Thursday, August 17, 2017

Top Funds' Activity in Q2 2017

David Randall of Reuters reports, Billionaire hedge-fund manager Tepper adds contrarian energy stocks:
Hedge-fund manager David Tepper, known for taking positions in out-of-favor companies in his Appaloosa Management hedge fund, added stakes in embattled Wells Fargo Co and several energy companies in the second quarter as the price of oil fell, according to quarterly filings released Monday.

Among the six new energy companies Tepper added to his fund were Antero Resources Corp, Southwestern Energy Co, and Chesapeake Energy Corp.

Shares of each company are down by 20 percent or more year-to-date as part of a broad sell-off in energy companies. The price of oil hit a 9-month low in June due to concerns about a glut of supply. Overall, energy companies in the S&P 500 are down 12.7 percent for the year through Friday, compared with a 9.3 percent gain in the broad index.

Tepper, who manages roughly $17 billion overall, bought approximately 681,000 shares of Wells Fargo during the quarter. Shares of the company are down 4 percent for the year as the company faces the ramifications of a scandal over unauthorized account openings and lawsuits that charged it modified borrower's mortgages without their authorization.

Overall, shares of financial stocks in the S&P 500 gained 6.9 percent for the year through Friday.

In addition to energy and financial companies, Tepper took a roughly 3.7 million-share stake in Chinese online retailer Alibaba Group Holdings Ltd, making it the third-largest holding in the fund. Dan Loeb's Third Point once again has a stake in Alibaba, having bought 4.5 million shares during the second quarter. Shares of the company are up 76 percent year-to-date after the company raised its revenue forecast in June.

Other new additions to the fund included down-market retailer Dollar General Corp, mall-based retailer L Brands Inc, and travel bookings site Expedia Inc, filings show.

Among technology stocks, Tepper added approximately 449,000 shares of Facebook Inc, increasing his stake in the company by 23 percent, and sold all of his shares of Snap Inc. Shares of the social media company have slid 14 percent since its $3.4 billion initial public offering in March on increased investor concerns that the company may never turn a profit.
It's time for our quarterly sneak peek into the portfolios of "money manager gods" but before I begin looking into what top funds bought and sold during the second quarter, let me once again state my top three macro conviction calls going forward:
  1. Long US long bonds (TLT) as I see the US economy slowing and global deflation spreading to the United States. 
  2. Long the USD (UUP) as I see the global economy following the US economy and slowing. Even if the Fed pauses its rate hikes, the USD will gain as global economies start slowing. If a crisis hits, it's bullish for the greenback and yen.
  3. Short oil (OIL), energy (XLE) and metals and mining (XME) shares as well as commodity currencies. Why in the world would you be long energy and commodities with global deflation looming around the corner? That's just plain nuts.
Given my views on global deflation coming to America, I'm also short emerging markets bonds (EMB), currencies and stocks (EEM) and short financials (XLF) and other cyclical stocks, including industrials (XLI), retail (XRT) and transportation (IYT) shares.

And even though I worry about deflation, I'm also weary of utilities (XLU), REITs (IYR) and even consumer staples (XLP) as I find a lot of these dividend "safe places to hide" are way overvalued and can get clobbered if markets melt down. People don't realize that dividends don't protect you from a market meltdown.

As far as biotech (XBI and IBB) and technology (XLK), the two sectors I liked most right before Trump got elected, I believe these high beta, high flyers are cruising for a major bruising and they will get clobbered when markets head south. This will impact healthcare (XLV) as there are a lot of biotech shares that drove that ETF up.

What about gold (GLD), the sector Ray Dalio recently recommended on LinkedIn to hedge against geopolitical and other risks? Even though there may be a tradable rally, I'm not touching gold given my bullish views on the greenback and I firmly believe that only US long bonds (TLT) will protect your portfolio from the ravages of global deflation.

Importantly, I see huge deflationary risks in the world which is why I truly believe US long bonds (TLT) offer investors the best risk-adjusted returns over the next year or longer and will prove to be the ultimate diversifier, protecting your portfolio from being obliterated as deflation roils all risk assets.

When I tell you that all my money and the money of my loved ones is in US long bonds (TLT), I mean it and the bad news is this isn't the market to be diversified among many ETFs or even to pick stocks, you risk getting killed either way because I foresee both active and passive strategies getting whacked hard over the next six months to a year (active less than passive).

I had to begin this comment with my macro views because every time I post a comment on what top funds bought and sold last quarter, people get all excited and ask me "What did Soros buy? What about Tepper, Griffin et al.?

Listen to me carefully, it doesn't matter what these top funds bought and sold last quarter, I stick by my macro views one hundred percent and that's why I am recommending US long bonds (TLT). If I had Tepper's fund in my hedge fund portfolio, I'd be grilling him on his contrarian energy bets and even his love affair with tech stocks.

"But Leo, that's David Tepper you're talking about! You can't question him, Ray Dalio and other elite hedge fund managers, they have more money than you'll amass in one million lifetimes and everyone listens to them, not you."

That's true but that's also the problem, people glorifying uber-wealthy hedge fund managers, paying them extraordinary fees when all they should be doing is raising their exposure to boring old US long bonds (TLT) and pay NO fees.

I'm willing to bet anyone reading this comment that over the next year, US long bonds will significantly outperform hedge funds on a risk-adjusted basis.

"Yeah but that's not sexy. Hedge funds and other alternative investments offer higher returns than bonds over a long period and we get to travel to New York, London, and other cool places to meet these managers who wine and dine us at nice restaurants and take good care of us, making us feel very important."

I hear you, my dear pension fund managers, been there, done that. All I can say is what the late great George Carlin repeated many times: "It's all bullshit and it's bad for you."

"Leo, is that your hyperthyroid talking or is that really you?". I assure you it's really me, I'm treating my hyperthyroid with two little Tapazole pills every morning and should be fine in one month (the endocrinologist told me I have Grave's disease and likely had it for a long time, but it's treatable).

Folks, I know, bonds aren't sexy. The Maestro and others think there's a bubble in bonds, but they don't understand the inflation deflation mystery. They think Trump will save us with tax cuts and big spending on infrastructure, and rates will rise to new highs. Keep dreaming, I warned you a long time ago, nobody trumps the bond market, especially not Trump.

In fact, I'm on record stating the 10-year Treasury note yield is headed below 1% and might touch 0.5% or head even lower if a global deflationary crisis develops.

When that happens, you won't care what Tepper and Soros bought or sold in the stock market. Soros will come out ahead of the hedge fund pack once again, not based on his stock selection skills, but on his great bearish macro calls.

That's why Soros is the undisputed king of hedge funds, because he understands the macro environment better than anyone else.

On that note, let me share some other articles covering what top funds bought and sold in Q2:
And on and on it goes, you can literally spend days reading about what hedge funds bought and sold last quarter. Like I said, it's all noise, these markets are headed lower, and will clobber passive and active managers alike.

All I can tell you is analyzing and trading markets and stocks is a passion of mine. I regularly look at the YTD performance of stocks, the 12-month leaders, the 52-week highs and 52-week lows. I also like to track the most shorted stocks and highest yielding stocks in various exchanges and I have a list of stocks I track in over 100 industries/ themes to see what is moving in real time.

When I tell you these aren't the markets you want to be playing in, I know exactly what I'm talking about because I'm watching these markets closely every day and my deflationary macro call looms large and is weighing on on all risk assets, not just stocks.

These ARE NOT the markets you want to be making any bullish or contrarian bets on. Trust me when I tell you global deflation will obliterate all risk assets and the only refuge will be in US long bonds (TLT).

On that cheery note, have fun looking at the second quarter activity of top funds I listed below (just click on links and then click on the fourth column head, % chg, to see where they descreased and increased their holdings).

Top multi-strategy and event driven hedge funds

As the name implies, these hedge funds invest across a wide variety of hedge fund strategies like L/S Equity, L/S credit, global macro, convertible arbitrage, risk arbitrage, volatility arbitrage, merger arbitrage, distressed debt and statistical pair trading.

Unlike fund of hedge funds, the fees are lower because there is a single manager managing the portfolio, allocating across various alpha strategies as opportunities arise. Below are links to the holdings of some top multi-strategy hedge funds I track closely:

1) Citadel Advisors

2) Balyasny Asset Management

3) Farallon Capital Management

4) Peak6 Investments

5) Kingdon Capital Management

6) Millennium Management

7) Eton Park Capital Management

8) HBK Investments

9) Highbridge Capital Management

10) Highland Capital Management

11) Pentwater Capital Management

12) Och-Ziff Capital Management

13) Pine River Capital Capital Management

14) Carlson Capital Management

15) Magnetar Capital

16) Mount Kellett Capital Management 

17) Whitebox Advisors

18) QVT Financial 

19) Paloma Partners

20) Weiss Multi-Strategy Advisors

21) York Capital Management

Top Global Macro Hedge Funds and Family Offices

These hedge funds gained notoriety because of George Soros, arguably the best and most famous hedge fund manager. Global macros typically invest across fixed income, currency, commodity and equity markets.

George Soros, Carl Icahn, Stanley Druckenmiller, Julian Robertson and now Steve Cohen have converted their hedge funds into family offices to manage their own money and basically only answer to themselves (that is my definition of true investment success).

1) Soros Fund Management

2) Icahn Associates

3) Duquesne Family Office (Stanley Druckenmiller)

4) Bridgewater Associates

5) Pointstate Capital Partners 

6) Caxton Associates (Bruce Kovner)

7) Tudor Investment Corporation

8) Tiger Management (Julian Robertson)

9) Moore Capital Management

10) Point72 Asset Management (Steve Cohen)

11) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)

12) Joho Capital (Robert Karr, a super succesful Tiger Cub who shut his fund in 2014)

Top Market Neutral, Quant and CTA Hedge Funds

These funds use sophisticated mathematical algorithms to make their returns, typically using high-frequency models so they churn their portfolios often. A few of them have outstanding long-term track records and many believe quants are taking over the world. They typically only hire PhDs in mathematics, physics and computer science to develop their algorithms. Market neutral funds will engage in pair trading to remove market beta.

1) Alyeska Investment Group

2) Renaissance Technologies

3) DE Shaw & Co.

4) Two Sigma Investments

5) Numeric Investors

6) Analytic Investors

7) Winton Capital Management

8) Graham Capital Management

9) SABA Capital Management

10) Quantitative Investment Management

11) Oxford Asset Management

12) PDT Partners

13) Princeton Alpha Management

Top Deep Value,
Activist, Event Driven and Distressed Debt Funds

These are among the top long-only funds that everyone tracks. They include funds run by legendary investors like Warren Buffet, Seth Klarman, Ron Baron and Ken Fisher. Activist investors like to make investments in companies where management lacks the proper incentives to maximize shareholder value. They differ from traditional L/S hedge funds by having a more concentrated portfolio. Distressed debt funds typically invest in debt of a company but sometimes take equity positions.

1) Abrams Capital Management (the one-man wealth machine)

2) Berkshire Hathaway

3) Baron Partners Fund (click here to view other Baron funds)

4) BHR Capital

5) Fisher Asset Management

6) Baupost Group

7) Fairfax Financial Holdings

8) Fairholme Capital

9) Trian Fund Management

10) Gotham Asset Management

11) Fir Tree Partners

12) Elliott Associates

13) Jana Partners

14) Gabelli Funds

15) Highfields Capital Management 

16) Eminence Capital

17) Pershing Square Capital Management

18) New Mountain Vantage  Advisers

19) Atlantic Investment Management

20) Scout Capital Management

21) Third Point

22) Marcato Capital Management

23) Glenview Capital Management

24) Apollo Management

25) Avenue Capital

26) Armistice Capital

27) Blue Harbor Group

28) Brigade Capital Management

29) Caspian Capital

30) Kerrisdale Advisers

31) Knighthead Capital Management

32) Relational Investors

33) Roystone Capital Management

34) Scopia Capital Management

35) Schneider Capital Management

36) ValueAct Capital

37) Vulcan Value Partners

38) Okumus Fund Management

39) Eagle Capital Management

40) Sasco Capital

41) Lyrical Asset Management

42) Gabelli Funds

43) Brave Warrior Advisors

44) Matrix Asset Advisors

45) Jet Capital

46) Conatus Capital Management

47) Starboard Value

48) Pzena Investment Management

Top Long/Short Hedge Funds

These hedge funds go long shares they think will rise in value and short those they think will fall. Along with global macro funds, they command the bulk of hedge fund assets. There are many L/S funds but here is a small sample of some well-known funds.

1) Adage Capital Management

2) Appaloosa LP

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) JAT Capital Management

8) Coatue Management

9) Omega Advisors (Leon Cooperman)

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Bronson Point Management

16) Hoplite Capital Management

17) LSV Asset Management

18) Hussman Strategic Advisors

19) Cantillon Capital Management

20) Brookside Capital Management

21) Blue Ridge Capital

22) Iridian Asset Management

23) Clough Capital Partners

24) GLG Partners LP

25) Cadence Capital Management

26) Karsh Capital Management

27) New Mountain Vantage

28) Andor Capital Management (it shut down again, for now)

29) Silver Point Capital

30) Steadfast Capital Management

31) Brookside Capital Management

32) PAR Capital Capital Management

33) Gilder, Gagnon, Howe & Co

34) Brahman Capital

35) Bridger Management 

36) Kensico Capital Management

37) Kynikos Associates

38) Soroban Capital Partners

39) Passport Capital

40) Pennant Capital Management

41) Mason Capital Management

42) Tide Point Capital Management

43) Sirios Capital Management 

44) Hayman Capital Management

45) Highside Capital Management

46) Tremblant Capital Group

47) Decade Capital Management

48) T. Boone Pickens BP Capital 

49) Bloom Tree Partners

50) Cadian Capital Management

51) Matrix Capital Management

52) Senvest Partners


53) Falcon Edge Capital Management

54) Park West Asset Management

55) Melvin Capital Partners

56) Owl Creek Asset Management

57) Portolan Capital Management

58) Proxima Capital Management

59) Tiger Global Management

60) Tourbillon Capital Partners

61) Impala Asset Management

62) Valinor Management

63) Viking Global Investors

64) Marshall Wace

65) Light Street Capital Management

66) Honeycomb Asset Management

67) Whale Rock Capital

70) Suvretta Capital Management

71) York Capital Management

72) Zweig-Dimenna Associates

Top Sector and Specialized Funds

I like tracking activity funds that specialize in real estate, biotech, healthcare, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.

1) Armistice Capital

2) Baker Brothers Advisors

3) Palo Alto Investors

4) Broadfin Capital

5) Healthcor Management

6) Orbimed Advisors

7) Deerfield Management

8) BB Biotech AG

9) Ghost Tree Capital

10) Sectoral Asset Management

11) Oracle Investment Management

12) Perceptive Advisors

13) Consonance Capital Management

14) Camber Capital Management

15) Redmile Group

16) RTW Investments

17) Bridger Capital Management

18) Boxer Capital

19) Bridgeway Capital Management

20) Cohen & Steers

21) Cardinal Capital Management

22) Munder Capital Management

23) Diamondhill Capital Management 

24) Cortina Asset Management

25) Geneva Capital Management

26) Criterion Capital Management

27) Daruma Capital Management

28) 12 West Capital Management

29) RA Capital Management

30) Sarissa Capital Management

31) SIO Capital Management

32) Senzar Asset Management

33) Southeastern Asset Management

34) Sphera Funds

35) Tang Capital Management

36) Thomson Horstmann & Bryant

37) Venbio Select Advisors

38) Ecor1 Capital

39) Opaleye Management

40) NEA Management Company

Mutual Funds and Asset Managers

Mutual funds and large asset managers are not hedge funds but their sheer size makes them important players. Some asset managers have excellent track records. Below, are a few funds investors track closely.

1) Fidelity

2) Blackrock Fund Advisors

3) Wellington Management

4) AQR Capital Management

5) Sands Capital Management

6) Brookfield Asset Management

7) Dodge & Cox

8) Eaton Vance Management

9) Grantham, Mayo, Van Otterloo & Co.

10) Geode Capital Management

11) Goldman Sachs Group

12) JP Morgan Chase & Co.

13) Morgan Stanley

14) Manulife Asset Management

15) RCM Capital Management

16) UBS Asset Management

17) Barclays Global Investor

18) Epoch Investment Partners

19) Thornburg Investment Management

20) Legg Mason (Bill Miller)

21) Kornitzer Capital Management

22) Batterymarch Financial Management

23) Tocqueville Asset Management

24) Neuberger Berman

25) Winslow Capital Management

26) Herndon Capital Management

27) Artisan Partners

28) Great West Life Insurance Management

29) Lazard Asset Management 

30) Janus Capital Management

31) Franklin Resources

32) Capital Research Global Investors

33) T. Rowe Price

34) First Eagle Investment Management

35) Frontier Capital Management

36) Akre Capital Management

37) Brandywine Global

38) Brown Capital Management

Canadian Asset Managers

Here are a few Canadian funds I track closely:

1) Addenda Capital

2) Letko, Brosseau and Associates

3) Fiera Capital Corporation

4) West Face Capital

5) Hexavest

6) 1832 Asset Management

7) Jarislowsky, Fraser

8) Connor, Clark & Lunn Investment Management

9) TD Asset Management

10) CIBC Asset Management

11) Beutel, Goodman & Co

12) Greystone Managed Investments

13) Mackenzie Financial Corporation

14) Great West Life Assurance Co

15) Guardian Capital

16) Scotia Capital

17) AGF Investments

18) Montrusco Bolton

19) Venator Capital Management

Pension Funds, Endowment Funds, and Sovereign Wealth Funds

Last but not least, I the track activity of some pension funds, endowment and sovereign wealth funds. I like to focus on funds that invest in top hedge funds and have internal alpha managers. Below, a sample of pension and endowment funds I track closely:

1) Alberta Investment Management Corporation (AIMco)

2) Ontario Teachers' Pension Plan

3) Canada Pension Plan Investment Board

4) Caisse de dépôt et placement du Québec

5) OMERS Administration Corp.

6) British Columbia Investment Management Corporation (bcIMC)

7) Public Sector Pension Investment Board (PSP Investments)

8) PGGM Investments

9) APG All Pensions Group

10) California Public Employees Retirement System (CalPERS)

11) California State Teachers Retirement System (CalSTRS)

12) New York State Common Fund

13) New York State Teachers Retirement System

14) State Board of Administration of Florida Retirement System

15) State of Wisconsin Investment Board

16) State of New Jersey Common Pension Fund

17) Public Employees Retirement System of Ohio

18) STRS Ohio

19) Teacher Retirement System of Texas

20) Virginia Retirement Systems

21) TIAA CREF investment Management

22) Harvard Management Co.

23) Norges Bank

24) Nordea Investment Management

25) Korea Investment Corp.

26) Singapore Temasek Holdings 

27) Yale Endowment Fund

Below, CNBC's Leslie Picker digs deeper into what the quarterly SEC filings by big-name investors say about the sectors they're buying and selling. Glad to see Ray Dalio increased his stake in US long bonds (TLT) in Q2.

And CNBC's traders discuss how David Tepper of Appaloosa Management, one the most respected and legendary investors in the hedge fund business, is betting big on technology (geez, what a pathetic shmooze fest this was, almost made me heave).

Third, on a more serious note, if there was any doubt about what kind of person went to protest in Charlottesville, Virginia, over the weekend, Vice News’s documentary should put those questions to rest. Watch this disturbing documentary and share it with others (warning: not easy to watch and highly offensive but it exposes the hatred, bigotry, and anti-Semitism right in our backyard).

Lastly, Larry Summers, former Treasury secretary, gives his thought about the role of executives on President Trump's advisory councils. Summers doesn't mince his words and that's why I respect him.

Update: My comment was written prior to the terrorist attack in Barcelona which was behind Thursday's selloff. These senseless acts of terrorism only add to my fears, as do geopolitics in North Korea and elsewhere, but that's not what I'm basing my macro calls on. My macro calls are based on a slowdown in the US economy, followed by a global slowdown which will export deflation to the United States. In this deflationary environment, only US nominal long bonds (TLT) will save your portfolio from being ravaged.  

The message here is clear, forget what hedge fund gurus are buying and selling. Now isn't the time to play with stocks, now is the time to be very defensive and load up on US long bonds (TLT), hunkering down as global deflation obliterates all risk assets, not just stocks.




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