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This past Friday was the 45th day of the third quarter and also the deadline for fund
managers to file the 13Ds that reflected their holdings as of 6/30/09. Especially
given the current market circumstances, 45 days is a LONG time and thus the data
can potentially be relatively stale and not reflective of these managers’ current
portfolios. Heck, in this market data that is 7 days old may not be indicative of a
manager’s current investment philosophy.
Having said that, it is often instructive to take a look at the changes made during
Q2 to get a sense of what themes managers are focusing on. Of course, we cannot
see their short portfolios so for many of these managers you really only get half the
story. But on the long side, having the data from Q4 2008, Q1 2009 and Q2 2009 all
together, it is sometimes possible to re-engineer a certain manager’s strategy.
Accordingly, I have taken a sample from an eclectic group of managers. Some are
concentrated while others have much smaller positions sizes. Some add and
subtracts positions while others hold very steady. Some are focused on certain
sectors and special situations while others are much more diversified. All in all I
think the following group of managers provides some useful insight into how the
pros navigate volatile markets.
2. Some of the banks whose shares had been hit the hardest garnered a lot of
interest from these managers. Specifically: Bank of America, Regions
Financial, SunTrust Banks, and Fifth Third.
3. Large cap tech names like Hewlett Packard and Oracle seemed to offer
compelling value.
6. Many of these funds run way too much money to buy small and micro cap
companies. However, there seemed to be a trend towards buying some of the
best known blue chips as they had not had the same run up as the lesser
quality, more levered companies.
Paulson and Co. Shares Owned Shares Owned Q4-Q1 Shares Owned Q1-Q2
Bought(Sold
Position Ticker 12/31/2008 3/31/2009 ) 6/30/2009 Bought(Sold)
AT&T ATT 3,000,000 3,000,000 0 3,000,000 0
BCE Inc BCE 22,597,600 0 (22,597,600) 0 0
Affiliated Computer Services ACS 348,500 348,500 0 0 (348,500)
Anglogold Ashanti AU 0 0 0 42,849,864 42,849,864
Bank of America BAC 0 0 0 167,990,464 167,990,464
Boston Scientific BSX 99,135,000 99,135,000 0 99,135,000 0
Brocade Communications BRCD 5,000,000 5,000,000 0 0 (5,000,000)
CB Richard Ellis CBRE 0 0 0 13,440,860 13,440,860
CF Industries CF 0 0 0 500,000 500,000
Capital One Financial COF 0 0 0 17,000,000 17,000,000
Centennial Communication CYCL 5,000,000 5,000,000 0 5,000,000 0
Centex CTX 0 0 0 1,256,400 1,256,400
Cheniere Energy CQP 7,524,085 7,461,191 (62,894) 7,461,191 0
Data Domain DDUP 0 0 0 2,030,000 2,030,000
Dr Pepper Snapple DPS 1,521,824 1,521,824 0 1,521,824 0
Embarq Corp EQ 2,000,000 2,000,000 0 2,000,000 0
Fifth Third Bancorp FITB 0 0 0 5,000,000 5,000,000
First Horizon National FHN 0 0 0 3,000,000 3,000,000
Equity Media Holdings EMDUQ 5,352,382 5,352,382 0 0 (5,352,382)
Genentech DNA 3,424,400 0 (3,424,400) 0 0
Gold Fields GFI 0 0 0 23,000,000 23,000,000
Goldman Sachs GS 0 0 0 2,000,000 2,000,000
Humana HUM 0 0 0 5,000,000 5,000,000
Istar Financial SFI 1,473,500 0 (1,473,500) 0 0
JP Morgan Chase JPM 0 0 0 7,000,000 7,000,000
Kimco KIM 0 0 0 217,259 217,259
Kinross Gold K 28,380,800 30,780,800 2,400,000 30,780,800 0
Liberty Media Corp LMDIA 2,365,000 2,365,000 0 2,000,000 (365,000)
Market Vectors ETF Trust (Gold) GDX 0 0 0 6,000,000 6,000,000
Marshall and Ilsley MI 0 0 0 12,000,000 12,000,000
Merrill Lynch MER 14,926,700 0 (14,926,700) 0 0
Mirant Corp MIR 18,394,000 18,203,321 (190,679) 18,203,321 0
NRG Energy NRG 5,259,700 0 (5,259,700) 0 0
National City Corp NCC 85,220,000 0 (85,220,000) 0 0
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Two other minor things to note. First, Paulson bought shares of Pepsi Bottling (PBG)
and Pepsiamericas (PAS) during Q2. The only reason that stands out to me is that
Dan Loeb, the manager of Third Point (discussed more below) also established a
stake in those companies during the second quarter. Could be some good research
fodder.
Finally, Paulson seems unafraid to dip his toe into the real estate-based stocks
(other than just that banks that are obviously inextricably tied to real estate). In Q2
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Third Point Shares Owned Shares Owned Q4-Q1 Shares Owned Q1-Q2
Bought(Sold
Position Ticker 12/31/2008 3/31/2009 ) 6/30/2009 Bought(Sold)
Biofuel Energy BIOF 5,578,800 5,578,800 0 5,578,800 0
Core Mark Holding CORE 670,000 534,000 (136,000) 0 (534,000)
Depomed Inc DEPO 7,050,000 7,050,000 0 6,790,000 (260,000)
Dinequity Inc DIN 472,900 0 (472,900) 0 0
Energy XXI EXXI 14,940,245 0 (14,940,245) 0 0
Epicor Software EPIC 1,959,800 0 (1,959,800) 0 0
Epicor Software Note 9,000,000 0 (9,000,000) 0 0
Exco Resources XCO 7,191,475 0 (7,191,475) 0 0
Global Brands Acquisition GQN 1,307,700 1,307,700 0 0 (1,307,700)
Global Consumer Acquisition GHC 982,500 982,500 0 0 (982,500)
Greenlight Capital GLRE 718,500 718,500 0 718,500 0
Guaranty Financial GFG 4,399,047 4,399,047 0 2,388,447 (2,010,600)
Hicks Acquisition TOH 750,000 750,000 0 0 (750,000)
Liberty Acquisition LIA 6,914,000 6,914,000 0 6,914,000 0
Lifetime Fitness LTM 95,000 20,000 (75,000) 0 (20,000)
Ligand Pharma LGND 2,007,378 2,007,378 0 2,007,378 0
Maguire Properties MPG 3,248,700 2,895,000 (353,700) 2,410,000 (485,000)
Merrill Lynch MER 250,000 0 (250,000) 0 0
Nabi Biopharma NABI 6,890,000 6,890,000 0 6,890,000 0
PHH Corp PHH 5,210,000 4,890,000 (320,000) 4,480,000 (410,000)
Phoenix Co's PNX 7,044,000 7,524,000 480,000 7,524,000 0
Potash Corp POT 600,000 0 (600,000) 0 0
Rohm and Haas ROH 250,000 0 (250,000) 0 0
Sapphire Industrial FYR 2,000,000 2,000,000 0 0 (2,000,000)
SPDR Gold Trust GLD 900,000 50,000 (850,000) 0 (50,000)
SPDR S&P 500 SPY 458,400 0 (458,400) 0 0
Stream Global OOO 3,125,000 2,825,000 (300,000) 2,825,000 0
Telephone and Data Systems TDS 952,900 0 (952,900) 0 0
Teradata TDC 2,792,000 0 (2,792,000) 0 0
Trian Acquisition TUX 2,750,000 2,750,000 0 2,750,000 0
TripleCrown Acquisition TCW 2,400,000 2,400,000 0 0 (2,400,000)
TXCO TXCO 2,048,700 0 (2,048,700) 0 0
UST UST 400,000 0 (400,000) 0 0
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Commentary: Loeb was very active during Q2, adding a lot of companies to his
portfolio. Most of the additions are well-known blue chips such as Apple (AAPL),
Hewlett-Packard (HPQ), Oracle (ORCL), and Yahoo (YHOO). Notice a theme there? He
definitely thought that the large cap tech players were undervalued when he
bought. Obviously the Nasdaq has had quite the nice run since the end of Q2 so it is
anyone’s guess whether or not he has since trimmed these positions. In other
moves, it appears that Loeb either realized the returns he was anticipating or
soured on the SPAC/blank check company space during Q2. After being active in a
number of these, including VRY, TCW, LIA, and TOH, Loeb sold out of all of them
other than Trian Acquisition (TUX).
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Finally, Loeb sold a large chunk of his disastrous investment in Guaranty Financial
(GFG), a bank that looks like it is on the brink of FDIC receivership. The first time I
looked at GFG it prompted me to run into my boss’s office to tell him that I found a
great new short candidate. It had just been spun off from Temple Inland (TIN) and it
was unambiguous from my perspective that the toxic MBS the company had taken
onto its balance sheet was going to cause GFG a lot of heartache. It just goes to
show that you better really understand the underlying balance sheet of financial
companies before jumping in. GFG in particular has hurt the returns of a number of
prominent funds, including Greenlight, Icahn Capital and Third Point.
Glenview Capital Shares Owned Shares Owned Q4-Q1 Shares Owned Q1-Q2
Bought(Sold
Position Ticker 12/31/2008 3/31/2009 ) 6/30/2009 Bought(Sold)
Advent Software ADVS 15,174 15,174 0 0 (15,174)
Aetna AET 8,596,022 8,513,612 (82,410) 5,921,679 (2,591,933)
Amdocs DOX 4,349,247 3,474,869 (874,378) 3,224,869 (250,000)
American Tower AMT 799,120 0 (799,120) 0 0
Americsourcebergen ABC 5,354,389 4,214,071 (1,140,318) 7,428,142 3,214,071
Arvinmeritor ARM 3,187,212 4,919,770 1,732,558 6,583,656 1,663,886
Blockbuster BBI-B 2,071,400 1,213,170 (858,230) 1,213,170 0
Burlington Northern Santa Fe BNI 60,700 0 (60,700) 0 0
Cigna CI 7,084,504 10,889,716 3,805,212 8,372,906 (2,516,810)
CSX Corp CSX 234,500 0 (234,500) 0 0
CVS Caremark CVS 4,775,440 6,862,340 2,086,900 6,006,195 (856,145)
RR Donnelley RRD 3,899,441 6,431,784 2,532,343 9,905,125 3,473,341
eBay EBAY 8,265,115 8,096,974 (168,141) 6,902,370 (1,194,604)
Electronic Arts ERTS 1,000,000 500,000 (500,000) 0 (500,000)
Fibertower Corp Note FTWR 19,000,000 0 (19,000,000) 0 0
Fidelity National Information FIS 10,644,675 7,085,245 (3,559,430) 4,929,645 (2,155,600)
First American Corp FAF 1,224,739 454,313 (770,426) 114,000 (340,313)
Fiserve FISV 408,783 3,088,142 2,679,359 634,942 (2,453,200)
Lender Processing Services LPS 758,969 0 (758,969) 0 0
Life Technologies LIFE 453,718 2,220,813 1,767,095 2,999,316 778,503
Macrovision MVSN 5,949,033 2,689,134 (3,259,899) 2,789,134 100,000
McKesson* MCK 5,003,990 2,670,838 (2,333,152) 1,970,838 (700,000)
Nalco NLC 3,216,489 0 (3,216,489) 0 0
Norfolk Southern SNSC 99,000 0 (99,000) 0 0
NRG Energy NRG 2,847,760 0 (2,847,760) 0 0
Omnicare OCR 8,989,488 7,182,155 (1,807,333) 7,199,424 17,269
Primedia PRM 2,497,052 2,497,052 0 2,479,552 (17,500)
RRI Energy RRI 9,033,082 6,200,855 (2,832,227) 0 (6,200,855)
Terrestar Corp TSTR 905,926 905,926 0 1,912,203 1,006,277
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Commentary: Wow, Larry Robins was a busy man during Q2. He significantly
trimmed his stake in many existing portfolio companies to add a slew of new
names. Similar to the strategy employed by Dan Loeb, Robbins focused his new
purchases on well known large cap companies such as Express Scripts (ESRX).
Mastercard (MA), Sealed Air (SEE), Monsanto (MON) and Tyco Electronics (TEL). Also,
like Paulson and Loeb, Robbins added shares of Bank of America (BAC), along with
other financial companies such as Regions Financial (RF), Capital One (COF), US
Bancorp (USB), and Fifth Third (FITB). As I noted in my Paulson piece , these stocks
have had a strong run since the end of Q2 so it is possible these positions have
been trimmed a bit. However, I am impressed by the way he and Paulson
anticipated a recovery in the shares of some of the most troubled and beaten down
banks. Were they lucky or were they good? Tough to tell but my guess is that their
investors don’t care either way.
Finally, it is interesting to see what Robbins sold to fund these new purchases. He
sold his entire stake in Genworth Financial (GNW) and RII (formerly Reliant) Energy
(RRI). He also made meaningful cuts to his positions in Aetna (AET), Cigna (CI),
Fidelity National (FIS) and Fiserv (FISV). I wonder if he is concerned about what
ObamaCare has in store for health service organizations such as CI and AET.
Commentary: Boone Pickens did a whole lot more selling than buying in Q2. He
closed his positions Consol Energy (CNX), Fluor (FLR), Massey Energy (MEE), Alpha
Natural Resources (ANR) and Foster Wheeler (FWLT). These moves are interesting
because many of the original purchases were made in Q1 and quickly closed out by
the end of Q2. The only positions he added to were Cabot Oil and Gas (COG),
Questar (STR), and Forest Oil (FST). All in all it appears that Pickens had ratcheted
down his exposure to the energy sector, at least through BP Capital. It makes you
wonder whether he is expecting a short term correction within what we know he
believes is a secular bull market.
Commentary: After a tough year in 2008, David Winters has not made dramatic
changes to his portfolio in 2009. In Q1 he sold out of his Fomento Economic (FMX)
and Wynn Resorts (WYNN). In Q2 he trimmed his stakes in Chesapeake Energy
(CHK), Leucadia National (LUK), and Reynolds American (RAI) while adding small
positions in McDonald’s (MCD) and Fairfax Financial (FFH). He also bought back into
WYNN during Q2. In contrast to Dan Loeb and Larry Robbins, Winters has pursued
the strategy of concentrating on the names he is comfortable with and not tinkering
too much with the portfolio. The reason it is interesting to examine Winters’ strategy
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Icahn Capital Shares Owned Shares Owned Q4-Q1 Shares Owned Q1-Q2
Bought(Sold
Position Ticker 12/31/2008 3/31/2009 ) 6/30/2009 Bought(Sold)
Adventrx Pharma ANX 3,459,459 3,459,459 0 3,459,459 0
Amicus Therapeutics FOLD 145,427 0 (145,427) 0 0
Amylin Pharma AMLN 11,426,157 12,971,328 1,545,171 12,971,328 0
Anandarko Petroleum APC 7,617,876 0 (7,617,876) 0 0
Biogen Idec BIIB 12,860,205 12,860,205 0 12,860,205 0
Blockbuster CLA BBI-A 10,523,840 10,523,840 0 10,523,840 0
Blockbuster CLB BBI-B 4,452,905 4,452,905 0 4,452,905 0
Cyberonics CYBX 2,008,612 2,107,972 99,360 2,107,972 0
Emisphere Technologies EMIS 86,430 86,430 0 86,430 0
Endo Pharma ENDP 1,506,080 1,129,126 (376,954) 1,129,126 0
Enzon Pharma ENZN 2,457,683 2,816,861 359,178 2,816,861 0
Exelixis Inc EXEL 2,357,110 2,357,110 0 2,357,110 0
Forestar Real Estate FOR 397,720 0 (397,720) 0 0
Guaranty Financial GFG 14,696,320 14,696,320 0 14,696,320 0
Life Technologies LIFE 196,507 0 (196,507) 0 0
Lions Gate LGF 8,959,668 13,432,899 4,473,231 16,578,320 3,145,421
Medarex MEDX 313,040 313,040 0 313,040 0
Motorola MOT 119,790,447 119,790,447 0 119,790,447 0
Regeneron Pharma REGN 2,508,001 2,508,001 0 2,508,001 0
Take Two Interactive TTWO 541,128 2,007,445 1,466,317 2,007,445 0
Temple Inland TIN 1,448,779 0 (1,448,779) 0 0
Wendy's Arby's WEN 643,590 643,590 0 643,590 0
Williams Co WMB 17,475,520 360,000 (17,115,520) 0 (360,000)
Yahoo YHOO 60,452,099 60,452,099 0 60,452,099 0
Lions Gate Note 0 800,000 800,000 923,000 123,000
Proshares Ultra Short Real
Estate SRS 0 24,000 24,000 26,400 2,400
Commentary: What stands out about Icahn’s Q2 portfolio is the utter lack of activity.
Aside from adding to his bet on Lion’s Gate (LGF) and increasing his stake in the
Proshares Ultra Short Real Estate ETF (SRS), the only other position change was the
sale of his remaining stake in Williams Companies (WMB). However, Icahn still holds
large stakes in Blockbuster (BBI), Motorola (MOT), and a number of pharmaceutical
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
and biotech companies. From what I have read he continues to take an activist role
with a number of these companies. The thing about special situations in general is
that sometimes the returns are market agnostic, meaning that the outcome of the
activist’s attempts to influence the company play a bigger role in the movement of
the stock than does the overall direction of the market. Accordingly, investors
cannot assume that the lack of changes in the portfolio, despite many compelling
valuations during Q2, is necessarily negative.
Shares Shares
Lone Pine Shares Owned Owned Q4-Q1 Owned Q1-Q2
Bought(Sold
Position Ticker 12/31/2008 3/31/2009 ) 6/30/2009 Bought(Sold)
Abercrombie and Fitch ANF 3,364,819 0 (3,364,819) 0 0
Activision Blizzard ATVI 20,261,910 6,511,264 (13,750,646) 0 (6,511,264)
America Movil AMX 24,007,275 18,641,417 (5,365,858) 11,784,662 (6,856,755)
Bunge Limited BG 550,000 0 (550,000) 0 0
Carnival Corp CCL 7,923,647 8,494,358 570,711 0 (8,494,358)
Coach COH 6,172,333 8,787,008 2,614,675 8,586,210 (200,798)
Deltek PROJ 2,206,293 2,206,293 0 3,564,426 1,358,133
Dolby Labs DLB 4,858,460 2,101,333 (2,757,127) 0 (2,101,333)
Fomento Economico FMX 1,629,254 7,834,394 6,205,140 7,222,748 (611,646)
Google GOOG 844,016 591,399 (252,617) 476,284 (115,115)
JP Morgan JPM 12,339,623 15,599,128 3,259,505 15,544,028 (55,100)
Las Vegas Sands LVLS 18,677,261 31,341,283 12,664,022 0 (31,341,283)
Lorillard LO 3,639,511 0 (3,639,511) 0 0
Mastercard MA 2,921,408 2,102,320 (819,088) 1,199,834 (902,486)
Monsanto MON 4,230,159 4,356,164 126,005 7,827,264 3,471,100
MSC Indl Direct MSM 4,923,117 3,006,797 (1,916,320) 1,782,137 (1,224,660)
Precision Castparts PCP 3,639,765 2,621,911 (1,017,854) 1,584,411 (1,037,500)
Priceline PCLN 3,604,068 2,599,444 (1,004,624) 2,339,444 (260,000)
Qualcomm QCOM 20,270,480 18,719,202 (1,551,278) 15,905,742 (2,813,460)
Sandringe Energy SD 6,616,611 6,616,611 0 6,616,611 0
Charles Schwab SCHW 7,568,466 0 (7,568,466) 0 0
Sears Holdings SHLD 3,167,900 500,000 (2,667,900) 500,000 0
SPDR Gold GLD 1,760,000 26,500,000 24,740,000 3,453,500 (23,046,500)
Teradata TDC 10,007,277 0 (10,007,277) 0 0
Union Pacific UNP 6,885,633 7,199,986 314,353 1,951,597 (5,248,389)
Visa V 8,435,552 9,105,957 670,405 6,786,223 (2,319,734)
XTO Energy XTO 3,973,533 2,667,833 (1,305,700) 2,468,287 (199,546)
Apollo Group APOL 0 1,888,980 1,888,980 0 (1,888,980)
Coca Cola KO 0 2,819,152 2,819,152 5,636,263 2,817,111
Ctrip Com Int'l CTRP 0 3,547,917 3,547,917 0 (3,547,917)
Deckers Outdoor DECK 0 1,093,072 1,093,072 0 (1,093,072)
The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Commentary: Steve Mandel definitely took a page of out the Larry Robbins playbook
(or vice versa) in Q2. Mandel took the initiative in Q2 to trim his positions in a
number of companies to buy some blue chips such as Nike (NKE), MCD, and HPQ.
He also added large stakes in Smithfield Foods (SFD) and Melco Crown
Entertainment (MPEL) as well as dipping his toe into the financial space by buying
FITB and SunTrust Banks (STI). To finance these acquisitions he sold out of a number
of positions, including: Pepsico (PEP), SLM Corp (SLM), Medco Health Solutions
(MHS), Deckers Outdoor (DECK), Apollo Group (APOL), Las Vegas Sands (LVS),
Carnival Corp (CCL) and Activision Blizzard (ATVI). He also meaningfully cut his
stakes in Urban Outfitters (URBN), Visa (V), Union Pacific (UNP), and America Movil
(AMX). However, one of the most interesting moves from my perspective is his sale
of 23M shares of GLD. Did he move to bullion instead? Did he change his position on
inflation and dollar debasement? Was it just a hedge that he felt he could take off?
He still owns about 3M shares but this was a significant move within his portfolio.