Maybe I’ve missed a few, but I can't find 400 hitters in the Icahn, Soros and Bill Ackman crowd. Aggressive stock pickers like Carl Icahn and Bill Ackman doggedly run highly compressed portfolios in one-off stocks like Chipotle Mexican Grill, American International Group and Herbalife. George Soros fanned on his gold play.
True to form, Warren Buffett holds to the mainstream. I'm agnostic on his airlines, IBM and Apple, but huge overweighting in bank stocks is paying off. Coca-Cola seems yesteryears’ play. Per capita consumption of cola fizzled out. Action focuses on leveraged commodity plays in energy, steel and aluminum as well as Internet houses like Alphabet, Facebook and Alibaba. I don't see much representation in many of these alpha portfolios.
A fact of life for many hedge funds is forced selling and increased turnover to cover redemptions. Turnover for several operators ran over 50% this past quarter, a sign of trouble. Nobody sells his winners prematurely. Traditional money managers normally keep turnover under one times per annum. Commissions today are minimal, but the cost of entry and exiting big blocks of stock is incalculable, easily 1% to 2%, particularly if you’re last in or late getting out.
My reading on selected 13Fs follows: Berkshire Hathaway's gathering headlines on its airlines’ play and building out the Apple position, but Coca-Cola and American Express, weighted legacy positions aren't pulling their weight, some 19% of assets. Berkshire will rise or fall on grossly overweighted position in Wells Fargo and other financials, some 30% of assets among top 10 holdings.
Now an octogenarian, I like Buffett more for dealmaking prowess than stock picking. In our low interest rate environment, I'd hope to see him sopping up liquidity with cash deals plus borrowing long term if he finds a whale. I prefer Citigroup and Bank of America as more leveraged to a steep yield curve setting.
The biggest issue for Icahn is his major holding in American International Group, 13.6% of assets. Many players were attracted to AIG as a major reallocation of assets story, but I see it as a gigantic can of worms in terms of underwriting risk as well as adequacy of reserves against underwriting losses. The old-time charisma of Hank Greenberg proved to be a hall of mirrors. AIG will never sell at more than 10 times earnings. Open your window and throw it out, Carl. Hertz Global Holdings, Xerox, Herbalife and Freeport-McMoRan remain one-off positions with huge variables that make ‘em tough for me to model, but I do own some Freeport.
You either like Icahn as a stock picker or not. He's missed big sector plays in financials and Internet properties. Kicked out Apple too early, but nobody's perfect. I give Carl an A for courage and fortitude. With the market in dangerously high ground, the prime issue for all of us is whether stock picking can prevail. Past year or so, sector overweighting and underweighting was the route to go.
Pershing Square's portfolio leaves me cold, unimpressed. Only half of assets remained static, half sold out, but still a highly compressed picture. Top 10 names comprise 92% of assets, Valeant Pharmaceuticals down to a 5% position.
There's nothing mainstreamed herein like banks or big tech houses. Air Products & Chemicals is a legit industrial play, but Restaurant Brands International and Chipotle comprise 50% of assets. Is this money management or game playing?
Greenlight Capital, down to a $5 billion asset pool, shows static assets of just 31%, with a sellout percentage of 25%. Some of what's left is likeable - Apple, General Motors and Time Warner nearly 30% of the portfolio. But, I can't find a theme in this value construct. They missed financials, major industrials and some energy plays.
Citadel Advisors is a horse of a different color - more mainstreamed and diversified. Top 10 positions always average out around 1% each. Orientation is growth stocks - Alphabet, Salesforce.com, Celgene. If you wanna play growth buy an ETF that mirrors the NASDAQ 100, a much more aggressively weighted index, some positions at 10%.
Third Point, a $10 billion asset house, shows incredible turnover. Only 16% of assets remain static with sellouts at 31.6%. Lots of healthcare herein with Baxter International at 22.5%. I haven't looked at Baxter in years. Finally, I see a couple of banks, JPMorgan Chase and Bank of America which I own, too, but they’re at 8% of assets and I'm over 25%.
Dow Chemical at 10% is a winner for the right reasons, but I'm less weighted because plastics pricing and worldwide overcapacity always tough issue to deal with. Finally, I see Internet plays - Facebook and Alphabet. I relate to this portfolio except for Baxter, up 10% since yearend and in triple top territory.
Farallon Capital Management at $6.6 billion shows static holdings at just 10.8%, 40% of the portfolio new faces fourth quarter. I have no opinion on their 10% position in St. Jude Medical except to opine that I hate pharma with few exceptions. I'm seeing more adds to media most everywhere: Time Warner and Charter Communications, both works in process with deals destined to expand footprints. I can't put my finger on this portfolio's theme, maybe growth at a reasonable price. I own 4 out of 10 positions: Alphabet, Visa, Charter Communications and Time Warner.
Finally, in Coatue Management, an $8.4 billion operator, I see at least a coherent high tech play, with Facebook at 8.3%, their leading position. Alibaba and Alphabet another 9.5%, pretty much where I'm at. This is a pure bull market concoction, close to double the market’s volatility. Lots of turnover, over 50% past quarter, only 27% of holdings static. I don't get this. If you like Internet plays you gotta say I’m in for the next couple of years. Same goes for Apple and Netflix.
As my Jewish grandmother used to lecture me: “Nobody's promised you a rose garden, sonny boy. Make your own luck.”
Sosnoff owns: Alphabet, Alibaba, Freeport-McMoRan, Citigroup, Bank of America, Facebook, Charter Communications, General Motors, JPMorgan Chase, Dow Chemical and Berkshire Hathaway.
