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Hedge Fund Wisdom: Free Sample Issue

Hedge Fund Wisdom: Free Sample Issue

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Published by marketfolly.com
This is a free sample of Hedge Fund Wisdom, a quarterly newsletter that details the portfolios of 25 top hedge funds. It also features commentary on their moves and equity analysis written directly by hedge fund analysts.
This is a free sample of Hedge Fund Wisdom, a quarterly newsletter that details the portfolios of 25 top hedge funds. It also features commentary on their moves and equity analysis written directly by hedge fund analysts.

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Published by: marketfolly.com on May 24, 2011
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hedge fund wisdom
Table of Contents
p.02 Baupost Group
Hedge FundPortfolio Updates
Q3 2010
a quarterly publication by 
marketfolly.com
Q3 2010 www.hedgefundwisdom.com 1
Every quarter, hedge funds and institutional managers arerequired to disclose their portfolios to the SEC via 13F filing. Thesefilings only detail long U.S. equity positions, American Depositary Receipts (ADRs), stock options (puts/calls), as well as convertiblenotes. The 13F filing does not disclose positions in other assetclasses (such as commodities, currencies, or debt). It also does notreveal short sales or cash positions.Hedge Fund Wisdom, a quarterly publication by MarketFolly.com, updates and analyzes the latest portfolios of prominent investment managers. The positions herein represent ahedge fund’s second quarter holdings as of Sept. 30
th
, 2010 but keepin mind they are not reflective of a fund’s entire overall portfolio.
Background:Third Quarter Summary:
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In This Issue:Next Page: Baupost Group’s Updated Portfolio
-
 
Portfolio updates on
23
prominent hedge fund portfolios (3new hedge funds added)-
 
In-depth investment write-ups on 2 stocks & “quick pitches”on 4 stocks hedge funds were buying in the third quarter-
 
 Analysis & commentary on each fund’s portfolio maneuversThe table below outlines the most frequent buys & sells in thethird quarter amongst the 23 prominent hedge funds profiled in thisissue.
p.04 Berkshire Hathaway p.06 Greenlight Capitalp.08 Lone Pine Capitalp.11 Appaloosa Managementp.14 Pershing Square Capitalp.16 Maverick Capitalp.19 Third Point LLCp.21 Blue Ridge Capitalp.24 Paulson & Cop.27 Tiger Managementp.29 Soros Fund Managementp.32 Bridger Managementp.35 Omega Advisorsp.39 Shumway Capital Partnersp.42 Fairholme Capitalp.44 Tiger Global Managementp.46 Passport Capitalp.51 Perry Capitalp.54 Glenview Capital
Hedge Fund Favorites:In-Depth Equity Analysis
p.69 Aon (AON)p.78 CareFusion (CFN)
To view a specific hedge fund’s portfolio, simply click on thefund’s name in the Table of Contents.
p.57 Viking Globalp.60 Farallon Capitalp.63 Icahn Capital
Hedge Fund Quick Pitches:
p.65 Cisco Systems (CSCO)p.66 Express Scripts (ESRX)p.67 Alcon (ACL)p.68 Sirius XM Radio (SIRI)
FREE SAMPLE ISSUE
 
Q3 2010 www.hedgefundwisdom.com 2
B
efore examining Baupost Group’sholdings, keep in mind that only a very smallportion of their overall portfolio is allocated toequities and convertible notes. At the end of thethird quarter, Klarman’s firm held only $1.6 billion in long equities/notes exposure.Compare this with the firm’s overall assetsunder management of around $22 billion andit’s clear their focus is in other asset classes.Baupost’s focus is typically on distressedassets, which the SEC does not requiredisclosure of. The firm invests mainly in bondsas they are a senior security with a built-incatalyst and usually offer more safety. Additionally, Klarman typically keeps a lot of cash on hand so he can deploy it asopportunities arise. In May of this year,Baupost had around a 30% cash position. And just recently, Baupost announced that it would be returning 5% of its capital to investors, citinglack of opportunities. This should sound somealarm bells for investors as Klarman is regardedas one of the greatest managers of thisgeneration. If he’s not finding many opportunities, it could be warning sign thatthings are overvalued here.Broadly, Klarman was concerned aboutthe equities rally of 2009 and delivered thischilling quote saying, “I’m more worried aboutthe world broadly than I’ve ever been in my  whole career.” As such, there’s not much interms of equity portfolio adjustment forKlarman in the third quarter. Most notably, heacquired brand new positions in Alere (ALR)and Regeneron Pharmaceutical (REGN) anddoubled his position in Liberty Media Starz(LSTZA). On the selling side of things, BaupostGroup reduced its stake in Domtar (UFS) by 56% and sold completely out of ADCTelecommunications (ADCT).Baupost Group’s five largest positionscontinue to be Viasat (VSAT), Theravance(THRX), News Corp (NWSA), Breitburn Energy (BBEP), and Capitalsource (CSE), in that order.Regarding areas Klarman currently seesopportunity, he’s mentioned privatecommercial real estate as an area worthexamining. Don’t confuse this with publicREITs as he feels those are overvalued. Asidefrom that, it’s clear Klarman isn’t seeing toomany opportunities.Lastly, Baupost Group has also boughtinsurance in the form of tail risk hedges.Rather than shorting to hedge, Bauposttypically will purchase out of the money puts onsomewhat extreme events that have a slimchance of occurring. But in the event they dooccur, Baupost is protected. Currently, the firmis concerned about inflation and holds far out of the money puts on Treasury bonds. They willmake money on this hedge if interest ratesskyrocket north of 10%. This insuranceapproach coupled with Klarman’s typically large cash position defines Baupost’s style of hedging. For his recent thoughts, head to aninterview with Seth Klarman.
 
Seth Klarman
Graduated from Harvard BusinessSchool & regarded as one of the bestinvestors of all time Author of Margin of Safety   View Seth Klarman’sRecommended Reading List 
 
Baupost Group
 View Baupost Group’s UpdatedPortfolio on the Next Page
Key Takeaways
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Baupost Group
Next Page: Berkshire HathawayThird Quarter 2010 Portfolio:Q3 2010 www.hedgefundwisdom.com 3
 
Rank Company Name TickerPut/Call% of Portfolio Activity  Value x$1000# of Shares
1 VIASAT, INC. VSAT 25.03% Added 0.79% $413,217 10,051,4922 THERAVANCE THRX 15.83% Unchanged $261,300 13,000,0003 NEWS CORP CL A NWSA 15.07% Unchanged $248,793 19,050,0004 Breitburn Energy Partners LP BBEP 7.92% Cut -13.63% $130,822 7,160,5005 ENZON PHARMACEUTICALS ENZN 7.07% Added 2.03% $116,727 10,382,6986 CAPITALSOURCE INC CSE 6.56% Unchanged $108,287 20,278,4007 LIBERTY STARZ LSTZA 3.93% Added 136.85% $64,930 1,000,0008 DOMTAR CORP NEW UFS 3.13% Cut -56.16% $51,664 800,0009 ALERE INC ALR 2.81% New $46,395 1,500,00010 THERAVANCE NOTE 3.0% 1/1 THRX 2.69% Unchanged $44,370 51,000,00011 SOLAR CAPITAL LTD. SLRC 2.29% Cut -12.17% $37,887 1,766,30012 ALLIANCE ONE INTL AOI 2.21% Unchanged $36,520 8,800,00013 REGENERON PHARMA REGN 1.66% New $27,400 1,000,00014 ITURAN LOCATION&CONTRL ITRN 1.50% Unchanged $24,783 1,721,06615 SYNERON MEDICAL LTD. ELOS 0.90% Unchanged $14,880 1,500,00016 MULTIMEDIA GAMES, INC. MGAM 0.58% Unchanged $9,620 2,600,00017 AUDIOVOX CORPORATION VOXX 0.44% Unchanged $7,254 1,060,57618 ENERGY XXI (BERMUDA) EXXI 0.37% Unchanged $6,124 265,00019 ADC TELECOM ADCT
Sold
-20 CAPITALSOURCE INC - NOTE CSE
Sold
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