risk filled global outlook [Felix Salmon, Reuters]

Are mortgages cheap or not? [Paul Kedrosky]

CKE Restaurants: Is a higher bid coming? [Merger Arbitrage Investing]

How Goldman's recommended trades cost clients billions [Zero Hedge]

David Einhorn's Greenlight Capital offers fund share class denominated in gold [Marketwatch]

The brave new world of money management [Institutional Investor]

Charting banking: commercial real estate [Variant Perceptions]

Hedge fund marketing: 10 steps to gain more clients [HedgeTracker]

Will Transocean easily ride out the gulf oil spill? [bnet]

Doug Kass: fear is the rational buyer's friend [TheStreet]

How to play China's growth: buy fertilizer [Times Online]

Will hedge fund Harbinger make a play for Inmarsat? [The Guardian]

Fear of a double-dip recession could cause one [Robert Shiller, NYTimes]

2010's coming stock market crash [Fortune]

Hugh Hendry's Eclectica Fund Sees Hyperinflation Via Deflationary Event; Constructs Asian Bear Portfolio

Hugh Hendry just released the May market commentary from his Eclectica hedge fund (see below). We haven't checked in on Hendry since his March update when we saw he liked Annaly Capital Management (NLY), but his time around we get much more in-depth macro commentary. Hendry has compiled eleven pages worth of insight complete with charts, pictures of Chairman Mao, and even lyrics from the band Gorillaz. The main takeaway from his commentary though is that he sees hyperinflation in store as sovereign entities will need to pay off their overwhelming debts via 'worthless fiat currency.' However, for this to occur, he argues that first we need to see a large deflationary event.

Curiously enough, Nassim Taleb mentioned this sort of scenario at an investment panel where Hendry was a speaker as well. Taleb presented the idea that if you were creating a portfolio today you should allocate a tiny portion to insurance against hyperinflation. If the scenario doesn't unfold, your cheap insurance expires worthless. However, if it does occur, your investment returns an exponential amount. We just yesterday detailed how legendary fund manager Seth Klarman is worried about inflation and has bought insurance to hedge this risk.

Turning back to Hendry's recent commentary, he writes that, "it is now commonly accepted that the magnitude of the financial problems confronting the world economy are so great that in all likelihood we will be confronted by a hyperinflation allowing sovereign debts to be paid off in worthless fiat currency. Just like the Bolsheviks in 1918 and 1919, the machine-gun of the Comissariat of Finance will pour fire into the rear of the bourgeois system. We do not dispute this outcome."

So, what would that deflationary event be that serves as a catalyst? His Eclectica Fund has essentially outlined two 'game changing' scenarios: 1. China's rate of economic growth slumps and 2. The Japanese Yen suddenly appreciates and bankrupts its domestic export base.

How has he positioned his portfolio for such a scenario? Hendry has built a short credit portfolio, "made up of over twenty single-name industrial, cyclical businesses which have the dubious distinction of suffering from gigantic financial leverage and Asian/commodity overdependence. Without a doubt, some of these businesses will not survive; others will have to be radically overhauled and restructured and we will make money." So, let the guessing game begin as to which individual names he's referring to.

Their aptly dubbed Asian bear portfolio is 3.5x short the fund's NAV and has a maximum loss of 8.5% and a maximum potential gain of 250% (if some of their names go bankrupt). In terms of other portfolio positions, the Eclectica Fund has seen strong performance from its European sovereign CDS positions as well as some of their interest rate 'swaptions' in the UK, Australia, and New Zealand. Lastly, Hendry mentions that since the Chinese have started to import corn, this could possibly be the birth of a new trend. Regardless though, he feels corn trading at $3.60 per bushel is too cheap and has started to build a position there as well.

Hendry is by far one of the more entertaining (and contrarian) fund managers out there these days and his macro insights never fail to leave you without contemplation. While we won't spoil the fun by telling you which Chapter Hendry is profiled in, suffice it to say that he certainly makes a lasting impression in Steven Drobny's recently released book, The Invisible Hands: Hedge Funds Off the Record.

Embedded below is the May market commentary from Hugh Hendry's Eclectica Fund:

You can download a .pdf by clicking here.

So, the inflation versus deflation debate wages on. While the vast majority of fund managers we cover on the site have had an inflationary bent, we know Hendry has been in the deflationist camp for a while now. Broyhill's Affinity hedge fund recently outlined ten reasons to buy bonds and Hendry would most likely agree with some of the rationale given that he doesn't think interest rates will rise anytime soon.

We've been posting up a bunch of the latest hedge fund investor letters, so make sure you check out insight from the following managers:

- Louis Bacon's Moore Capital Management

- Ricky Sandler's Eminence Capital

- David Einhorn's Greenlight Capital

- Jay Petschek's Corsair Capital

- Kyle Bass' Hayman Advisors

And for our past coverage on Hendry, be sure to check out his thoughts on how to invest $100 million. And as always, to prepare for either outcome, head to a previous post on investment scenarios: inflation versus deflation.

Lee Ainslie's Maverick Capital Bullish on CVS Caremark (CVS) & Technology: 13F Filing Q1 2010

(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 filings.)

Next up is Lee Ainslie's hedge fund Maverick Capital. Lee founded the firm with seed capital from the Wyly Family in Texas after he left Julian Robertson's hedge fund Tiger Management. Maverick focuses on intensive fundamental research on both the long and short sides of the portfolio, but doesn't employ pairs trades. Ainslie likes to focus on risk management and positions typically do not exceed more than 8% of the portfolio. Maverick's analytical team is divided up by sector and place an emphasis on enterprise value to sustainable free cash flow.

Maverick is part of the Tiger Cub Portfolio created with Alphaclone where you can replicate the holdings of some of the top hedge funds in the game. For recent market insight from Ainslie, we covered Maverick's investor letter where Ainslie saw a decline in the price of risk. Additionally, he gave some of his thoughts at a hedge fund panel. To learn more about Ainslie, head to our profile of Maverick Capital.

The positions listed below were Maverick's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Abercrombie & Fitch (ANF)

Dell (DELL)

Google (GOOG)

Hewlett Packard (HPQ)

Ironwood Pharmaceuticals (IRWD)

JPMorgan Chase (JPM)

Men's Wearhouse (MW)

Office Depot (ODP)

PNC Financial (PNC)

Solarwinds (SWI)

Stanley Black & Decker (SWK)


Increased Positions
Qualcomm (QCOM): Increased position by 269.7%

Bank of America (BAC): 159.3%

Pfizer (PFE): Increased by 125.8%

Expedia (EXPE): Increased by 95.4%

Family Dollar Stores (FDO): Increased by 88%

CVS Caremark (CVS): Increased by 85%

Davita (DVA): Increased by 68.8%

Wellpoint (WLP): Increased by 67.1%

Marvell Technology (MRVL): Increased by 60.9%

Corning (GLW): Increased by 56.9%

Visa (V): Increased by 48.6%

DirecTV (DTV): Increased by 30.6%

Mead Johnson Nutrition (MJN): Increased by 39.3%

Dish Network (DISH): Increased by 9.5%


Reduced Positions
Berkshire Hathaway (BRK.A): Reduced position by 99.6%

Gilead Sciences (GILD): Reduced by 47.2%

Healthnet (HNT): Reduced by 43.8%

Express Scripts (ESRX): Reduced by 42.2%

FedEx (FDX): Reduced by 30.6%

Athenahealth (ATHN): Reduced by 29.2%

Tyco International (TYC): Reduced by 22%


Positions They Sold Out of Completely
Autodesk (ADSK)

AIG (AIG)

Amgen (AMGN)

American Movil (AMX)

Anadys Pharmaceuticals (ANDS)

Apache (APA)

Autozone (AZO)

Brocade (BRCD)

Berkshire Hathaway (BRK.B)

Banco Santander (BSBR)

Citigroup (C)

Citrix (CTXS)

Cablevision (CVC)

Discovery Communications (DISCK)

Equinix (EQIX)

Green Mountain Coffee Roasters (GMCR)

Illumina (ILMN)

Infinera (INFN)

Lorillard (LO)

Priceline (PCLN)

Pepsico (PEP)

Parker Hannifin (PH)

RenaissanceRe (RNR)

Rovi (ROVI)

Sears Holdings (SHLD)

State Street (STT)

Target (TGT)

South Financial Group (TSFG)

Ultra Clean Holdings (UCTT)

Wells Fargo (WFC)

XenoPort (XNPT)

XTO Energy (XTO)

Top 15 Holdings (by percentage of assets reported on 13F filing)

1. CVS Caremark (CVS): 4.04%

2. Marvell Technology (MRVL): 3.89%

3. Apple (AAPL): 3.88%

4. Corning (GLW): 3.88%

5. Qualcomm (QCOM): 3.82%

6. Pfizer (PFE): 3.80%

7. Wellpoint (WLP): 3.75%

8. Apollo Group (APOL): 3.73%

9. Family Dollar Stores (FDO): 3.73%

10. DirecTV (DTV): 3.67%

11. Hewlett Packard (HPQ): 3.54%

12. Progressive (PGR): 2.29%

13. Expedia (EXPE): 2.78%

14. Google (GOOG): 2.71%

15. Visa (V): 2.62%

CVS Caremark is Maverick's largest stake and here's a brief history with their position: Back in the first quarter of 2009, we actually saw Ainslie sell out of CVS and buy into rival Walgreens. Then in the fourth quarter of 2009, we posted on our Twitter account that Ainslie mentioned he was very keen on shares of CVS at an investment conference as it was one of his highest conviction picks. That much is now evident in his portfolio as CVS sits as Maverick's largest holding as of the first quarter in 2010. CVS was also mentioned on a list of analysts' best stock picks for 2010.

Earlier this morning we saw that John Griffin's Blue Ridge started a huge new position in Google (GOOG). Maverick did the same, albeit on a slightly smaller scale. So you have two very prominent hedge funds adding shares of GOOG in size and the stock now trades below any price they would have purchased at this past quarter. Additionally, we see that both Maverick & Blue Ridge sold out of data center play Equinix (EQIX). It should also be highlighted that Ainslie started a sizable stake in tech bellwether Hewlett Packard (HPQ) as well.

We also see Maverick sold over 40% of their Express Scripts (ESRX) position which is interesting because fellow Tiger Cub hedge fund Viking Global favors it as one of their top picks. If we were to hazard a guess, we'd say Maverick reduced this position because they have CVS (another pharmacy benefit management company) as their top holding. We also wanted to highlight Maverick's Family Dollar Stores (FDO) position because this is a name we've seen popping up on numerous 13F filings as of late as it attracts hedge fund interest (and as you'll see in our continuing coverage). Lastly, we make note of Ainslie's departure from some high flying stocks such as Priceline (PCLN) and Green Mountain Coffee Roasters (GMCR).

On a sector basis, Maverick's largest weightings are in technology and consumer services. This is along the lines of what we saw last quarter from Maverick as they bet on technology then as well. Assets reported on the 13F filing were $9.3 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn'sGreenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, and John Griffin's Blue Ridge Capital. Be sure to check back daily for new hedge fund updates.

John Griffin's Blue Ridge Capital Bets Big on Google (GOOG): 13F Filing Q1 2010

(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 filings.)

Next up is John Griffin's hedge fund Blue Ridge Capital. Griffin attended the University of Virginia for undergrad and Stanford for his MBA. Prior to founding Blue Ridge, Griffin served as Julian Robertson's right-hand man at legendary hedge fund Tiger Management.

Blue Ridge invests in companies that dominate their industry and shorts those that have fundamental problems. They generally classify an investment as either catalyst driven or time arbitrage. They point out that there are times when markets will be mis-priced as investment time horizons compress more than normal. Blue Ridge looks to exploit this by taking advantage of situations where people 'stop thinking.' To learn to invest like John Griffin, check out hedge fund Blue Ridge's recommended reading list.

The positions listed below were Blue Ridge's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Apollo Group (APOL)

Banco Santander (BSBR)

Boston Scientific (BSX)

CIT Group (CIT)

Citrix Systems (CTXS)

General Growth Properties (GGP)

Google (GOOG)

Morgan Stanley (MS)

Nvr (NVR)


Increased Positions
Market Vectors Gold Miners (GDX): Increased position by 180.5%

TD Ameritrade (AMTD): Increased by 158.6%

Iberiabank (IBKC): Increased by 64.1%

Teva Pharmaceutical (TEVA): Increased by 28.8%

Mastercard (MA): Increased by 17%

Ares Capital (ARCC): Increased by 14%

JPMorgan Chase (JPM): Increased by 11.3%

Amazon (AMZN): Increased by 3.7%


Reduced Positions

iShares Silver Trust (SLV): Reduced by 41.2%

Millipore (MIL): Reduced by 35.4%

Discovery Communications (DISCK): Reduced by 25%

Discovery Communications (DISCA): Reduced by 25%

Green Mountain Coffee Roasters (GMCR): Reduced by 21.9%

Crown Castle International (CCI): Reduced by 8.72%

Positions They Sold Out of Completely
Berkshire Hathaway (BRK.A)

Charles Schwab (SCHW)

Redwood Trust (RWT)

Pfizer (PFE)

Petrohawk Energy (HK)

Equinix (EQIX)

First Niagara Financial Group (FNFG)

Washington Federal (WFSL)


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. JPMorgan Chase (JPM): 7.03%

2. Apple (AAPL): 5.34%

3. Amazon (AMZN): 4.83%

4. Google (GOOG): 4.45%

5. Crown Castle (CCI): 4.25%

6. McDonald's (MCD): 4.20%

7. MarketVectors Gold Miners (GDX): 3.74%

8. Thermo Fisher Scientific (TMO): 3.62%

9. Teva Pharmaceuticals (TEVA): 3.42%

10. Western Union (WU): 3.41%

11. CME Group (CME): 3.39%

12. Millipore (MIL): 3.37%

13. Express Scripts (ESRX): 3.19%

14. CIT Group (CIT): 3.16%

15. Microsoft (MSFT): 2.66%

John Griffin's Blue Ridge Capital has probably the most intriguing set of portfolio moves we've covered this far. Starting with his new positions we see he added numerous hedge fund favorites including Apollo Group (APOL), a stock owned by many fellow Tiger Cub hedge funds. Keep in mind that while it shows they also started a new stake in General Growth Properties (GGP), they could have possibly already owned shares because GGP previously traded on the pink sheets and in previous quarters was not a security required for disclosure by the SEC. General Growth of course is the emerging-from-bankruptcy REIT play that Bill Ackman, Bruce Berkowitz, and Whitney Tilson all have large stakes in. Thirdly, they started a new CIT position just as Seth Klarman was selling out of it. On the other hand though, David Einhorn added to his CIT stake in the first quarter as well. However, Einhorn and Griffin differ in their view on Boston Scientific as John Griffin was starting a brand new stake in that company just as Einhorn was exiting. It's very interesting to see so many prominent managers take different views on hotly traded stocks.

Blue Ridge also started a new position in Citrix (CTXS), a cloud computing play. As we've covered in the past, David Stemerman's hedge fund Conatus Capital is bullish on cloud computing as well. And staying with technology for a second, Griffin started a hefty new position in Google (GOOG). Market participants will be well aware that GOOG has been trading down for quite some time now and believe it or not, some managers are actually touting it as a 'value' play now. Clearly Griffin sees something there, but shares are now trading below any level he could have purchased at in the first quarter.

Some readers will take note of Griffin's increase in his gold miners exchange traded fund stake (GDX) given that gold has been in the headlines so much recently. Griffin also added to hedge fund favorite names Mastercard (MA) and Teva Pharmaceutical (TEVA). In terms of sector dispersion, Blue Ridge currently has its largest allocations within financials and technology.

On the selling side of Blue Ridge's portfolio, they notably exited Pfizer (PFE), Berkshire Hathaway (BRK.A), and Equinix (EQIX). PFE is owned by a lot of hedgies, BRK.A is owned by a lot of value players, and EQIX is owned by a lot of Tiger Cub hedge funds as well. So, it's interesting to see Griffin's divergence from the pack here on these names and we'll have to see if he revisits them in the future. Yet at the same time, Blue Ridge still owns some of the 'consensus' hedge fund holdings such as Apple (AAPL), JPMorgan Chase (JPM), and Express Scripts (ESRX). That wraps up the notable changes to their portfolio. Make sure to check out Blue Ridge's extensive reading list if you're looking to become a more successful investor.

Assets reported on the 13F filing were $6.1 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, and Mohnish Pabrai's Investment Fund. Be sure to check back daily for new hedge fund updates.

Hedge Fund T2 Partners Still Cautious (Investor Letter)

Whitney Tilson and Glenn Tongue's hedge fund T2 Partners recently sent out their May letters to investors and in it they briefly outline how they are still cautious on the markets. They were down 2.6% for April but are still up 10.1% for the year. A lot of their losses stemmed from short positions rallying in their faces such as MBIA (MBI), Ambac (ABK), and Netflix (NFLX) - we've also detailed some of their other short positions in the past as well. However, they won't be covering this shorts anytime soon because they say they have extreme conviction in their picks.

T2 Partners is still cautious on the markets/economy and cite various reasons for their stance such as: eight million Americans still not paying mortgages, high unemployment, and continued stimulus (both monetary & fiscal) causing large deficits. T2 essentially argues that the market is priced for a rosy outcome when the economy is by no means out of the woods yet. Their view is summed up by an interesting chart comparing long term interest rates to average P/E ratios in the market.

Embedded below is hedge fund T2 Partners' May letter to investors:

You can download a .pdf here.

For more insight from this hedge fund, we recently posted up T2's bearish presentation on the housing market as this stance obviously contributes to their overall pessimistic view in the near-term. The presentation also includes an investment idea of Anheuser Busch InBev (BUD). They presented this sequence at the recent Value Investing Congress and you can view detailed notes from the event here. For past commentary from T2, head to their annual letter.

We've also detailed a lot of hedge fund investor letters as of late and if you've missed these great reads we highly recommend checking out the latest commentary from the managers listed below (click to view their respective letters):

- Louis Bacon's Moore Capital Management

- Ricky Sandler's Eminence Capital

- David Einhorn's Greenlight Capital

- Kyle Bass' Hayman Advisors

- Jay Petschek's Corsair Capital

Make sure to check back daily as we're right in the midst of our hedge fund portfolio tracking series.

Mohnish Pabrai's Investment Fund: Latest Portfolio (13F Filing Q1 2010)

(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 filings.)

Next up in our series is Mohnish Pabrai and his Pabrai Investment Fund. He is a value investor in the true sense of the word and has followed in the footsteps of Warren Buffett in numerous ways. Firstly, his fund is structured similarly to Buffett's Partnerships where he charges no management fee and then no incentive fee until the fund gains at least 6%. Once Pabrai clears this hurdle, he charges a 25% incentive fee. Typical hedge funds charge a 2% management fee and a 20% performance incentive. Pabrai has in the past won an auction for lunch with Warren Buffett as well.

For 2009, Pabrai's funds performed well after having a poor 2008. Last year, his PIF2 finished up 122.5%, PIF3 up 125%, and PIF4 up 118.8% as noted in our hedge fund performance numbers post. Pabrai recently presented at the Value Investing Congress and you can read in-depth notes from the event here.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
International Coal Group (ICO)


Increased Positions
Fairfax Financial Holdings (FFH): Increased position by 0.34%
Terex (TEX): Increased by 0.02%


Reduced Positions
Teck Resources (TCK): Reduced position by 99.5%
Harvest Natural Resources (HNR): Reduced by 14.74%
Potash (POT): Reduced by 2.03%
Pinnacle Airlines (PNCL): Reduced by 0.25%
Air Transport Services Group (ATSG): Reduced by 0.24%
CapitalSource (CSE): Reduced by 0.18%
Berkshire Hathaway (BRK.B): Reduced by 0.02%


Positions They Sold Out of Completely
n/a


Pabrai's Portfolio (by percentage of assets reported on 13F filing)

1. Potash (POT): 11.89%
2. Brookfield Properties (BPO): 10.89%
3. Harvest Natural Resources (HNR): 10.80%
4. Fairfax Financial (FRFHF): 9.28%
5. Berkshire Hathaway (BRK.B): 7.81%
6. Cresud (CRESY): 7.20%
7. Leucadia National (LUK): 5.90%
8. Goldman Sachs (GS): 5.68%
9. Air Transport Group (ATSG): 5.42%
10. Horsehead Holding (ZINC): 4.83%
11. CapitalSource (CSE): 4.72%
12. Pinnacle Airlines (PNCL): 4.48%
13. Terex (TEX): 3.62%
14. Wells Fargo (WFC): 3.50%
15. International Coal Group (ICO): 3.45%
16. Interactive Brokers (IBKR): 0.46%
17. Teck Resources (TCK): 0.07%


As you can see, Pabrai favors many natural resource type plays and has held some of them for quite some time. Potash (POT) is the most notable as it is his largest position. However, he has essentially sold completely out of Teck Resources (TCK), as he only has a tiny part of his position left. Pabrai also started a brand new stake in International Coal Group (ICO). Given that he is a true value investor, you won't see as much turnover in his portfolio to begin with so that wraps up the major moves. For more on Pabrai, head to his recent insight at the Value Investing Congress.

Assets reported on the 13F filing were $332 million this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, and David Tepper's Appaloosa Management. Be sure to check back daily for new hedge fund updates.

David Tepper's Appaloosa Management Trims Financials & Airlines, Buys Blue-Chip Health Stocks (13F Filing Q1 2010)

(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 filings.)

Next up in our coverage is David Tepper's hedge fund Appaloosa Management. Tepper's hedge fund focuses on companies that other people have thrown in the towel on and he takes concentrated positions in distressed debt and equity. This investment style was epitomized in the heart of the financial crisis when Tepper bought numerous financial stocks. This wager earned him billions and he gained a few spots on the Forbes billionaire list. He is from Pittsburgh and owns the NFL's Pittsburgh Steelers. While Appaloosa won big with their financials bet, they were also one of the top hedge fund losers in 2008. Needless to say, it's been a volatile past few years for Appaloosa. Previously, Tepper was a high yield bond trader for Goldman Sachs.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Pfizer (PFE)
Johnson & Johnson (JNJ)
Merck (MRK)
Valero Energy (VLO)
Yahoo (YHOO)
SuperMedia (SPMD)
Sunoco (SUN)
Tesoro (TSO)
Con-way (CNW)
YRC Worldwide (YRCW)
Continental Airlines (CAL)
Arkansas Best (ABFS)
American Commercial Lines (ACLI)


Increased Positions
Navistar International (NAV): Increased position by 293.6%
Goodyear Tire & Rubber (GT): Increased by 32.6%
Newcastle Investment Group (NCT): Increased by 17.9%
Willis Group Holdings (WSH): Increased by 15.6%
Hartford Financial (HIG): Increased by 5.4%


Reduced Positions
Office Depot (ODP): Reduced position by 81.1%
XL Capital (XL): Reduced by 73.5%
Valassis Communication (VCI): Reduced by 61%
Citigroup (C): Reduced by 54.8%
AMR Corp (AMR): Reduced by 44.04%
Delta Airlines (DAL): Reduced by 37.6%
SunTrust Banks (STI): Reduced by 35.7%
Fifth Third Bancorp (FITB): Reduced by 30.2%
E*Trade Financial (ETFC): Reduced by 28.9%
OfficeMax (OMX): Reduced by 27.6%
UAL Corp (UAUA): Reduced by 26.1%
BB&T (BBT): Reduced by 25.6%
Capital One Financial (COF): Reduced by 25.4%
CNO Financial (CNO): Reduced by 25%
Brunswick (BC): Reduced by 20.3%
Wells Fargo (WFC): Reduced by 18.5%
Microsoft (MSFT): Reduced by 18.5%
US Airways (LCC): Reduced by 13.2%
Gramercy Capital (GKK): Reduced by 11.9%
Strategic Hotels & Resorts (BEE): Reduced by 7.7%
Bank of America (BAC): Reduced by 5.9%
Maguire Properties (MPG): Reduced by 3.65%


Positions They Sold Out of Completely
Rite Aid (RAD)
Hospitality Properties Trust (HPT)


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. Bank of America (BAC): 20.47%
2. Wells Fargo (WFC): 10.54%
3. Citigroup (C): 9.55%
4. Fifth Third Bancorp (FITB): 8.74%
5. Hartford Financial (HIG): 7.07%
6. SunTrust Banks (STI): 5.56%
7. Pfizer (PFE): 4.18%
8. Capital One (COF): 3.50%
9. Johnson & Johnson (JNJ): 3.13%
10. Microsoft (MSFT): 2.70%
11. Merck (MRK): 2.43%
12. Valero (VLO): 2.14%
13. Yahoo (YHOO): 1.96%
14. UAL Corp (UAUA): 1.66%
15. Willis Group Holdings (WSH): 1.64%

Back when we covered Appaloosa's fourth quarter portfolio, we noted they were buying airlines. Well, this time around they were trimming those positions. While Tepper also trimmed positions in numerous financials, they are still some of his largest holdings. The top half of his portfolio looks pretty similar to last quarter, but take note that he sold over half his Citigroup (C) position and almost a third of his Fifth Third Bancorp (FITB) stake. Despite these sales, these positions are still some of his largest. We also highlight that Appaloosa sold 30% of their SunTrust Banks position and we mention this because we just saw Warren Buffett's Berkshire Hathaway exit their STI stake completely.

Tepper also made a few notable buys in the first quarter of 2010 including Pfizer, Johnson & Johnson, and Merck. Obviously he's playing the blue-chip health theme here that we've seen so many other hedge funds flock to as many of these companies are undervalued. Just yesterday we noted David Einhorn added to his PFE position as well. Lastly, Tepper also started a new stake in SuperMedia (SPMD), a company we recently saw John Paulson start a position in as well.

Assets reported on Appaloosa's 13F filing were $2.6 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for aggregating the hedge fund portfolio movements and backtesting the performance (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, and Eddie Lampert's RBS Partners. Be sure to check back daily for new hedge fund updates.

Eddie Lampert's RBS Partners Portfolio: 13F Filing Q1 2010

(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 filings.)

Next up is RBS Partners, the parent company of Eddie Lampert's hedge fund ESL Investments. Prior to forming ESL, Lampert worked with Robert Rubin at Goldman Sachs' risk arbitrage department. Lampert graduated from Yale where he was a member of the skull and bones secret society, as well as Phi Beta Kappa. He runs highly concentrated portfolios and his focus has long been on the retail sector, most notably through his ownership of Sears Holdings (SHLD). He has graced Forbes' billionaire list but was also one of the top hedge fund losers in 2008. In terms of recent investment activity, we saw that Lampert bought AutoNation (AN) shares and his Sears Holdings purchased Bill Ackman's stake in Sears Canada. Our coverage of RBS also includes Lampert's 2010 annual letter.

The positions listed below were their long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
n/a


Increased Positions
n/a


Reduced Positions
Wells Fargo (WFC): Reduced position by 62.7%
SLM (SLM): Reduced by 62.1%
Acxiom (ACXM): Reduced by 60.1%
Genworth Financial (GNW): Reduced by 7.7%
Sears Holdings (SHLD): Reduced by 7%
Capital One (COF): Reduced by 4.91%
AutoZone (AZO): Reduced by 4.33%
AutoNation (AN): Reduced by 3.33%


Positions They Sold Out of Completely
Bank of America (BAC)


Eddie Lampert's Entire Portfolio (by percentage of assets reported on 13F filing)

1. Sears Holdings (SHLD): 54.27%

2. AutoZone (AZO): 27.21%

3. AutoNation (AN): 11.36%

4. Capital One (COF): 3.09%

5. CIT Group (CIT): 1.44%

6. Genworth Financial (GNW): 1.21%

7. Citigroup (C): 1.03%

8. Acxiom (ACXM): 0.15%

9. Wells Fargo (WFC): 0.14%

10. SLM (SLM): 0.11%

Lampert obviously runs a highly concentrated portfolio so there's not a lot to cover in terms of changes. We want to quickly point out that while it *appears* as if Lampert was trimming positions in Sears, AutoNation, and AutoZone, that's not the case. As we detailed previously, Lampert was distributing these shares to some of his different investment vehicles as well as to investors in his funds.

Be advised that since this filing he has actually bought AN shares which we detailed in April. In terms of selling, Lampert actually sold over 60% of his stakes in Acxiom, SLM Corp, and Wells Fargo. He also sold entirely out of his small stake in Bank of America (BAC). Other than that, there's not a whole lot to update you on.

Assets reported on RBS Partners' 13F filing were $12.2 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital. Be sure to check back daily for new hedge fund updates.

Seth Klarman: Worried About Inflation & the Markets

"I'm more worried about the world broadly than I've ever been in my whole career." ~ Seth Klarman

Those haunting words were uttered yesterday at the CFA Institute's annual conference in Boston according to Reuters' coverage. Are you concerned yet? You probably should be. When the investment manager from Baupost Group speaks, you listen. After all, Baupost Group has averaged 20% annual gains. Klarman went on to say, "Given the recent run-up, I'd be worried that we'll have another 10 years of zero returns." That should inspire some confidence, right?

Reuters had two intriguing articles regarding Klarman's recent remarks here and here. Essentially, Klarman is quite concerned about inflation and has purchased far out of the money puts on bonds. These aren't the type of puts that he'll make money on if interest rates go to 5% either. Nope. Klarman is betting on extreme inflation that would require interest rates of 10% for him to make money on the play... that's how far 'out of the money' he is.

While we can't confirm this, it sounds an awful lot like Julian Robertson's constant maturity swap (CMS) trade he put on a while back (see also our explanation of curve steepener trades). Very loosely speaking, these are somewhat like buying far out of the money puts on long term treasuries. They're likely to expire worthless, but if the scenario does play out, these trades can pay out over 50x. While we can't confirm the exact vehicle he's selected for this play, Klarman is merely seeking insurance should this drastic event occur as he wants to hedge out the potential risk.

In terms of current investment pursuits, the Baupost Group manager is looking at private commercial real estate. He doesn't like publicly traded REITs here because they've rallied too much. This is largely in line from what we've seen out of hedge fund land as many hedgies have been short commercial real estate plays to no avail as everyone seems to think they are overpriced and destined for a correction.

Just a few days ago we detailed the latest portfolio update on Baupost Group and saw that Klarman added a couple of new equity positions. However, the main thing to take away from that update confirms what Klarman recently stated at the conference: Baupost is sitting on a ton of cash. The assets on their 13F filing (mainly US equities) only totaled around $1.7 billion and the firm manages $22 billion. While we know Klarman has also invested in distressed assets, do the math there. Apparently Baupost is sitting on over $6 billion in cash (30% of assets) and don't see many opportunities to put that money to work.

Klarman is notorious for always keeping cash on the sidelines should he find opportunities. However, now is clearly not one of those times as he has debated returning some of the money to investors. A compelling investment landscape from over a year ago is clearly no more. The opportunities seem fewer and farther between and it's very apparent Klarman is concerned given the drastic run-up in equities. Many managers feel we're not out of the proverbial woods yet so now would probably be as good a time as ever to review Seth Klarman's lessons from the financial crisis. While Seth Klarman doesn't speak in public very often, those interested in hearing him will have the opportunity at the upcoming Ira Sohn investment conference.

For our recent coverage of Baupost Group's portfolio, check out their new positions in ADC Telecommunications and Solar Capital. We'll leave you with some closing remarks from Klarman: "We'd rather underperform a huge bull market than get clobbered in a bear market." A true investment manager indeed.


Source: Reuters

Bill Ackman Talks Financial Regulation & Ratings Agencies

We wanted to quickly highlight that BloombergTV recently had Bill Ackman of hedge fund Pershing Square on to talk about financial regulation and the ratings agencies. The conversation stems from Ackman's battle with MBIA where he shorted the stock and over the course of six years eventually won. This story is detailed in Christine Richard's new book Confidence Game that we recently reviewed. In order to help change the system, Ackman is in favor of Sheila Blair's proposal which he talks about in the interview.

Embedded below is the video and Email readers will need to come to the site to view it:



For more of our coverage on Bill Ackman, be sure to check out our recently updated post on Pershing Square's portfolio.

Jeff Saut Says Market in Bottoming Process

Jeff Saut, Chief Investment Strategist over at Raymond James, thinks the market is in the middle of a bottoming process. In his latest market commentary, he mentions that the market's 'convalescing period' could take anywhere from two to eight weeks. He is looking to accumulate stocks during this period and has advised to ready your 'buy list' of preferred names you want to own. In the weeks leading up to the pullback, Saut had advocated caution and raised cash levels. The market initially declined recently from the flash crash and then rallied sharply back but did not breach the 50 day moving average. As such, he thinks a re-test of the recent low is in order and he anticipates it will hold.

In terms of what specifically to invest in, Saut had a few recommendations. He in particular likes Brazil as the country has plenty of fresh water, agricultural commodities and energy. While he has been somewhat cautious on emerging markets in the near-term, he is quite bullish for the long-term. For fund investors, he mentions the new Dreyfus Brazil Equity Fund (DBZAX) and for individual stocks he recommends CPFL Energia (CPL). Regarding non-Brazilian recommendations, Saut again mentions 7% yielding Enterprise Partners (EPD) which is on Raymond James' focus list. He mentioned this last time around when he advised to selectively upgrade the stocks in your portfolio.

Jeff Saut ends his commentary by saying, "Indeed, market historians should recall that after a selling climax what typically happens is a one-to-three-session throwback rally followed by a downside retest attempt of those 'lows.' Sometimes the 'lows' are marginally broken, but most of the time they are not. I continue to invest accordingly."

Embedded below is Jeff Saut's latest market commentary:



You can download a .pdf here.

Saut was right in his call to be cautious and raise cash a few weeks ago. We'll have to see if he's correct again if the market does start to bottom here and trade higher. However, many market pundits are calling for the market to go decisively lower, so no we wait. For more from Jeff Saut, you can see his past investment strategy here.

David Einhorn's Greenlight Capital Bets on CIT Group & Pfizer: 13F Filing (Q1 2010)

(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 filings.)

Next up is David Einhorn's hedge fund Greenlight Capital. Greenlight is a value oriented investment firm with a focus on spin-offs, mergers and other catalytic situations. Einhorn graduated Summa cum laude from Cornell and launched his long/short hedge fund with $1 million back in 1996 and nowadays is a multi-billion dollar fund. For 2009, Greenlight's various hedge funds were up between 30.6% and 36.9% as noted in our hedge fund performances list.

Greenlight has also returned an impressive 22% annualized since inception if you needed another reason to track them. In terms of recent portfolio activity, we posted up two of Greenlight's position changes. To learn more about Einhorn's investment process, we highly recommend reading his book: Fooling Some of the People All of the Time.

The positions listed below were Greenlight's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Xerox (XRX)
NVR (NVR)
Flagstar Bancorp (FBC)
Symetra Financial (SYA)
Coinstar (CSTR)
Iconix Brand Group (ICON)


Increased Positions
Energy Partners (EPL): Increased position by 2,226.7%
Foster Wheeler (FWLT): Increased by 401%
CIT Group (CIT): Increased by 67.55%
Ralcorp (RAH): Increased by 50%
EMC (EMC): Increased by 24.5%
Pfizer (PFE): Increased by 22.63%


Reduced Positions
URS (URS): Reduced position by 50%
Health Management (HMA): Reduced by 28.5%


Positions They Sold Out of Completely
Boston Scientific (BSX)
McDermott (MDR)
BJ Services (BJS)
Patterson UTI-Energy (PTEN)
Ticketmaster (TKTM - merged with LiveNation (LYV), a position Einhorn sold)
Endurance Specialty Holdings (ENH)
MEMC Electronics (WFR)
Barrick Gold (ABX)
Huntsman (HUN)
Nike (NKE)
Sinclair Broadcast (SBGI)


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. CIT Group (CIT): 14.07%
   
2. Pfizer (PFE): 10.62%
   
3. Cardinal Health (CAH): 8.05%
   
4. CareFusion (CFN): 7.86%
   
5. EMC (EMC): 5.48%
   
6. Einstein Noah Restaurant Group (BAGL): 4.45%
   
7. Aspen Insurance (AHL): 4.07%
   
8. Travelers (TRV): 3.92%
   
9. Microsoft (MSFT): 3.40%
   
10. Foster Wheeler (FWLT): 3.36%
    
11. Ralcorp (RAH): 3.12%
    
12. URS (URS): 3.05%
    
13. Health Net (HNT): 2.97%
    
14. Everest Re (RE): 2.71%
15. MI Developments (MIM)
    

We already knew from Greenlight Capital's investor letter that their portfolio activity was pretty muted for the first quarter and the 13F filing confirms that. That said, there are a few transactions we wanted to highlight. They added significantly to their position in CIT Group (CIT) which is intriguing because it is their top US equity long. We just noted yesterday that Seth Klarman's Baupost Group sold completely out of CIT so the divergence here is intriguing. Greenlight's exit from shares of Boston Scientific was also notable, but we already knew about that from their letter.

If you hadn't noticed, there are clearly two portfolio themes at play here: health and insurance. Einhorn has owned many of these positions for multiple quarters now and it's clear he thinks the market is undervaluing these companies' prospects. While Einhorn specifically holds a decent sized stake in Travelers (TRV), we learned yesterday that Warren Buffett sold out of TRV. So yet again, we have a divergence of opinion from two great investors.

Other notable activity out of Einhorn's hedge fund includes adding to their position in Pfizer (PFE), which is now their second largest holding. Additionally, they added heftily to their position in infrastructure play Foster Wheeler (FWLT). While Greenlight increased their position in Energy Partners (EPL) substantially on a percentage basis, the position is still relatively small in the context of their overall portfolio.

In the past, we'd also detailed Einhorn's thesis on Vodafone (VOD) but prudent observers will notice this position is not listed in the 13F filing. This is most likely because Greenlight has invested in the VOD shares traded directly in London, a security that does not require disclosure here in the US with the SEC. As we saw in Greenlight's first quarter letter, Einhorn still owns Vodafone and as a matter of fact it's one of their top positions. Additionally, they also still hold a large position in physical gold which obviously does not appear in disclosures either. Einhorn has selected physical gold as it was cheaper to maintain than paying expense ratios on exchange traded funds like GLD. To learn more about Greenlight, head to Einhorn's book entitled, Fooling Some of the People All of the Time.

Assets reported on the 13F filing were $2.93 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for sorting through all the hedge fund portfolio maneuvers and backtesting the performance (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square Capital Management. Be sure to check back daily for new hedge fund updates.

Bill Ackman's Pershing Square Sells Automatic Data Processing (ADP): Q1 2010 13F Filing

(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 filings.)

Next up is Bill Ackman's hedge fund Pershing Square Capital Management. Ackman runs a value and activist fund with a highly concentrated portfolio so it is ideal for tracking purposes. He received his undergraduate degree from Harvard and his MBA from Harvard Business School. As we recently reviewed, Ackman and the saga surrounding his short position in MBIA (MBI) is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. It's definitely worth a read if you want to learn more about Ackman, the short selling process, and perseverance in general. Additionally, for more background on Bill Ackman's hedge fund, we've previously detailed a profile of Pershing Square.

The positions listed below were Pershing's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
Kraft Foods (KFT)


Increased Positions
Yum Brands (YUM): Increased position by 10%


Reduced Positions
Target (TGT): Reduced position by 0.51%


Positions With No Change
General Growth Properties (GGP)
Corrections Corp of America (CXW)
Landry's Restaurants (LNY)
Borders Group (BGP)
Greenlight Capital Re (GLRE)


Positions They Sold Out of Completely
Hyatt Hotels (H)
Automatic Data Processing (ADP)


Pershing's Entire Long US Equities Portfolio (by percentage of assets reported on 13F filing)

1. Target (TGT): 32.79%
   
2. Kraft Foods (KFT): 29.89%
   
3. Yum Brands (YUM): 17.56%
   
4. General Growth Properties (GGP): 11.62%
   
5. Corrections Corp of America (CXW): 6.55%
   
6. Landry's Restaurants (LNY): 0.84%
   
7. Borders Group (BGP): 0.55%
   
8. Greenlight Capital Re (GLRE): 0.20%
   

Given Ackman's concentrated portfolio, there's not a lot to cover in terms of portfolio adjustment. However, we want to first immediately address misinformation that is floating around in mainstream news land regarding Pershing Square's portfolio. Firstly, we'll start with the fact that CNBC yesterday wrongly reported that Pershing added 23.9 million shares of General Growth Properties (GGP). Other news outlets have mistakenly followed suit. This is merely the exact same position that Pershing has held all along. As we've detailed countless times, General Growth Properties traded on the pink sheets for a period of time under the ticker GGWPQ. When this occurred, these shares became a security that was not deemed reportable by the SEC. As such, Pershing Square still owned it but was not required to disclose it.

Fast forward to the present as the new 13F filings come out and you see that General Growth Properties is listed on Pershing's disclosure. This is merely because shares now trade on the NYSE under ticker GGP, a security that *is* deemed reportable by the SEC. So, people not familiar with tracking 13F's or those who blindly follow sorted data will be viewing what *looks* like a new position in GGP, but in reality, isn't.

Ackman was on television a few weeks back talking about how he thinks GGP could double over the next few years "if done correctly." One thing this disclosure does provide us is knowledge of Pershing Square's total equity ownership in GGP of just over 23.9 million shares. Since there was essentially a 'dark period' when no one knew how much equity they owned due to the disclosure issue we touched on above, we now get clarification. To get an idea as to Ackman's total position, we've in the past detailed Pershing's economic exposure to GGP as they own other securities as well.

Secondly, back in January when we covered Pershing's fourth quarter portfolio, we made special note that they had sold out of Hyatt Hotels as per a 13G filing and it is obviously just now reflected in their latest update. They only owned shares briefly as they purchased them sometime in the fourth quarter of 2009 and then sold them in the first week of January 2010.

Thirdly, regarding their stake in Yum Brands (YUM), we just wanted to highlight that they did not disclose this position until April 2010 when in reality they owned it as of December 31st, 2009. In their original 13F for the fourth quarter 2009, Pershing did not disclose their YUM position. But via an amended 13F in April, they all of a sudden disclosed the position. So now via the first quarter 2010 13F filing we see that they have since added to the position to the tune of 10%. Whew, got all that?

In terms of other recent portfolio activity not covered via 13F filing, we saw that Pershing sold its Sears Canada stake to Sears Holdings for around $560 million. Lastly, in the past we've covered a ton of Pershing's investment presentations regarding their positions and have posted links below for those of you wanting to learn about their specific investment thesis for each name:

- Pershing's presentation on Kraft (KFT)
- Pershing's Corrections Corp of America (CXW) presentation
- Pershing's updated General Growth Properties thesis & we also detailed their original GGP presentation from when they first established the position

Assets reported on Ackman's 13F filing were $3.3 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source that seamlessly sorts through all the hedge fund portfolio maneuvers and backtests the performance (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, and Stephen Mandel's Lone Pine Capital. Be sure to check back daily for new hedge fund updates.