In this piece, fresh off the release of Q2 2017 hedge fund ownership data, we dive into the latest hedge fund trends. IPOs, Tech, and more.
Only a few short weeks ago, the SEC released thousands of 13F filings from investment managers who disclosed their June 30th holdings. Novus collects, compiles, and analyzes this information by feeding it into our Hedge Fund Universe (HFU), a value-weighted portfolio of some 1,500 hedge fund (HF) managers identified and vetted by Novus. This portfolio provides our clients insight into HF positioning and trading across the industry, including sector shifts, overlap, and crowdedness.
Read on for some broad trends we’ve identified through this quarter’s public filings.
Sector exposures in the HFU have shifted slightly. Technology and Consumer Discretionary remain the largest allocations. In fact, Technology experienced the largest exposure increase across the industry (up 15% YTD), which is partly due to its relative outperformance. Exposure decreased in Consumer Discretionary, Financials, and Healthcare, all down ~5% YTD. Energy had the largest downward shift with a 19% decrease from the start of the year, as expected from its underperformance.
Although there were a few large offerings this quarter, hedge funds haven’t piled in. SNAP faces skepticism about its prospects, and now Blue Apron faces off against Jeff Bezos and the recently acquired Whole Foods. One bright spot attracting hedge fund attention was Altice launching Altice USA (NYSE: ATUS).
SNAP: Since the close of its first day of trading in March, SNAP’s price has fallen roughly -48%. Only 4% of Shares Outstanding (S.O.) are owned by HFs, with ¾ of those shares held by three managers: Coatue, Lone Pine, and Glade Brook. Lone Pine tripled its Q1 position, adding 5.8MM shares to reach a $135MM filed market value on June 30th. Balyasny Asset Mgmt and Melvin Capital entered with a $53MM position and a $13MM position respectively.
APRN: This stock has also fallen steadily since its IPO this summer, down roughly -43%. A handful of managers entered APRN with positions $10MM and below: Laurion Capital, Millennium, and JANA Partners.
ATUS: The Netherlands-based Altice formed this company after its acquisition of Cablevision and raised approximately $1.9B in the IPO. Managers jumped into the name, now owning 4.6% of S.O. Lone Pine and Scopia were the largest purchasers, pumping in $271MM and $117MM.
NXPI continues to be popular, and MobileEye gains attention in the driverless car space.
NXPI: Hedge funds increased their ownership from 30% to 42% of S.O. Large purchases came from Elliott $1.35B, Soroban $1.826B, Pentwater $1.54B, and Third Point $295MM.
MBLY: Intel completed their tender offer for MBLY just last week, August 8th. Mobileye is a key player in technology for driver assistance systems and autonomous driving. Hedge fund ownership of S.O. saw a significant increase from 9% at year-end 2016 to 37% in June 2017.
Alibaba and newly formed Altaba (formerly Yahoo!) are increasingly crowded as more funds pile in.
BABA: Hedge fund ownership is at a two-year high at 3.9%, increasing from 2.9% last quarter. Third Point $634MM, Appaloosa $520MM, Lone Pine $249MM, and Suvretta $234MM all increased or initiated their positions. Point72 ($98MM) was the largest reduction.
AABA: This is the new name and ticker for the entity remaining after Verizon purchased Yahoo. Its value stems from its stake in Alibaba. HFs owned 31% of S.O. of Yahoo in March 2017. Altaba’s ownership increased to 43% as of June 2017. This is, potentially, a bullish play on CEO Thomas McInerney’s ability to wind down this company. The drivers of this recent increase are Millennium $768MM, Och-Ziff $705MM, Aristeia $255MM, Davidson Kempner $250MM, Abrams $213MM, Pentwater $208MM, Senator $176MM, Appaloosa $160MM, and Cadian $163MM. Two Sigma ($284MM), Renaissance ($209MM), Highfields ($163MM), and Falcon Edge ($162MM) all reduced or exited.
Permian Basin is still popular even as Energy has been hurt YTD.
PE: This Permian pure-play producer attracted brand name hedge funds as well as Energy specialists. HFs’ outstanding share percentage rose from 22.3% in September 2016 to 25.7% by the end of June. Third Point increased its shares 80% to reach a $125MM position. Energy specialists Zimmer $170MM, Brenham (Initiated $90MM), and Caymus $64MM are also invested.
RSPP: Another Permian pure-play, RSP attracted hedge funds even faster than Parsley: HFs’ outstanding share percentage rose from 11% in September 2016 to 28% at the end of Q2 2017. Millennium and Citadel both added to existing positions, owning a combined $300MM. Although Zimmer exited RSP, Third Point also added to their existing position with $124MM as of June 30th. Brenham initiated with $92MM; Caymus and Two Creeks added.
Though many investors group these securities together as FAANG, FAAMG, or any other iteration, the most recent filings reveal some disagreement among managers.
FB: Hedge funds own 4.5% of S.O. This is down slightly from 5% in March. Two Sigma $310MM and Lone Pine $160MM added to their positions, and Tudor $126MM initiated. Viking ($1446MM), Point72 ($268MM), Renaissance ($262MM), and Citadel ($173MM) all decreased their positions.
AAPL: AAPL remains one of the most popular HF names with ~220 reporting it. Not much changed since last quarter, but D.E. Shaw $184MM, Laurion $175MM, Balyasny $155MM, and Alyeska $99MM all added or initiated positions. In contrast, Citadel ($493MM) and Blue Ridge ($185MM) reduced and exited their positions.
AMZN: Amazon made headlines earlier this quarter after purchasing Whole Foods, and while it continues driving headlines, hedge funds have been skeptical. Ownership is slightly down, from 3.3% to 3.26%—but again there are disagreeing opinions. Citadel $175MM, Scopus $155MM, PointState $138MM, Tybourne $134MM, and Balyasny $93MM have all initiated or added to their positions. Two Sigma ($579MM), Viking ($457MM), Blue Ridge ($236MM), and Tiger Global ($107MM) all decreased.
NFLX: Ownership decreased from 12.6% to 10% of S.O. Very few managers added to their positions. Citadel $66MM, Scopus $64MM, Tremblant $61MM, and Two Sigma $52MM all added slightly. Viking ($632MM), D.E. Shaw ($214MM), Millennium ($121MM), and SRS ($112MM)—the largest HF holder—decreased their positions.
GOOG / GOOGL: While ownership held steady, there was again disparity across managers. Soroban $311MM, Melvin $231MM, Citadel $197MM, SPO Partners $189MM, D.E. Shaw $171MM, Point72 $162MM, and Third Point $111MM all added or initiated positions. Viking ($977MM), Darsana ($159MM), and Highfields ($130MM), all decreased or exited.
CRM: Ownership increased since June 2016 from 4.6% to 7.4% and has hovered around 7% YTD. Lone Pine $229MM, Viking $184MM, Tybourne $178MM, and Coatue $94MM all increased their positions. On the other hand, Third Point ($260MM), Discovery ($157MM), Corvex ($112MM), and Millennium ($106MM) exited their positions.
Hedge Fund Favorites
These names are popular with hedge funds and continue to be relevant due to the heavy concentration of managers owning a large percentage of outstanding shares.
FLT: Hedge funds decreased their ownership from 32% (a year ago) to 25% in June 2017. Lone Pine $296MM, Steadfast $211MM, Tourbillion $161MM, and Tiger Global $126MM drove this. The only large reductions and exits were Highline ($159MM) and Millennium ($87MM).
TDG: Hedge fund ownership increased from 28% to 30%. Tiger Global $392MM, Viking $143MM, Meritage $118MM, and Darsana $72MM all added or initiated positions. Blue Ridge ($92MM) was the only large reduction.
CHTR: Over the past year ownership decreased. In March 2016, HFs owned 54% of S.O. but now own only 21%. Since last quarter TCI $394MM, Meritage $390MM, Balyasny $116MM, and Maverick $110MM all added to their position. Lone Pine ($443MM), SRS ($399MM), Tybourne ($287MM), Citadel ($236MM), and Tiger Global ($194MM) reduced their positions.
Technology names are back in favor, but there’s greater divergence among hedge funds than is discussed in the market. IPO performance, acquisition, and merger aftermath, and hedge funds’ evaluation of crowded trades are all vital stories within the industry. We’ll continue to follow these once the next round of filings comes out in November.
The HFU is accessible to Novus clients for further analysis.Published on September 19, 2017