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13F Filings: Thumbs Up Or Thumbs Down For Gladiators?

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Hedge fund operators mainly run compressed portfolios, and should be measured against NASDAQ 100, up 5.5%, rather than the S&P 500, up 8% to date.

Scroll down the S&P 500 Index, focusing on performers and non-performers. Without fail, patterns emerge. Bank paper is out while Internet properties excel. Many industrials remain wallpaper, but technology is in, and non-cyclical stocks covering tobacco, healthcare and utilities did attract funds.

To earn a good report card you had to choose value over growth, throw banks out the window, exchanging them for low pressure plays like AT&T and Verizon Communications. Hopefully, you came into energy when oil futures were around $35, and then chose the right Internet properties, underweighted Apple, overweighting Wal-Mart.

Special situations? Deals count, and stocks that buck the mindless consensus that was too pessimistic. I put Wal-Mart, Merck, IBM, 3M, Qualcomm and Union Pacific in this category along with Texas Instruments and Time Warner.

You needed 10% energy participation but stock selection made a difference. ConocoPhillips lost 13%, but Chevron and ExxonMobil rose 11% and Schlumberger some 16% year-to-date.

Curiously, several of the biggest capitalization names struck out. Apple up just 3% along with Alphabet. Microsoft underperformed but not Amazon, doubling the market’s advance. Facebook was the leading Internet property, up 19%, but outdistanced by AT&T, up 25%. Who knew? (AT&T is now correcting.)

Many of last year's winners like Gilead Sciences, succumbed, with no incremental initiatives surfacing. Likewise, Bristol-Myers Squibb, Nike, Allergan, Boeing and Starbucks. Where’s the blue sky?

Boiled down, you had to play energy, avoid financials, but own high yielding stocks like Verizon and AT&T. Covering the Internet sector across the board, including Alibaba which doesn't make either the S&P 500 or NASDAQ 100 paid off.

The top 10 NASDAQ stocks comprise 52% of that index whereas S&P's top 10 equal just 19%. Apple, numero uno, is a 3% position. In NASDAQ it's 10%. Russell Value leads all indices, ahead over 10%, but growth stocks are closing the gap of late.

You had to possess near perfect pitch and an exquisite sense of timing as well as healthy respect for valuation analytics and changing macroeconomic forces impinging on specific stock groups.

Is it any wonder that so many high intensity players were left at the post last year and so far into 2016? Many are one-off players, like Ponce de León, they searched diligently for the Fountain of Youth, for under-owned, underresearched goods selling at a below average market valuation. How else can you explain Pershing Square's top 5 positions comprising almost 80% of its portfolio?

Yes, I understand Canadian Pacific Railway where they were early on and a recent seller. Same goes for Zoetis. I am a holder here. But, I don't understand 21% in Restaurant Brands International. Valeant Pharmaceuticals is down to a 6% position from its market haircut. Mendeley at least is a big cap property.

The big question is how to rate Bill Ackman and what index to use. Obviously, NASDAQ 100, but is what Bill does money management or rank speculation? You could say the same thing about Warren Buffett. Consider, Wells Fargo, Kraft Heinz and Coca-Cola comprise nearly half the $100 billion plus portfolio. Admittedly, the bank and Coke are legacy positions and Kraft Heinz evolved out of a deal construct. None are overleveraged.

Even so, IBM and American Express tot up to 25% of invested assets. Net asset value for Berkshire Hathaway rose an anemic 2.9% in the first half and the past 5 years showed performance problems. To what extent does hubris creep into portfolio positioning? The I’m right and everyone else is wrong syndrome.

For Third Point, some 44% of the portfolio rests in Baxter International, Allergan and Dow Chemical. I rate these as 5% positions, at most. Facebook crops up as a 4% holding. This portfolio is basically non-cyclical, loaded with fairly priced paper.

Allergan, which we own, crops up in many portfolios, but not Facebook. MLPs are big winners now with oil pushing $50 a barrel. Energy Transfer Equity is an 11% position - gutsy. I've got 20% of my gelt in MLPs, namely Enterprise Products Partners, Williams Partners and Plains All American Pipeline. You do this for yourself, because there’s nobody to report to but your spouse.

Amazon crops up as a 20% position in Tiger Global Management which has 3 big winners including Priceline and Charter Communications. At least, they're unafraid of big cap paper - some 60%, including Amazon.

Soros, bearish, has sold off much of his portfolio; the remainder is unremarkable with Liberty Broadcasting Network 15% of assets, the sole concentrated holding. Has he fallen out of love with gold stocks like Barrick Gold?

Paulson holds onto a quirky group of stocks, mainly in healthcare, with the exception of Starwood Hotels & Resorts Worldwide and American International Group. Just back from the Continent, I can tell you that occupancy ratios in deluxe hotels like Waldorf-Astoria Berlin and Four Seasons in Paris, my favorites, are showing late summer occupancy of 29% to 51% with heavily discounted rooms and suites. Anyone who owns Delta Air Lines, which I despise as a heartless carrier, should reevaluate this paper for revenue shrinkage.

Only in Lone Pine Capital do I see Internet properties at 11% of assets, namely Amazon and Facebook. No energy or utilities here. This is nearly a pure growth portfolio with recognizable names.

When I get to Carl Icahn’s list, I’m head-scratching looking for his theme. Maybe it’s: “Up yours! I am going to rape stocks the market won't touch.” Namely:  Freeport-McMoRan, Herbalife, Xerox and Cheniere Energy which I’ve never ever looked at. Allergan crops up here, too. This is a reasonably priced drug house with plenty of deal money now resting in the balance sheet.

Glenview Capital Management shows an-easy-to-understand construct:  No cyclicals, no tech. It’s weighted down in healthcare, hospitals and HMOs. Humana and HCA Holdings comprise almost 20% of assets. This portfolio could work. Certainly not overpriced but subject to more stringent federal intervention if Hillary Clinton prevails. Major macro risk.

Stepping back, rate many of these operators high on courage, but analyzing sector concentration and stock picking I’d give ‘em just a gentleman’s C. Many missed the basic macro impact of low interest rates on utilities as well as the implication of rising valuation for growth stocks while 30-year Treasuries touched down at 2.3%. Late on energy, too, and missing MLP snapbacks of 100% to 200%.

For me, what defines a great money manager is extreme sensitivity to that fine line separating order from chaos. These operators run hyper-compressed portfolios because they know there are so few good stories making the rounds that hold water. Macro forecasts, of course, stand worthless, invariably wrong and therefore revisable on a minute’s notice.

Nobody's comes close to batting .406 Like Ted Williams, the Secretariat of baseball. Williams radiated sheer elegance at the plate. Nowadays turn on the Yankee broadcast and you're faced with close-ups of a bunch of .250 hitters chewing gum with their mouths open.

Please watch my recent interview on Tastytrade.com

Sosnoff and/or Atalanta Sosnoff’s clients own:  AT&T, Verizon Communications, Apple, Merck, Texas Instruments, Time Warner, Chevron, ExxonMobil, Schlumberger, Alphabet, Microsoft, Amazon, Facebook, Gilead Sciences, Bristol-Myers Squibb, Allergan, Starbucks, Alibaba, Zoetis, Valeant Pharmaceuticals, Wells Fargo, Coca Cola, Dow Chemical, Enterprise Products Partners, Williams Partners, Plains All American Pipeline, Charter Communications, American International Group and Freeport-McMoRan.