What We're Reading ~ 5/28/10

Pequot Capital & Art Samberg to pay $28 million to settle insider trading charges [FINalternatives]

Scottwood Capital got taken to the woodshed last month [Dealbreaker]

Taking issue with/smacking down David Einhorn's Ira Sohn speech [Pragmatic Capitalism]

The genetic makeup of winning stocks, a case study [Valuehuntr]

How hedge funds shaped financial reform [AR Hedge]

Is Google (GOOG) a growth or value stock? [YCharts]

Tons of hedge funds bought Google in the first quarter, Citi thinks it's a buy too [Business Insider]

Lessons for the apprenticed investor [Big Picture]

Equity analysts are always overoptimistic [Greenbackd]

Seven worries for Wall Street & what's next [Marketwatch]

How StockTwits is changing trading (we're an active participant) [Fast Company]

Tigris Financial goes all-in on gold (subscription required to view; here's a WSJ discount) [WSJ]

Some recent hedge fund performance numbers (they're ugly) [HFAlert]

Hedge funds are eyeing auto-parts makers for possible acquisitions [BusinessWeek]

Many hedge funds have been buying CME Group, here's a reason why [Fortune]

David Einhorn's Ira Sohn Presentation: "Good News for the Grandchildren"

Earlier, we posted a compilation of notes from the Ira Sohn Conference and we also detailed Steve Eisman's presentation, Subprime Goes to College. Next, we're detailing the speech from Greenlight Capital's David Einhorn. The hedge fund manager's speech entitled, "Good News for the Grandchildren" focuses on how our grandchildren won't have to pay for the consequences of our actions; we will. He thinks a crisis has already unfolded and that our generation will be the ones paying for it. Instead of watching the situation spiral into a debt crisis, Einhorn urges us to address the situation right now. As you can imagine, Einhorn likes gold and gold stocks. In particular, he mentioned African Barrick Gold (ABG) traded in London.

Additionally, Einhorn attacked the ratings agencies and again mentioned he was still short Moody's (MCO) and McGraw Hill (MHP). Some of you will remember that Einhorn originally laid out his short thesis on these names at last year's Ira Sohn Conference when he presented The Curse of the Triple-A. To see what else Einhorn has been investing in, we highlighted his new position in NCR and we've also covered Greenlight's portfolio for those interested. To learn more about Einhorn and his investment process, we recommend checking out his book, Fooling Some of the People All of the Time.

Embedded below is David Einhorn's presentation from yesterday's Ira Sohn Investment Conference entitled, "Good News for the Grandchildren":



You can also download a .pdf copy here.

For more coverage of this event, be sure to head to notes from the Ira Sohn Conference as well as Steve Eisman's presentation, Subprime Goes to College. And if you want to see the latest portfolio moves from top investment managers, head to our ongoing hedge fund portfolio tracking series.

Steve Eisman & FrontPoint Partners Ira Sohn Presentation: Subprime Goes to College

Earlier we aggregated a compilation of notes from the Ira Sohn Investment Conference where some very prominent hedge fund managers detailed investment ideas. One of those managers was Steven Eisman of FrontPoint Partners (Morgan Stanley). You may be familiar with him as he was profiled as one of the successful subprime traders in Michael Lewis' book, The Big Short.

Eisman thinks he has identified the next 'subprime' so to speak and gave a presentation at the Ira Sohn Conference entitled, "Subprime Goes to College." This speech provided a negative thesis on the for-profit education plays. In particular, Eisman is bearish on Apollo Group (APOL), ITT Educational (ESI), Corinthian Colleges (COCO), and Education Management (EDMC). Lastly, he also dislikes Washington Post (WPO) due to their ownership of the Kaplan test preparation business. His general thesis focuses on two factors: Washington clamping down on the industry and a rise in employment (generating a decline in enrollment). He notes that a key to the problem here is the 'rating' these institutions receive from accreditation boards and he likens these boards to the ratings agencies who blessed subprime mortgages.

Embedded below is the Ira Sohn presentation from Steven Eisman & FrontPoint Partners entitled, 'Subprime Goes to College':



You can download a .pdf copy here.

As we've detailed numerous times, the for-profit education space is an investor battleground with a clear divergence of opinion. Stephen Mandel's hedge fund Lone Pine Capital has been bullish on education plays. In fact, at least year's Ira Sohn event, he gave a bullish presentation on Strayer Education (STRA). While he has since scaled back his position some, we saw he still owned it when we detailed Lone Pine's portfolio. We also recently saw Roberto Mignone's hedge fund Bridger Management buy shares of Princeton Review (REVU), another test preparation service.

That said, we've also noted that some of these managers have had a recent change of heart. David Stemerman's hedge fund Conatus Capital had been long and sold out of their education plays. Andreas Halvorsen's Viking Global also exited Apollo Group recently. Additionally, there are also numerous high profile detractors such as Jim Chanos who gave a negative presentation on for-profit education at last year's conference. And now, Eisman has joined the mix with his negative view too. We'll watch with great interest to see how this one plays out. For more great ideas from hedge fund managers, head to our aggregation of notes from the Ira Sohn Investment Conference and be sure to also check out our hedge fund portfolio tracking series.

Ira Sohn Conference Notes: Investment Ideas From Hedge Fund Managers

This year's Ira Sohn Conference was packed with investment presentations from heavy hitting hedge fund managers including Seth Klarman, David Einhorn, Bill Ackman, David Tepper, Larry Robbins and more. Like the Value Investing Congress (in-depth notes from that recent event here), you get a plethora of ideas from top talent. Presentations at Ira Sohn in years past include Greenlight Capital's David Einhorn blasting Lehman Brothers before it failed and Pershing Square's Bill Ackman detailing his bullish stance on shares of General Growth Properties when they were trading below $1 (as they now trade north of $13).

We covered many of last year's Ira Sohn presentations for those interested and the list goes on, but you get the picture. Without further ado, let's dive into some of the investment presentations we've aggregated from various sets of notes that were sent to us, as well as the live-tweeting of NY Times' Michael de la Merced and additional coverage from Barron's Tiernan Ray. We'll post up more in-depth presentations as they become available.


David Tepper of Appaloosa Management: Tepper was nonchalant in the outset of his presentation where he mentioned that his firm had lost $1 billion in AUM over the past month, yet he shrugged his shoulders and joked 'what are ya gonna do?' He then shifted to his current investment ideas such as his bet on AIG 8.175 junior subordinated debt. It trades somewhere around 70 cents on the dollar and he thinks this mispricing is due to a misunderstanding of AIG's capital structure. Additionally, Tepper likes Bank of America (BAC) and thinks it could see $27 in the next year. Sticking with banking, he also likes Spanish giant Banco Santander (STD). Lastly, Tepper also likes commercial mortgage backed securities (CMBS) here. Regarding the economy and a potential turnaround, he is hopeful and thinks we can handle it. His funds are typically invested in 70% debt and 30% equity. Currently, his debt exposure is 50% corporate and 20% asset backed. We recently detailed Appaloosa's portfolio for those interested in the rest of Tepper's investments.


David Einhorn of Greenlight Capital: Einhorn had all kinds of negative things to say about the creditworthiness of the US. His presentation was entitled, "Good News for the Grandchildren" implying that grandchildren won't have to pay off the government's spiraling debt. Einhorn actually thinks that a crisis has unfolded already and our generation will be the ones paying for it. He says it is very necessary to address the situation now rather than spiral into a debt crisis. Einhorn again lambasted the credit ratings agencies and thinks official ratings should be eliminated. He notes that Treasury Secretary Timothy Geithner is 'all-in' because he thinks that the US's credit rating will never be cut. To this though, Einhorn said, "I don't believe a US debt default is inevitable." In his presentation, Einhorn mentioned that he is still short Moody's (MCO) as well as McGraw Hill (MHP), the parent company of ratings agency Standard & Poors. Einhorn originally laid out a short thesis on these names at last year's Ira Sohn Conference in a presentation, The Curse of the Triple-A.

Einhorn then shifted the discussion to real-world costs and inflation. He went on to say that, "if your goal is to never see inflation, you will never see it until it is rampant." Einhorn was critical of the government's zero interest rate policy and warns it can create another bubble. He thinks that higher rates would actually lead to increased lending in the private sector because right now all you're seeing is banks playing the yield curve. Einhorn outlined all the past scenarios where the Federal Reserve didn't see a bubble until it was too late: from Long Term Capital Management to the dot-com bubble to the housing bubble and now to the sovereign debt crisis.

In terms of investment ideas, he likes African Barrick Gold (LON: ABG) traded in London. He thinks this name is cheap and could eventually be added to various indexes as well which would serve as a catalyst for institutional buying. Einhorn ended by saying, "We own some gold and some gold stocks for our investors and for ourselves. We will worry about our grandchildren later." If you'll remember a long while back, we first detailed when Greenlight Capital started storing physical gold. In recent activity, regulatory filings disclosed Einhorn's new position in NCR and we've also detailed Greenlight's portfolio. To learn more about Einhorn and his investment process, we recommend checking out his book, Fooling Some of the People All of the Time.


Bill Ackman of Pershing Square Capital Management: In typical Ackman fashion, he crammed an 80-slide presentation into 15 minutes. He proposed a "Wait to Rate" system to reform the rating agency business where it would be illegal for an agency to issue a rating within sixty days of the security's issuance. And if the agencies mess up, then they should lose their status. Turning to specific investment ideas, Ackman again focused on General Growth Properties (GGP). Some of you will remember that Ackman presented this same idea last year when shares were ridiculously cheap. Last year's premise with this name was an argument that the company's assets were worth more than their liabilities and that this bankruptcy was different than most.

This year, Ackman's GGP thesis continues on in that he sees very little mall construction over the next three to five years, an area GGP already has a dominant position in. He highlights that GGP is being split up into two entities: GGP & GGO. GGP would be the cash-flow generating side of the business and GGO would represent underperforming but valuable assets. Lastly, Ackman quickly remarked that his firm Pershing Square has been buying Citigroup (C) in recent weeks and has assembled a position of 150 million shares, but ran out of time to elaborate on the stake. For more on Ackman's investing style, he is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. Additionally, we've previously profiled Pershing Square and detailed Ackman's portfolio.


Seth Klarman of Baupost Group: Klarman continued his stern and gloomy comments from last week. He essentially gave a speech on what he would say if he were called in front of Congress to discuss Wall Street. He likened short sellers to policeman and reiterated the fact that they are not evil. He commented negatively on risk regulators, saying that they will inevitably make mistakes and that they won't be able to head off the next crisis at the pass. He feels the market should work itself out and that there should be no bailouts and that only the strong should survive. Klarman noted that many institutions have been bailed out and that the government's action related to AIG has 'raised moral hazards to new heights.' Klarman also joined in on the berating of the ratings agencies saying something should be done about them. Lastly, Klarman says that anyone in a transaction with a counterparty thinks the other investor is wrong, that's the beauty of a market. Just a few days ago we highlighted Seth Klarman's recommended reading list so definitely check that out. We also posted a summary of Klarman's speech at the CFA conference and have previously detailed Baupost Group's portfolio as well.


Steve Eisman of FrontPoint Financial Services Fund (Morgan Stanley): This name should be familiar to those of you who have read Michael Lewis' The Big Short, as he was one of the investors profiled in the story of the subprime trade. His presentation was entitled, "Subprime Goes to College" and as you can guess, he's negative on for-profit education companies. Those of you who followed the Ira Sohn Conference last year will remember that Jim Chanos gave a similar presentation berating these companies. Eisman sees Washington continuing to clamp down on the industry after these companies hired seemingly every lobbyist out there in previous years. He notes that a key to the problem here is the 'rating' these institutions receive from accreditation boards and he likens these boards to the ratings agencies who blessed subprime mortgages.

Eisman focused specifically on Apollo Group (APOL) and noted that if employment figures started to rise, APOL & others could see EPS declines of 40% annually. His presentation called out numerous other players in the space, including ITT Educational (ESI), Corinthian Colleges (COCO), and Education Management (EDMC). Eisman also painted Washington Post (WPO) in a negative light due to their ownership of the Kaplan test preparation business. That last one is intriguing because we recently saw Roberto Mignone's hedge fund Bridger Management buy shares of Princeton Review (REVU), a fellow test prep service.

The dichotomy of opinion continues as the for-profit education space has been an area ripe for debate. We've seen many prominent hedge fund managers own sizable stakes as Stephen Mandel's Lone Pine Capital has been bullish on education plays. That said, we've also noted that some of these managers have had a recent change of heart. David Stemerman's Conatus Capital had been long and sold out of their education plays. Andreas Halvorsen's Viking Global also exited Apollo Group recently. Additionally, there are also numerous high profile detractors such as Chanos and now Eisman.


Jamie Dinan of York Capital: Dinan's first idea was Coca Cola Enterprises (CCE) as they saw Coca Cola buy their bottling operations in the US earlier this year. He loves CCE's free cash flow. We've actually seen numerous other prominent hedge funds owning CCE shares as well, so they're definitely not alone in this pick. Dinan's second bet is on ING (ING). He values it at 1.2x book resulting in a value of 9.32 euros a share. He also noted that post bankruptcy equities are good places to be. This is a sweet spot for York Capital given their focus and he cited Lyondell (LALLF) as an example as he thinks it's worth $22 (it currently trades around $17). We just yesterday detailed some of York's recent portfolio activity for those interested.


Larry Robbins of Glenview Capital: Robbins highlighted that the market's P/E multiple is 12.3x and as the political presence in Washington grows, the P/E shrinks. He thinks now is a great time for stockpicking and not cash, 10 year treasuries or debt. He says to buy definitive growth and avoid high valuations. In particular, Robbins likes McKesson (MCK), Express Scripts (ESRX), Life Technologies (LIFE) and Fidelity National Information (FIS). Regarding FIS specifically, he agrees with the board's decision to reject Blackstone's bid and is in favor of the leveraged recapitalization plan. Regarding Express Scripts, he sees stable earnings and points out they have cash on hand to buy back stock or make acquisitions. We've pointed out that Andreas Halvorsen's Viking Global is bullish on ESRX as well. On Life Technologies, Robbins highlights organic growth, a defensive business mix, and potential industry consolidation. He also likes McKesson because it has a ton of cash, great free cash flow, and is trading at 11x earnings. For more from Robbins, we've previously outlined his thoughts on the case for global equities in 2010 at a hedge fund panel.


Jon Jacobson of Highfields Capital: Jacobson, formerly of Harvard's endowment and now one of the founders of Highfields, listed Sallie Mae (SLM) as his favorite pick. The main thesis here is that it is moving into a fee-based business with a great management team. He noted that the street has had a hard time valuing shares due to the gross leverage. And while this play is risky, he thinks it's undervalued. In a run-off scenario, Jacobson thinks SLM is worth between $15 and $25. While Sallie Mae is term funded, he argues they are adequately capitalized. He mentioned its legacy "FFELP" business is worth $6-8 a share on its own. SLM trades at 2x earnings and many of their competitors are essentially gone. SLM enjoys economies of scale, the credit quality of their loans is getting much better, and Jacobson also mentioned insider buying. Shares were up in aftermarket trading following his presentation. Shifting to the general commentary, Jacobson also cited his concern for the climate in Washington as he claims there is no leadership and that many US states are the American equivalent of Greece, bankrupt or about to be. Overall, he feels that the government is simply delaying these problems for future generations. We've covered some of Jacobson's previous thoughts at a hedge fund panel where he addressed whether or not there is alpha in asset allocation.


Daniel Arbess of Perella Weinberg Partners/Xerion Capital: Arbess' presentation focused on China. He specifically likes Yum Brands (YUM), as the fast food chain has great exposure to that country. Additionally, he likes Ivanhoe (IVN) in the metallurgical coal space as he's bullish on gold and commodities as well. On gold specifically, he says "I doubt we're at a top" but at the same time he does not like it as a safe haven against inflation. In currency trades, he likes a trade of short the Japanese yen and long the Canadian dollar. Arbess also listed Celanese (CE) as one of his picks. Lastly, he sees more distressed credit opportunities coming up as maturities start to roll in. And like many other presenters, he had an unpleasant view of the current political administration and their actions. Turning lastly to the debt crisis, Arbess thinks there are no quick fixes and the outcome is unpredictable. In the past, we've previously covered some brief portfolio activity out of Perella Weinberg.


Jeremy Grantham of GMO: His favorite picks were commodities and in particular, timber. He highlights this because it's the only asset class that did not lose value in the 1970's or during the Great Depression. His second pick centered on emerging market equities and thirdly, Grantham also favors high quality US stocks. Armed with a chart displaying equity valuation of mega caps since 1955, he points out that mega cap valuation has declined since 1955 and they currently represent great value. Shifting to macro thoughts, he thinks the UK housing bubble has yet to burst and that prices could fall as much as 33% more and also warned of a possible bubble in Australia.


Niall Ferguson: He mentioned that now is not the time to short Treasuries. However, he also cautioned to avoid holding 10 year bonds to maturity. Scarily enough, Ferguson thinks the US will be like Greece by 2013 and that we won't be able to 'print' our way out of this mess.


That wraps up our aggregation of notes from the Ira Sohn Investment Conference. If you enjoyed our coverage, please consider receiving our free hedge fund updates via email or our free updates via RSS reader. Thank you to those that sent us notes and stay tuned as we'll post up in-depth presentations as we receive them.

David Stemerman's Hedge Fund Conatus Capital Favors Tech: 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 David Stemerman's hedge fund Conatus Capital. Stemerman founded his firm last year with $2.3 billion after he left Stephen Mandel's Lone Pine Capital. Conatus places an emphasis on bottom-up individual stockpicking via a long/short equity strategy. Stemerman's firm focuses on the quality of the business and the quality of the associated management team. They seek short positions by identifying companies that are seeing increased competition from low-cost alternatives and those that are being displaced by new technology. We've previously taken a more in-depth look at Conatus' investment process for those interested. For 2009, Stemerman's firm finished up 19.16% as detailed in our hedge fund performances post.

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
JPMorgan Chase (JPM)
Union Pacific (UNP)
American Tower (AMT)
US Bancorp (USB)
FMC Technologies (FTI)
City National (CYN)
Mead Johnson Nutrition (MJN)
Sotheby's Holdings (BID)
Charles Schwab (SCHW)
Webmd Health (WBMD)


Increased Positions
BHP Billiton (BHP): Increased position size by 103%
Ctrip.com (CTRP): Increased by 94.4%
Wells Fargo (WFC): Increased by 91.8%
Amazon.com (AMZN): Increased by 84%
Schlumberger (SLB): Increased by 73%
Bed Bath & Beyond (BBBY): Increased by 58.5%
Visa (V): Increased by 54.9%
Goldman Sachs (GS): Increased by 52.5%
NetApp (NTAP): Increased by 48.5%
Urban Outfitters (URBN): Increased by 38.4%
Google (GOOG): Increased by 35%
Polo Ralph Lauren (RL): Increased by 35%
Walter Energy (WLT): Increased by 29.4%
Salesforce.com (CRM): Increased by 25.9%
Citrix Systems (CTXS): Increased by 23.6%
Crown Castle (CCI): Increased by 20.8%


Reduced Positions
Priceline.com (PCLN): Reduced position size by 34.4%


Positions They Sold Out of Completely
Abercrombie & Fitch (ANF)
Credicorp (BAP)


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

1. Apple (AAPL): 5.6%
2. Express Scripts (ESRX): 4.4%
3. Google (GOOG): 3.9%
4. Estee Lauder (EL): 3.9%
5. Cognizant Technologies (CTSH): 3.9%
6. Amazon.com (AMZN): 3.9%
7. Walter Energy (WLT): 3.9%
8. Cisco Systems (CSCO): 3.8%
9. Medco Health (MHS): 3.8%
10. Schlumberger (SLB): 3.4%
11. Wells Fargo (WFC): 3.3%
12. Visa (V): 3.3%
13. Covidien (COV): 3.2%
14. JPMorgan Chase (JPM): 2.8%
15. Bed Bath & Beyond (BBBY): 2.8%


As you can see, Conatus Capital did little in the way of selling in the first quarter of 2o10. In fact, they were quite active on the buying side, adding to numerous existing stakes like BHP Billiton, Ctrip.com, Wells Fargo, and Amazon.com. They also started brand new stakes in JPMorgan Chase, Union Pacific, and American Tower among others. Given the recent market decline, it will be intriguing to see next time around whether Conatus was reducing long exposure or if they continued to add.

Since Stemerman previously plied his trade at Stephen Mandel's Lone Pine Capital, it should come as no surprise that this portfolio has obvious similarities to Lone Pine's. While the typical 'hedge fund favorite stocks' like Apple and Amazon are present, both Conatus and Lone Pine are bullish on shares of Estee Lauder and Cognizant Technologies, names we don't see as frequently in hedge fund portfolios.

Lastly, we want to point out the three sectors Conatus seems to like the most: technology, health, and energy. They own the typical tech bellwethers in Apple, Google, Cisco, and Amazon. But at the same time, they're focusing on niche segments like cloud computing. Shifting to pharmacy benefit management companies (PBMs), Conatus has a large position in Express Scripts, a company we saw fellow hedge fund Viking Global heavily favors. Additionally, Conatus is long Medco Health as their ninth largest US equity long. In energy, Conatus likes Schlumberger and Walter Energy. In the end though, technology is by far and away the overwhelming theme as five of their top ten positions are in tech.

As we've previously detailed, Conatus is bullish on cloud computing and this is evident from their positions in VMWare, Citrix Systems, and NetApp. And as we've also highlighted, hedge funds favor wireless tower stocks and Conatus is no different: they own all three majors in American Tower, Crown Castle, and SBA Communications.

Assets reported on the 13F filing were $2.6 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, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, Roberto Mignone's Bridger Management, and Phil Falcone's Harbinger Capital Partners. Be sure to check back daily for new hedge fund updates.

Phil Falcone's Harbinger Capital Shows Massive New Citigroup Position: 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 Philip Falcone's hedge fund Harbinger Capital Partners. Harbinger is a multi-billion dollar hedge fund firm with a focus on both distressed assets and equity plays. They often take highly concentrated positions and so they're an easier fund to track. After horrible performance in 2008, Harbinger rebounded in 2009 and finished up 46.5% as noted in our hedge fund performances post. In terms of recent portfolio activity, we detailed Harbinger's new position in African Medical Investments and saw that they've been selling New York Times shares. Falcone's firm has actually been quite active and ambitious as of late as we learned they will be starting a 4G wireless network as they make a large bet on mobile data transmission.

The positions listed below were Harbinger'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
Citigroup (C)
NRG Energy (NRG)
Bunge (BG)
Seagate (STX)
Trina Solar (TSL)
Consol Energy (CNX)
VIX Short-term Futures (VXX)
Harbinger Group (HRG)
Vantage Drilling (VTG)
Clearwire (CLWR)
Pioneer Drilling (PDC)
Calpine (CPN) Calls


Increased Positions
Strategic HL & RS (BEE): Increased position size by 252.8%
SPDR Gold (GLD): Increased by 145%
Corn Products (CPO): Increased by 141.9%
Exco Resources (XCO): Increased by 75.7%
Superior Well Service (SWSI): Increased by 33.6%


Reduced Positions
Harry Winston (HWD): Reduced by 60.1%
Istar Financial (SFI): Reduced by 54%
Sprint (S): Reduced by 33.8%
Freeport McMoran (FCX): Reduced by 11.8%


Positions They Sold Out of Completely
Calpine (CPN)
Walter Energy (WLT)
Interpublic (IPG)
Take-Two Interactive (TTWO)
Cloud Peak (CLD)
ProShares Ultrashort Financials (SKF)
Alpha Natural Resources (ANR)
August Resource (AZC)
ICO (ICOG)
Mgic Investments (MTG)
Delta Petroleum (DPTR) Notes


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

1. Citigroup (C): 15.2%
2. Sprint (S): 10.1%
3. New York Times (NYT): 10%
4. NRG Energy (NRG): 8.5%
5. SPDR Gold (GLD): 7.2%
6. Exco Resources (XCO): 6.9%
7. Corn Products (CPO): 6.5%
8. Bunge (BG): 5.2%
9. Complete Production (CPX): 4.6%
10. Calpine (CPN) Calls: 4%
11. Freeport McMoran (FCX): 3.4%
12. US Airways (LCC): 3.2%
13. Terrestar (TSTR): 2.2%
14. Seagate (STX): 2%
15. Trina Solar (TSL): 1.7%

Please keep in mind that these equity holdings are by no means representative of Harbinger's entire portfolio. They undoubtedly also hold numerous distressed plays and positions in other markets that aren't required to be disclosed. That said, we do get an interesting look at some of their long US equities exposure which totals $1.9 billion.

Harbinger started a few massive new long positions in the first quarter, most notably in Citigroup and NRG Energy. They also disposed of longstanding stakes in Calpine, Walter Energy, and Take-Two Interactive. The latter is interesting because we've seen corporate activist Carl Icahn adding TTWO shares and actively trying to drum up shareholder value. And while Harbinger sold completely out of CPN common stock, they also added a new position in CPN call options so they still have some exposure there.

One interesting talking point is Harbinger's use of exchange traded funds presumably as hedging tools. They've held a position in SPDR Gold Trust (GLD) for a while but heavily added to it in the first quarter. They also started a brand new stake in VXX, an ETF based on the volatility index (VIX). As volatility increases (as it definitely has as of late), VXX increases in value. In essence, Harbinger is looking for hedges against panic and for assets that might increase when equity markets are declining.

Lastly, we highlight Harbinger's continued stake in numerous natural resource plays. They've owned and have been in & out of various plays but seemingly like Freeport McMoran and Cliffs Resources the best.

Assets reported on the 13F filing were $1.9 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, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, Chase Coleman's Tiger Global, and Roberto Mignone's Bridger Management. Be sure to check back daily for new hedge fund updates.

Roberto Mignone's Bridger Management Adds Financials, Exits 'Hedge Fund Favorite' Names: 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 Roberto Mignone's hedge fund Bridger Management. Bridger focuses on long/short equity and event driven strategies (which you'll see evidence of in their portfolio below). Last we heard, Bridger has just under $3 billion in assets under management and is closed to new investors because Mignone likes to focus on investing rather than running a large organization. Not to mention, he argues that once you garner too large of an AUM pool, you can't have a short portfolio of complementary size. After all, Mignone is known for his sleuthing abilities on the short side. Previously, we had detailed some of his investment thoughts for 2010 from a hedge fund panel.

Before founding Bridger, Mignone co-founded Blue Ridge Capital with John Griffin in 1996, another hedge fund we track here on the site. And before that, both Mignone and Griffin worked at Julian Robertson's legendary Tiger Management. As such, they are both 'Tiger Cub' hedge funds. Mignone received his degree from Harvard and his MBA from Harvard Business School. In terms of recent portfolio activity disclosed after the date of the filing's we're covering, Bridger revealed two new positions.

The positions listed below were Bridger'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
Centene (CNC) ~ we detailed the specifics of this stake when they first disclosed it
Genpact (G)
Waters (WAT)
Iesi-Bfc (BIN)
JPMorgan Chase (JPM)
Goldman Sachs (GS)
Marriott (MAR)
Red Hat (RHT)
XTO Energy (XTO)
Comerica (CMA)
AMR (AMR)
Fuel Systems (FSYS)
Istar Financial (SFI)
Medifast (MED) ~ we detailed the specifics of this new position earlier
Marshall & Ilsley (MI)
Key Corp (KEY)
Suntrust Bank (STI)
Xenoport (XNPT)
Cathay Gen Bancorp (CATY)
Wonder Auto Tech (WATG)
Popular (BPOP)
Bristol Myers Squibb (BMY)
Carefusion (CFN)
Macquarie (MIC)
Iberiabank (IBKC)
Nektar Therapeut (NKTR)
Acorda (ACOR)
Immunogen (IMGN)
Glacier Bancorp (GBCI)
Amedisys (AMED) Puts


Increased Positions
Morgan Stanley (MS): Increased position size by 150%
Electronic Arts (ERTS): Increased by 73.8%
Regions Financial (RF): Increased position by 72.7%
Casella Waste Systems (CWST): Increased position by 48.6%
Davita (DVA): Increased position by 33%
State Street (STT): Increased position by 32.9%
Exxon Mobil (XOM): Increased position by 30.8%
Boston Scientific (BSX): Increased position by 26.6%
Synovus Financial (SNV): Increased position by 20.5%
Waste Connections (WCN): Increased position by 19.3%


Reduced Positions
Aetna (AET): Reduced by 70%
Life Tech (LIFE): Reduced by 67.8%
Millipore (MIL): Reduced by 42%
Eclipsys (ECLP): Reduced by 39.6%
OSI Pharmaceuticals (ONXX): Reduced by 33.6%
Jazz Pharmaceuticals (JAZZ): Reduced by 28.1%
Biogen Idec (BIIB): Reduced by 17.6%


Positions They Sold Out of Completely
Royal Carribean (RCL)
Apple (AAPL)
First American (FAF)
Microsoft (MSFT)
Green Mountain Coffee Roasters (GMCR)
Amerigroup (AGP)
Allergan (AGN)
Republic Service (RSG)
Warner Chilcott (WCRX)
Expedia (EXPE)
United Therapeutics (UTHR)
Talecris Biotherapeutics (TLCR)
Ritchie Bros (RBA)
Mannkind (MNKD)
Mako Surgical (MAKO)
Petmed (PETS)
Ehealth (EHTH)
Given Imaging (GIVN)
Sanderson Farms (SAFM)
CIT Group (CIT)
Amylin Pharmaceuticals (AMLN) Puts


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

1. Waste Connections (WCN): 3.4%
2. Pall (PLL): 3.3%
3. Covidien (COV): 3.1%
4. Cardinal Health (CAH): 3%
5. Medtronic (MDT): 3%
6. Dr Pepper Snapple (DPS): 3%
7. Centene (CNC): 2.9%
8. Morgan Stanley (MS): 2.9%
9. Amgen (AMGN): 2.8%
10. Unitedhealthcare (UNH): 2.4%
11. Millipore (MIL): 2.4%
12. Las Vegas Sands (LVS): 2.3%
13. Berkshire Hathaway (BRK.A): 2.3%
14. Hyatt Hotels (H): 2.3%
15. Genpact (G): 2.2%

In the first quarter, we saw Bridger completely sell out of a few names that are typically hedge fund favorites which was interesting. They exited Apple, Microsoft, CIT Group, and Green Mountain Coffee Roasters. Many of these names are on Goldman Sachs VIP list of the stocks most important to hedge funds. Other positions Bridger also sold sizable partial positions in include Aetna, Life Tech, and Eclipsys.

In terms of additions, we already knew about their new Centene position, but now you see how large it is in the context of their overall portfolio. Not to mention, their new ownership of Genpact (G) is notable too as it's their fifteenth largest US equity long. They also added to exiting position Waste Connections, which is now their largest holding. We also make note of their addition in shares of Electronic Arts. Just yesterday we examined Chase Coleman's hedge fund Tiger Global and saw they were clearly bullish on ERTS.

And while Bridger's large focus is on the health space, you obviously see many financial plays scattered in their portfolio. They were adding to regional banks like Regions and Synovus in the first quarter and added shares of big banking plays as well, like JPMorgan Chase and Morgan Stanley.

Assets reported on Bridger's 13F filing were $2.5 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, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, and Chase Coleman's Tiger Global. Be sure to check back daily for new hedge fund updates.

Bill Ackman's Pershing Square Receives Borders Group Warrants (BGP)

In a Form 4 filed with the SEC last evening, we see that Bill Ackman's hedge fund firm Pershing Square Capital Management has received warrants to purchase shares of common stock in Borders Group (BGP). The transaction date was May 21st and the warrants expire October 9th, 2014 with a conversion price of $0.65. Pershing received warrants to purchase an aggregate of 2,701,837 shares of BGP. Additionally, due to an adjustment, Pershing's hedge funds will also be issued warrants to purchase 8,542,399 shares of common stock. Since Pershing's hedge funds have ownership interests in BGP Holdings, Ackman's funds have exposure to a total amount of 17,401,837 warrants. As of March 31st, we saw that Ackman owned 10,597,980 shares of common stock when we looked at Pershing Square's portfolio.

As per Pershing's recently filed 13D on BGP, we see that Ackman's firm has a 31.5% ownership stake in the company with an aggregate amount of common stock beneficially owned totaling 27,999,817. Ackman's Borders exposure also includes cash settled total return equity swaps covering 4,376,163 notional shares of common stock which are not included in the above totals. As such, Pershing's aggregate economic exposure to Borders Group is then 36.4%. For background on Bill Ackman, check out our profile of Pershing Square.

Taken from Google Finance, Borders Group is "an operator of book, music and movie superstores and mall-based bookstores." If you want to learn more about Ackman and his investing style, he is the subject of Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff.

James Dinan's Hedge Fund York Capital Files 13D on Sybase (SY)

James Dinan's hedge fund York Capital recently filed a 13D with the SEC disclosing a new position in shares of Sybase (SY). This is the first time we've really detailed the portfolio activity out of York Capital so here's a brief background: Dinan's firm is a hedge fund that invests in both public equities and fixed income. Their primary focus is companies with catalysts such as mergers & acquisitions, restructurings, special situations, distressed plays, etc. Taken from York's website, they think that, "While the markets may be efficient on balance, there are pockets of inefficiency that can be exploited by experts who know where to look." York was founded in 1991 by Dinan and today manages over $12 billion. At the end of the first quarter, we saw that York was up 4.52% for the year in our hedge fund performance post.

Due to activity on May 13th, York has disclosed a 4.2% ownership stake in Sybase with 3,659,183 shares and the aggregate amount of funds used to purchase these securities was $273,603,384. Keep in mind that a 13D filing signifies an activist stake so we'll have to see what York has planned. Per the filing, Dinan's firm says they acquired shares "for investment purposes and not with a view towards changing or influencing control of the company." They bought shares after a tender offer was announced by Sheffield Acquisition Corp for all of Sybase's outstanding shares.

It looks like York purchased the majority of their position in the $64.xx range on May 12th & 13th. However, they also disclosed a steady stream of sales from May 19th to May 21st, and it's not clear if they're still reducing their position. But, the filing does note that on May 21st, York ceased to be the beneficial owner of a 5% stake in the company. While this is just speculation on our part, it's almost as if they bought a large position which triggered a regulatory filing, but they are already reducing or winding down this position. Unfortunately there is no information as to whether or not they've continued selling this week; the filing only encompasses sales up to May 21st.

At a recent investment conference, hedge funds Highbridge and York Capital both said they were taking risk off the table, so maybe this coincides with that, who knows. For those interested, York has disclosed their transaction details of the shares they acquired at the bottom of their 13D filing here. So, we'll definitely have to keep a close eye on this one. This is a brand new equity stake for York because as of March 31st they did not own any SY shares per their most recent 13F filing.

Taken from Google Finance, Sybase is "delivers enterprise software and services to manage, analyze and mobilize information. The Company provides open, cross-platform solutions that deliver information anytime, anywhere, providing decision-ready information to the right people at the right time."

As always, for the latest movements from prominent investment managers, head to our hedge fund portfolio tracking series.

Seth Klarman's Recommended Reading List

In the past, we've detailed various investment book recommendations from some truly notable investors. This list could quite possibly top them all though. After all, apart from Warren Buffett, Baupost Group's Seth Klarman is widely regarded as one of the most successful investment managers in the game. In fact, Klarman himself has written one of the most coveted books on investing out there, Margin of Safety. Copies are no longer in print and remaining copies sell for exorbitant sums. At the recent CFA Institute Annual Conference in Boston, Klarman provided a list of book recommendations and here are his picks:

- Benjamin Graham's The Intelligent Investor: This should come as no surprise given that Klarman is a fundamental investor and Graham's text is literally *the* testament for value investors.


- Joel Greenblatt's You Can Be A Stock Market Genius: Greenblatt's book examines catalyst based investing such as spin-offs, mergers, risk arbitrage, etc in an effort to exploit market inefficiencies.


- Martin Whitman's The Aggressive Conservative Investor: This one delves into the topics of value investing and is regarded as a great guide for learning how to analyze and evaluate stocks. We've not read this book before and look forward to picking up a copy.


- Klarman also recommends anything by Jim Grant. Some of his books include: Bernard M. Baruch: The Adventures of a Wall Street Legend as well as Money of the Mind and lastly, Mr. Market Miscalculates: The Bubble Years and Beyond.


- The Baupost Group manager also recommends anything by Roger Lowenstein, whose books include:

Buffett: The Making of an American Capitalist: This book's title is self-explanatory.

When Genius Failed: The Rise and Fall of Long-Term Capital Management: Those of you interested in hedge funds would find this book particularly intriguing.

Also, Lowenstein's most recent book: The End of Wall Street which we also look forward to reading in the near future.


- Michael Lewis' classic, Moneyball: The Art of Winning an Unfair Game. Klarman says Lewis hasn't written a bad book yet, so we'll add in his most recent regarding the subprime trade as well, The Big Short.


- Andrew Ross Sorkin's book about the financial crisis, Too Big to Fail


A rousing set of suggestions from an investing legend himself, Seth Klarman. For more great investment reading recommendations, head to some of our other guru picks:

- Warren Buffett's recommended reading
- Dan Loeb's favorites
- Hedge fund Blue Ridge Capital's recommended reading

Chase Coleman's Tiger Global Shows Large Put Positions on Market Indexes: 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 Chase Coleman's hedge fund Tiger Global. Coleman is considered a 'Tiger Seed' because he previously plied his trade under mentor Julian Robertson at legendary fund Tiger Management. He then became one of the many managers Robertson seeded in an effort to recognize up and coming talent. Coleman is also one of the many managers selected to be in the Tiger Cub portfolio created with Alphaclone where you can piggyback the investment ideas of numerous top hedge fund managers (Market Folly readers can receive a free 30-day trial if interested).

The positions listed below were Tiger Global'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
Powershares QQQ Trust (QQQQ) Puts
SPDR S&P 500 (SPY) Puts
Electronic Arts (ERTS)
Electronic Arts (ERTS) Calls
Apollo Group (APOL) Calls
Liberty Global (LBTYA) Calls
Nike (NKE)
Genpact (G)
Kraft (KFT)
Liberty Capital (LCAPA)
American Tower (AMT)
Commscope (CTV)
Live Nation (LYV)
Duoyuan (DGW)
Amazon (AMZN)
Lincare Holdings (LNCR)
Shanda Games (GAME)
Madison Square Garden (MSG) ~ spin-off as a result of their stake in Cablevision
Symetra Financial (SYA)
Berkshire Hathaway (BRK.A)


Increased Positions
Western Union (WU): Increased position size by 577%
Liberty Global (LBTYA): Increased by 204.6%
Hewlett Packard (HPQ): Increased by 200%
Apple (AAPL): Increased by 62.2%
Lockheed Martin (LMT): Increased by 45%
Google (GOOG): Increased by 35%
Apollo Group (APOL): Increased by 30%
Mercadolibre (MELI): Increased by 24.6%
Discovery Communications (DISCK): Increased by 23%


Reduced Positions
Yahoo (YHOO): Reduced position size by 79.8%
E*Trade Financial (ETFC): Reduced by 46.7%
Mastercard (MA): Reduced by 35%
Monsanto (MON): Reduced by 34.6%
Transdigm Group (TDG): Reduced by 34.1%
IAC Interactive (IACI): Reduced by 28%
Cablevision (CVC): Reduced by 25.7%


Positions They Sold Out of Completely
Qualcomm (QCOM)
McDonalds (MCD)
IMS Health (RX)
Teradata (TDC)
Ebix (EBIX)
Discovery (DISCA)
Gushan Environmental (GU)


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

1. Powershares QQQ Trust (QQQQ) Puts: 9.0%

2. Apollo Group (APOL): 8.32%

3. DirecTV (DTV): 7.87%

4. Pepsico (PEP): 5.96%

5. Apollo Group (APOL) Calls: 5.39%

6. Google (GOOG): 4.47%

7. SPDR S&P 500 (SPY) Puts: 4.45%

8. Mercadolibre (MELI): 4.06%

9. Lockheed Martin (LMT): 3.51%

10. Electronic Arts (ERTS) Calls: 3.41%

11. Mastercard (MA): 3.34%

12. Priceline.com (PCLN): 2.93%

13. Apple (AAPL): 2.80%

14. Liberty Global (LBTYA): 2.75%

15. Visa (V): 2.42%

Alright, there's a lot to cover here. The most noteworthy thing to take away from Coleman's portfolio is the fact that in the first quarter he started massive put positions on the Nasdaq-100 (QQQQ) and S&P 500 (SPY). These could merely be hedges, or they could be a directional bet, we don't know. What we do know though, is that these are very sizable positions. These puts are likely already profitable positions for the fund as well (that is, unless for some reasons they purchased the puts at the lows in February, which seems unlikely).

Tiger Global was quite active in options markets in the first quarter as they also started a large new position in Apollo Group calls. This is a complement to their already large position in common stock of the company as well, making it by far one of their biggest company specific bets. Additionally, we point out their large stake in DirecTV (DTV) because in Tiger Global's fourth quarter letter, Coleman indicated that this was one of their highest conviction picks as they believe that DTV will increase leverage to buyback shares and then their cashflow will cover current debt.. Tiger has also built up a sizable long position in Electronic Arts (ERTS) via common shares and calls.

Regarding positions they decreased, Tiger sold nearly 80% of their Yahoo (YHOO) position and almost half of their E*Trade Financial (ETFC) position. While TIger Global added significantly to their Western Union (WU) stake, the position is still not very large in the context of their overall portfolio. Other positions they notably added to in the first quarter include Hewlett Packard and Liberty Global.

Assets reported on the 13F filing were $4.9 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, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, Dan Loeb's Third Point, and John Paulson's hedge fund Paulson & Co. Be sure to check back daily for new hedge fund updates.

John Paulson's Hedge Fund Starts New Positions in MGM Mirage, Apache, Mylan & More: 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 Paulson's hedge fund Paulson & Co. Before becoming a hedge fund 'rockstar' due to his wildly successful bet against subprime, Paulson managed a seemingly mediocre merger arbitrage fund. So while Paulson has since started other hedge funds focused on other strategies (Recovery Fund, etc), keep in mind that many of the equity positions listed below are related to his core arbitrage strategy. Also, please note that Paulson's massive stake in exchange traded fund GLD is merely a hedge to his fund share class that is denominated in gold.

For more on Paulson's big trade, Wall Street Journal columnist Gregory Zuckerman detailed the impressive wager in the book, The Greatest Trade Ever (one we highly recommend reading). Such amazing performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings in the past.

In recent portfolio activity that has occurred after these filings, John Paulson's fund has disclosed a new stake in American Capital (ACAS) as well. Paulson has been in the spotlight in recent months due to the controversy surrounding Goldman Sachs and the subprime mortgage trade and he cleared the air with his recent letter to investors. Nowadays, Paulson has found his next big bet: a wager against the US dollar. He is executing this via his new gold fund.

The positions listed below were Paulson & Co'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
MGM Mirage (MGM)
Apache (APA)
Mylan (MYL)
Family Dollar Stores (FDO)
Devon Energy (DVN)
Novell (NOVL)
Novagold Resources (NG) ~ we already covered how Paulson was set to buy NG shares
Supermedia (SPMD) ~ we previously detailed this stake as well
DEX One (DEXO)
Smith International (SII)
Boyd Gaming (BYD)
Randgold Resources (GOLD)
Bank of America (Warrants)
Iamgold (IAG)
Beazer Homes (BZH)
Barrick Gold (ABX)
First Midwest Bancorp (FMBI)
Beazer Homes (BZMD)


Increased Positions
Hartford Financial (HIG): Increased position size by 363.6%
Apollo Group (APOL): Increased by 93%
XTO Energy (XTO): Increased by 30%
Bank of America (BAC): Increased by 11%


Reduced Positions
Mead Johnson Nutrition (MJN): Reduced position size by 50%


Positions They Sold Out of Completely
Sun Microsystems ~ inactive, merger completed
Philip Morris International (PM)
Pepsi Bottling Group ~ inactive, merger completed
IMS Health (RX)
Bank of America Preferreds (BAC-S)
Liberty Entertainment (LSTAV)
Burlington Northern Santa Fe ~ inactive, merger complete
Kraft Foods (KFT)
PepsiAmericas ~ inactive, merger complete
Encore Acquisition ~ inactive
Fifth Third Bancorp (FITB)
Chattem ~ inactive
Dr Pepper Snapple (DPS)
Valley National (VLY)
New York Community (NYB)


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

1. SPDR Gold Trust (GLD): 16.2%

2. Bank of America (BAC): 14.2%

3. Citigroup (C): 9.7%

4. Anglogold Ashanti (AU): 7.8%

5. Comcast (CMCSA) 3.9%

6. Suntrust Banks (STI): 3.8%

7. Boston Scientific (BSX): 3.4%

8. Capital One (COF): 3.3%

9. XTO Energy (XTO): 2.9%

10. Kinross Gold (KGC): 2.7%

11. Wells Fargo (WFC): 2.6%

12. MGM Mirage (MGM): 2.3%

13. Hartford Financial (HIG): 1.7%

14. Apache (APA): 1.6%

15. JPMorgan Chase (JPM): 1.5%


The majority of Paulson's portfolio activity in the first quarter centered around brand new positions or closing positions entirely; there were very few partial adjustments. In terms of new stakes, his position in MGM Mirage is sizable at their 12th largest US equity long. Sticking with the gaming sector, they also started a new position in Boyd Gaming (BYD). We highlight Paulson's new Novell (NOVL) play because this stock seems to currently be 'in play' as hedge fund Elliott Management made a bid for the company at $5.75 (most likely to drum up other bids) and now there are supposedly a bundle of private equity firms interested in NOVL. Lastly, we've been highlighting that numerous hedgies added Family Dollar (FDO) in the first quarter, and Paulson is one of those firms.

Paulson also continues to own a few of the stocks on Goldman Sachs' VIP list such as Bank of America, Pfizer, and JPMorgan. In terms of positions Paulson & Co sold out of, we see that these stocks were mainly in companies that completed merger transactions. This obviously reflects Paulson's core arbitrage strategy. Lastly, the fact that Paulson & Co hold such a large position in SunTrust Banks intrigued us solely because we've seen Warren Buffett sell STI and David Tepper's Appaloosa Management trim their STI stake.

Assets reported on Paulson's 13F filing were $21.1 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, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, and Dan Loeb's Third Point. Be sure to check back daily for new hedge fund updates.

David Einhorn Discloses New NCR Position

Due to activity on May 14th, 2010, David Einhorn's hedge fund Greenlight Capital has disclosed a 5.1% ownership stake in NCR (NCR) with 8,234,065 shares. Einhorn's firm filed a form 13G with the SEC after market close today and this marks a brand new position for them as they did not own a stake when we looked at Greenlight's portfolio. This means that they've assembled this position over the past two and a half months.

Greenlight has returned an impressive 22% annualized since inception and that should provide you plenty of reason to track them. In terms of other recent portfolio activity, we also 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.

Taken from Google Finance, NCR is "provides technology and services that help businesses connect, interact and transact with their customers. Through its presence at customer interaction points, such as automated teller machines (ATMs), retail point-of-sale (POS) workstations, self-service kiosks, self-check-in/out systems and DVD kiosks, the Company’s solutions enable companies to address consumer demand."

For the latest portfolio movements from prominent investment managers, make sure to check in our hedge fund portfolio tracking series.

Steve Cohen's Hedge Fund SAC Capital Discloses XenoPort Position (XNPT)

Due to activity on May 14th, 2010, Steven Cohen's hedge fund firm SAC Capital has disclosed a new position in XenoPort (XNPT). As per a 13G filed with the SEC, SAC Capital shows a 6.0% ownership stake in the company with 1,819,228 shares. Again, this is a new position for them as they did not own it in their previous portfolio disclosure as of March 31st, 2010.

Please also keep in mind that SAC is a trading oriented firm and moves in and out of positions much quicker than the fundamental hedge funds we typically track. Of the prominent hedge funds we cover, we've only seen one other firm previously own shares of XNPT. Lee Ainslie's firm had a position in XenoPort, but Maverick Capital just sold out in the first quarter. Regarding other recent portfolio activity from Steven Cohen's firm, we saw that they raised their stake in Inspire Pharma (ISPH) and updated their position in The Talbots (TLB).

Taken from Google Finance, XenoPort is "a biopharmaceutical company focused on developing and commercializing a portfolio of internally discovered product candidates, which utilizes the body’s natural nutrient transport mechanisms to improve the therapeutic benefits of existing drugs."

For more of the latest investments from top managers, head to our hedge fund portfolio tracking series.

Goldman Sachs' VIP List: Stocks That Matter Most to Hedge Funds

Each quarter, Goldman Sachs updates a list of stocks owned by an overwhelming majority of hedge funds. The aptly named VIP list details 'very important positions' to hedge funds that employ fundamental strategies (rather than trading oriented firms) and we like to cover it due to the obvious tie-ins with our hedge fund portfolio tracking series. Last quarter, we posted up the previous iteration of Goldman Sachs' VIP list and this time around there are a few notable changes to the basket of fifty stocks.

Goldman updates the list each quarter to reflect the most recent hedge fund holdings using the same 13F forms filed with the SEC that we use for our tracking here on Market Folly. Twelve new stocks appeared on the list, representing stocks hedge funds as a whole were buying in the first quarter 2010, including: CIT Group (CIT), Alcon (ACL), CF Industries (CF), Coca-Cola Enterprises (CCE), Kraft Foods (KFT), Xerox (XRX), Assured Guaranty (AGO), Baidu (BIDU), Equinix (EQIX), Gilead Sciences (GILD), Liberty Global (LBTYA), and News Corp (NWSA).

As we've already detailed in our selective hedge fund tracking, many funds have large stakes in CIT Group, such as David Einhorn's Greenlight Capital. Not to mention, many firms are bullish on shares of Kraft, like Bill Ackman's Pershing Square. The addition of Xerox is curious because we've slowly but surely started to see more hedgies adding shares to their portfolios but have yet to see anyone provide a thesis. It should come as no surprise that Baidu joins the list given the hoopla surrounding Google's exit from China, as Baidu has been the prime beneficiary there. And lastly, we make note of Equinix gracing the VIP list as we've seen numerous prominent hedge funds in and out of this name over the past few quarters.

Hedge fund returns are often dependent on only a few key stocks and a fund's top 10 holdings typically represent 60% of their assets. As such, it makes complete sense that the VIP list tracks stocks that most frequently appear in the top ten holdings of various fundamentally driven hedge funds. Goldman's VIP basket of 50 stocks has outperformed the S&P 500 by 67 basis points on a quarterly basis since 2001 with a Sharpe ratio of 0.24. Those of you with Bloomberg Terminal access can look it up via GSTHHVIP.

Here are the top 10 stocks from Goldman Sachs' VIP List ranked by the number of hedge funds that owned that specific stock as a top holding at the end of the first quarter:

1. Apple (AAPL): 72 hedge funds owned it as a top 10 holding
2. Bank of America (BAC): 46
3. Google (GOOG): 43
4. Microsoft (MSFT): 40
5. JPMorgan Chase (JPM): 39
6. Pfizer (PFE): 34
7. CIT Group (CIT): 31
8. Intel (INTC): 25
9. Qualcomm (QCOM): 25
10. Cisco Systems (CSCO): 22

And embedded below is the rest of the 50-stock basket that makes up Goldman Sachs' VIP List:



You can download a .pdf here.


Keep in mind that if you wish to replicate hedge fund portfolios via SEC filings like Goldman's VIP list, you can easily do so via Alphaclone (MarketFolly readers receive a free 30 day trial). It is by far the best replicator out there and we use it for all of our hedge fund tracking. And if you want to know what prominent hedge funds are up to specifically, head to our portfolio tracking series that is updated daily.