Best Stock Picks of Best Hedge Funds

Q3 2012 Issue:2
Inside This Issue 1

Why Track Hedge Funds
3
22 Billionaire Fund Managers
47
Most Popular Stocks Among Hedge Funds
54
Least Popular Stocks Among Hedge Funds
57
15 Picks by Insider Monkeys Secret Strategy
57
15 Stocks That are Dumped by Hedge Funds
58
In-depth Look: Stock 1
59
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Dont pay hedge funds hefty fees when you can buy the best stock picks of best hedge fund managers at a fraction of what they charge
A Gift To You From Insider Monkey

Please enjoy the first half of our newsletter, as a gift from us to you. In it you'll find extensive analytical discussions on the nation's best hedge fund managers. If you like what you see, you have a few options to get more and better information. Become a Newsletter Subscriber and access to our two strategies' stock picks. Here's what the subscribers of the newsletter fared with the picks from last quarter: The Small Cap Strategy gained an average of 4.2% between the end of August and November 16th. During the same time period S&P 500 index ETF (SPY) lost 2.9%. Our Secret strategy lost an average of 0.9%, also beating the SPY by 2 percentage
points. The real value in the newsletter lies in the stock picks of the two investment strategies developed by our Ph.D. quant research director. These two strategies beat the market by nearly 20 percentage points per year on the average in a 10-year backtest. You can find out our new stock picks by becoming a premium subscriber. We have a 30-day money back guarantee, so hurry up and take advantage of our limited time offer. the strategy that invests in the most popular small cap stocks
Why Track Hedge Funds

Hedge funds charge 2% of assets and 20% of returns because they historically managed to deliver above average performance. However, hedge funds' alpha overall has been declining over the past decade and will probably disappear soon. The reason is simple. As they manage more and more money, they have to buy less and less attractive stocks. Most hedge fund managers have a few great investment ideas. They overweight these stocks and fill up the rest of their portfolio with mediocre stock picks. Insider Monkey thinks investors would be better off by imitating the best stock picks of the best hedge fund managers than paying them around 40% of gross returns.
This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge Fund Alpha

The Best Stock Picks of The Best Hedge Funds
Hedge 2
Fund Alpha Why Track Hedge Funds

In this newsletter, you'll find analysis of hedge funds latest 13F filings and a list of their best ideas. Our proprietary ranking methodology helps determine who the best hedge fund managers are. You'll also see a summary of our quarterly findings in an easy to understand format and actionable investment ideas. Hedge fund industry has shown tremendous growth over the past three decades, and for good reason. People who know how to invest invented this mechanism to extract as much value as they can from their talent. Hedge fund managers enriched themselves by delivering positive risk adjusted returns. Alpha is the terminology used to Hedge funds start to invest in their 35th best idea as their assets under management swell. This dilutes their alpha and in some cases measure a fund managers stock picking ability. Historically hedge funds delivered high alpha especially when compared to the mutual fund industry. This success attracted more and more funds from investors who didnt want to be left out. As hedge funds assets began to swell, they started to invest in ideas that they are less comfortable with. They also allocated a higher percentage of their portfolio to larger-cap stocks which are relatively more efficiently priced. It isnt delivers huge surprises surprising that hedge funds alpha has been on a declining trajectory to them. for the last decade. Some of most recent studies even claim that an average hedge fund doesnt have alpha anymore. This should be alarming for hedge fund investors. Hedge funds are becoming like mutual funds. Not generating any alpha doesnt mean that hedge fund managers are losing their stock picking abilities. There are two issues here. The first issue is the adverse selection problem. People with no stock picking ability have enormous incentives to launch hedge funds. If they get lucky, they will make millions. If they dont get lucky, investors will lose, not them. The second issue is the fact that hedge funds start to invest in their 35th best idea as their assets under management swell. This dilutes their alpha and in some cases delivers huge surprises to them. So why do we track hedge funds? Because we are interested in the best stock picks of the best hedge fund managers. A typical manager has a small number of good ideas. They give higher weight to these ideas in their portfolios. The remaining positions are large in number but small in weight. These positions help fund managers to diversify, deploy more capital, and extract higher management fees. Academic studies have shown that fund managers best ideas manage to beat the market by as much as 7 percentage points annually. This newsletter aims to follow these studies and our in-house research to pick stocks that can beat the market on the average over the long run.
Hedge Fund Alpha 3
Warren Buffett Berkshire Hathaway New Positions

-Deere & Co (DE) -Precision Castparts (PCP)
Increased Positions -Wells Fargo(WFC) -General Motors (GM) Reduced Positions -Visa (V) -Kraft (KFT) Sold Out -CVS (CVS) -Dollar General (DG)
Brief Discussion: Warren Buffett and Berkshire Hathaway are going down in history, so investors should keep an eye on their investment activity as long as possible and drill into the activity as much as possible. Here are a few trends which we think are worth paying attention to: New positions in Deere & Company (DE) and Precision Castparts (PCP) along with massive cuts to General Electric (GE), Johnson & Johnson (JNJ), and United Parcel Service (UPS) were disclosed. All in all, it's Buffett's position in Precision Castparts that may be the most under the radar, as Bloomberg had reported earlier this year that the investor was considering a stake in Deere. Both newly established positions are a welcome sight for each company's shareholders. Berkshire's total investment in Precision Castparts, a metal fabrication and industrial goods manufacturer, amounts to 1,248,901 shares worth an approximate $216.4 million. Meanwhile Deere now accounts for close to 5% of Buffett's total 13F portfolio, at an estimated market value of $337.2 million. The size of Buffett's investment in Deere puts the company in Berkshire's top ten holdings, above such stalwarts as ConocoPhillips and DirecTV. At the moment, it looks like it wouldn't be a bad idea for individual investors to mimic, or "monkey", Buffett into the agricultural machinery company, as it trades at rather attractive trailing (11.3X) and forward (10.2X) earnings multiples. Both valuations are below Deere's historical average by 30%-40%, and revenues also trade at a discount. Deere is expected to see its EPS grow by an average rate of 8.9% a year over the next half-decade, though this is nearly half the rate of expansion the company has maintained post-recession. In its most recent earnings report, Deere missed the Street's forecast by nearly 15%, as slowing overseas sales and production line delays hurt both top and bottom line financials. In the nearly three months since the release, however, the stock has risen nearly 6%, possibly a partial result of Buffett's bullish behavior. Deere is a value play through and through, but needs to impress with its fourth quarter earnings to avoid a late-year decline. Sell-side analysts expect Q4 EPS to come in at $1.87, up 15.4% year over year. Deere reports Q4 financials on November 21st. Precision Castparts meanwhile has been up close to 7% over the past month, as the company recently bought Titanium Metals Corp. for close to $2.9 billion. Titanium Metals, one of the largest producers of titanium in the world, will add a significant amount of "value creation" to Precision, according to the company's CEO Mark Donegan. Interestingly, Titanium Metals has become an increasingly large supplier to aerospace manufacturers like Boeing, as titanium's usage in this industry continues to increase. Precision Castparts had also dabbled in this arena, producing entire aero-structures for a few major players, but the addition of Titanium Metals should shore up this segment of its business. Precision currently trades at an attractive forward P/E below
13.0X, but has disappointed the Street's earnings expectations in four of the past five quarters. We like the company because of Buffett's endorsement and its recent acquisition.
Hedge Fund Alpha 4
Warren Buffett Berkshire Hathaway New Positions

-Deere & Co (DE) -Precision Castparts (PCP)
Increased Positions -Wells Fargo(WFC) -General Motors (GM) Reduced Positions -Visa (V) -Kraft (KFT) Sold Out -CVS (CVS) -Dollar General (DG)
Brief Discussion:
Berkshire downsized its positions in GE, Johnson & Johnson, and UPS quite significantly. GE's position was more than 5 million shares one quarter ago is now a shave under 600,000- a whopping 88% reduction. Johnson & Johnson, which had been one of the fund's favorite healthcare stocks, was reduced by more than 95%, and now accounts for just $34 million in Buffett's multi-billion portfolio. Berkshire's position in UPS has been reduced by 77.3%, marking the second straight quarter of a sell-off. The air courier company that amounted to a $115 million position for Berkshire in March of this year is now just $4.1 million. UPS is the only Buffett Bear in the red for 2012, as shares of the company have lost close to 4% since the start of the year. Johnson & Johnson and GE are up 5.6% and 11.7% on the year, though each has fallen off a bit in recent weeks. In late October, GE reported third quarter revenue that fell below analyst estimates, and shared a rather bleak outlook for 2013. The company's execs cut year-ahead revenue growth forecasts from 5% to 3%, as they expect Europe to weigh most heavily on its top line. Shares of GE currently trade at moderately attractive valuation metrics, but it's never a good sign when the company, and Warren Buffett of all people, are feeling blue. Johnson & Johnson and UPS are trading at similarly cheap forward earnings multiples of 12.6X and 13.7X respectively, though each is expected to experience single-digit EPS growth over the next five years. Johnson & Johnson actually impressed the Street with its Q3 results last month, outpacing estimates by 3%, on the back of Zytiga, Xarelto, and Stelara, three drugs that have been recently approved by the FDA. There are reasons to be bearish on Johnson & Johnson, though, as dividend growth is slowing and book value is at a premium to the averages of the drug manufacturing industry and the S&P 500. UPS reported rather disappointing Q3 financials, as earnings fell 56% year over year, and international shipping volume fell 1.2%. As a key player in the global shipping industry, UPS will always be sensitive to economic instability and exchange rate fluctuations, and it's not exactly operating with any competitive advantage in the air delivery marketplace. Our advice: consider the reasoning behind Buffett's bearish behavior in UPS, Johnson & Johnson, and GE, and think of the possibilities that a stagnant global economy will have on all three. If you're looking to make a buy off of any of his 13F plays, Precision Castparts may be the best option, as its recent acquisition gives it a key foothold in the titanium manufacturing industry almost overnight. Deere, now one of Buffett's top holdings, also looks like a solid investment, though it needs to impress with its fourth quarter earnings to see any short-term appreciation.
Hedge 5
Fund Alpha Warren Buffetts Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio COCA COLA CO KO SH N 15,172,000 0% 20.1% WELLS FARGO & CO NEW WFC SH N 14,590,638 3% 19.4% INTERNATIONAL BUSINESS MACHS COR IBM SH N 14,006,587 1% 18.6% AMERICAN EXPRESS CO AXP SH N 8,620,585 0% 11.4% PROCTER & GAMBLE CO PG SH N 3,661,728 -11% 4.9% WAL MART STORES INC WMT SH N 3,447,061 0% 4.6% U S BANCORP DEL USB SH N 2,101,375 -7% 2.8% DIRECTV DTV SH N 1,549,896 4% 2.1% CONOCOPHILLIPS COP SH N 1,379,405 -16% 1.8% KRAFT FOODS INC KFT SH N 1,259,700 -48% 1.7% PHILLIPS 66 PSX SH N 1,259,591 0% 1.7% MOODYS CORP MCO SH N 1,255,102 0% 1.7% DAVITA INC DVA SH N 1,056,570 10% 1.4% WASHINGTON POST CO WPO SH N 627,230 0% 0.8% LIBERTY MEDIA CORP LMCA SH N 572,440 0% 0.8% M & T BANK CORP MTB SH N 512,155 0% 0.7% BANK OF NEW YORK MELLON CORP BK SH N 444,119 5% 0.6% COSTCO WHOLESALE CORP NEW COST SH N 434,030 0% 0.6% VIACOM INC NEW VIA-B SH N 407,670 12% 0.5% U S G CORP USG SH N 374,735 0% 0.5% GENERAL MOTORS CO GM SH N 341,250 50% 0.5% NATIONAL OILWELL VARCO INC NOV SH N 335,405 47% 0.4% DEERE & CO DE SH N 328,129 New 0.4% GENERAL DYNAMICS CORP GD SH N 256,355 0% 0.3% TORCHMARK CORP TMK SH N 217,509 0% 0.3% VISA INC V SH N 208,867 -25% 0.3% PRECISION CASTPARTS CORP PCP SH N 203,996 New 0.3% MASTERCARD INC MA SH N 182,849 0% 0.2% SANOFI SNY SH N 174,981 0% 0.2% WABCO HOLDINGS INC WBC SH N 92,235 New 0.1% VERISK ANALYTICS INC VRSK SH N 74,435 -16% 0.1% GLAXOSMITHKLINE PLC GSK SH N 69,846 0% 0.1% JOHNSON & JOHNSON JNJ SH N 33,905 -95% 0.0% GANNETT INC GCI SH N 30,889 0% 0.0% MEDIA GENERAL INC MEG SH N 24,067 New 0.0% GENERAL ELECTRIC CO GE SH N 13,374 -88% 0.0% UNITED PARCEL SERVICE INC UPS SH N 4,251 -77% 0.0% LEE ENTERPRISES INC LEE SH N 1,673 -65% 0.0% C V S CAREMARK CORP CVS SH N Sold out 0.0% DOLLAR GENERAL CORP NEW DG SH N Sold out 0.0% INGERSOLL RAND PLC IR SH N Sold out 0.0%
Hedge 6 Fund Alpha Steve Cohen-
SAC Capital New Positions Increased Positions -Tiffany & Co. (TIF) -Suncor Energy (SU)
Brief Discussion: With a net worth of $8.8 billion, Steven Cohen is one of the wealthiest hedge fund managers in the world, and his hedge fund SAC Capital Advisors manages over $14 billion in assets under management for nearly 100 clients. Since founding his own fund in 1992, Cohen has made money in every year but one, with that sole blemish coming at the height of the most recent financial crisis. Even in 2008, its one down year, SAC Capital still outperformed the S&P, and has beaten the benchmark by nearly 22% a year on average since its inception. With the help of Fibonacci guru Tom DeMark, Cohen uses technical analysis in conjunction with fundamental tactics, and has a penchant for the services, basic materials, and technology sectors. Unlike his more traditional peers like Warren Buffett and David Einhorn, who each hold 30-40 positions for a relatively consistent period of time, Cohen employs quite a bit of turnover in his portfolio, a natural result of his decision to include technical indicators in his analysis.
-American Intl. Group (AIG) -Fossil (FOSL)

In the third quarter of this year alone, from the start of July to the end of September, Cohen's fund transferred out more than one third of its positions for new holdings. One of the most notable stocks that Cohen sold over this time was Lockheed Martin (LMT), while he also chose to downsize his position in Amazon.com (AMZN) by two-thirds, and cut his stake in Murphy Oil (MUR) by a whopping 99%. Two of the most intriguing bets, meanwhile, made by the hedge fund manager were in Sirius XM Radio (SIRI) and American International Group (AIG). After owning just fewer than 90,000 shares of AIG at the end of the second quarter, Cohen increased his position in the recovering insurer to a whopping 8.7 million shares worth a market value of $286.1 million last quarter. With the transaction, AIG is now one of the ten largest holdings in Cohen's 13F portfolio. Other hedge funds making the move into AIG in Q3 were plentiful, as a total of 110 funds held long positions in the insurer at the end of September, compared to 61 at the end of June. The most notable AIG investors aside from
Reduced Positions
Cohen are Leon Cooperman - another DeMark employer - and Dan Loeb.
-Amazon (AMZN) -Nordstrom (JWN)

It's likely that many of these money managers bought in on the company's latest share buyback from the U.S. Treasury in September, when the $182.3 billion taxpayer loan it received four-plus years ago pushed the company into profitability, passing an important psychological level. Shares of AIG hit a 52-week high of $36.67 in early October before fears of Hurricane Sandy-related losses pushed the company down to the $31 territory. With a positive surprise in its most recent earnings, AIG is well on its way toward further Sold Out appreciation, as it sports a surprisingly cheap valuation, at 8.9 times forward earnings and a book value discount of nearly 50%. -Ensco (ESV) -Murphy Oil (MUR) When looking at Cohen's other bullish bet in Sirius XM, we can see a decidedly similar value play, despite Liberty Media's takeover effort's pushing shares up by more than 37% over the past six months. Postelection, the stock has been dragged down into the $2.60 range, but that only makes the sub 1.0 PEG
and trailing P/E below 6.0X more attractive. The broadcasting company did miss the Street's earnings estimates by a penny, coming in with one-cent earnings, but revenue rose by 14% year over year, beating consensus. Assuming a deal with Liberty is passed by the FCC, Sirius will either remain a subsidiary of the company, or spin it off into a separate venture, perhaps even merging it with a third player. Each of these scenarios can create wealth for Cohen and other bulls, as Sirius is in a prime position due to reduced competition, and expanded OEM contracts with GM and Ford have the potential to drive growth by double-digits over the intermediate term. Sell- side analysts certainly agree, and are predicting Sirius to expand its earnings by an average of 27.9% over the next five years.
Hedge 7 Fund Alpha Steve Cohen-
SAC Capital New Positions Increased Positions -Tiffany & Co. (TIF) -Suncor Energy (SU)
Brief Discussion: Moving onto Amazon and Murphy Oil, two of Cohen's most notable cuts in Q3, we notice that each stock has been down by at least seven percentage points over the past month, as each recorded disappointing profit figures last quarter. That's where the similarities end between this e-retailer and oil and gas E&P, but they're important to point out. In Amazon's case, it reported a loss (adjusted for its LivingSocial debacle) of 23 cents a share, far below consensus of -$0.08 a share. The company's daily deal acquisition has lost 95% in value since it was purchased two years ago, and operating margins have remained below 2% in five consecutive quarters. With a cash flow premium of nearly 50% above historical averages and a trailing P/E greater than 3,000X, it's easy to question if there's still any value to be had with Amazon, especially when we consider the ever-shrinking gap between itself and competitors like e- Bay and many traditional retailers.
-American Intl. Group (AIG) -Fossil (FOSL)

Murphy Oil, meanwhile, is one of the most singularly focused energy companies out there, with over four fifths of its product mix dependent on oil. Before poor third quarter results were announced, in which earnings declined by 44% from one year earlier, the oil and gas E&P had been boosted by WTI crude prices above $100 a barrel for much of the year's first half. Prices have since fallen off though, and foreign exchange variations haven't done Murphy Oil any favors. The company is planning to spin off its U.S. downstream business into an entity called Murphy USA by the middle of 2013, though the benefits of this split won't hit Murphy Oil until at least this time next year. In a portfolio as mobile as Cohen's, we can understand why he may hesitate to snatch up the stock until next year, and individual investors may be served well by taking a wait-and-see approach. Year-end earnings are expected to actually finish lower than in 2011, so unless commodities take a sharp turnaround over the next month or so, we don't see Murphy generating enough traction to impress in the fourth
Reduced Positions
quarter.
-Amazon (AMZN) -Nordstrom (JWN)

Cohen closed out Lockheed Martin in the third quarter. The hedge fund manager held $41.8 million in the aerospace company at the end of June. Over the past month, Cohen's sale appears to have paid off, as he has avoided a loss of more than five percentage points; the company recently reported that third quarter revenue fell by 1.7% to $11.9 billion from one year earlier.
Sold Out
The U.S. government's largest defense contractor is dependent on a booming DoD budget, but the reelection of President Obama all but rings a death knell to the days of high-flying -Ensco (ESV) growth, literally. Many of Lockheed Martin's flagship products, including the F-22 fighter -Murphy Oil (MUR) and anti-missile systems, may be on the chopping block as budgets are cut. The company does produce a bevy of unmanned drones, but it has far less of a competitive advantage in this arena. With expected
EPS growth of nearly four percentage points below that of its closest competitor Boeing - while trading at a higher PEG valuation - we'd understand if individual investors followed Cohen out of Lockheed, or even considered taking a short position.
Hedge 8
Fund Alpha Steve Cohens Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio SPDR S & P 500 ETF TRUST SPY SH PUT 663,229 -1% 3.3% SIRIUS X M RADIO INC SIRI SH N 341,579 15% 1.7% AMERICAN INTERNATIONAL GROUP INC AIG SH N 286,096 9723% 1.4% ISHARES TRUST TLT SH PUT 224,925 439% 1.1% ANADARKO PETROLEUM CORP APC SH N 211,699 27% 1.0% GILEAD SCIENCES INC GILD SH N 208,167 59% 1.0% TIFFANY & CO NEW TIF SH N 200,921 3742% 1.0% ISHARES TRUST TLT SH CALL 199,887 299% 1.0% SCHLUMBERGER LTD SLB SH N 187,513 3% 0.9% APPLE INC AAPL SH N 186,850 -12% 0.9% MICHAEL KORS HOLDINGS LIMITED KORS SH N 183,484 55% 0.9% SUNCOR ENERGY INC NEW SU SH N 170,063 906% 0.8% NOBLE ENERGY INC NBL SH N 152,308 67% 0.8% INGERSOLL RAND PLC IR SH N 152,161 176% 0.8% MONSANTO CO NEW MON SH N 148,028 192% 0.7% ENDO PHARMACEUTICALS HLDNGS INC ENDP SH N 146,707 -2% 0.7% NORDSTROM INC JWN SH N 141,139 -42% 0.7% TRANSOCEAN LTD RIG PRN N 132,407 -4% 0.7% SUPERIOR ENERGY SERVICES INC SPN SH N 126,651 485% 0.6% WEATHERFORD INTL LTD NEW WFT SH CALL 122,320 58% 0.6% EBAY INC EBAY SH N 121,525 628% 0.6% ARIAD PHARMACEUTICALS INC ARIA SH N 119,592 -28% 0.6% FOSSIL INC FOSL SH N 118,248 New 0.6% HUBBELL INC HUB SH N 116,746 16% 0.6% ENCANA CORP ECA SH N 115,290 7778% 0.6% SIMON PROPERTY GROUP INC NEW SPG SH N 113,738 15933% 0.6% VISTEON CORP VC SH N 113,493 42% 0.6% WHIRLPOOL CORP WHR SH N 113,258 159% 0.6% E Q T CORP EQT SH N 110,573 68% 0.5% MEAD JOHNSON NUTRITION CO MJN SH N 110,074 -22% 0.5% TARGET CORP TGT SH N 108,438 2326% 0.5% GENERAL ELECTRIC CO GE SH N 106,294 30238% 0.5% CLIFFS NATURAL RESOURCES INC CLF SH N 106,151 1575% 0.5% BED BATH & BEYOND INC BBBY SH N 103,506 1183% 0.5% EXXON MOBIL CORP XOM SH PUT 103,339 New 0.5% VERIZON COMMUNICATIONS INC VZ SH N 97,192 11698% 0.5% YUM BRANDS INC YUM SH N 96,438 55% 0.5% E M C CORP MA EMC SH N 94,931 721% 0.5% AMAZON COM INC AMZN SH N 94,793 -64% 0.5%
Hedge Fund Alpha 9
Stan DruckenmillerFamily Office New Positions -Exxon (XOM) -Chevron (CVX) Increased Positions -Eli Lilly (LLY) -D.R. Horton (DHI) Reduced Positions -Elan (ELN) -Vertex (VRTX) Sold Out -Altria (MO) -Chipotle (CMG)
Brief Discussion: Stanley Druckenmiller shut down his hedge fund in 2010, but continues to manage money and his investments are reported on 13F filings. These filings make public what a hedge fund or other major investor owned at the end of each quarter about six weeks afterward. As a result the general public can evaluate each investors new filing and pick out trends in their buying and selling activity. Here are some things that we noticed when comparing Druckenmillers most recent 13F to previous filings: Oil majors. Druckenmiller had several new positions in this 13F portfolio, and the two largest were stakes in Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX). Weve thought of these two large oil companies as good energy investments, with BP being a good pick as well if an investor is willing to take on a bit more risk to get a stock that is a bit cheaper in terms of earnings multiples. Exxon Mobil and Chevron arent so bad on a P/E basis themselves; they trade at 9 and 8 times their respective trailing earnings even though Chevrons market cap is about $200 billion and Exxon Mobils is about twice that. There is considerable risk here due to oil prices, but we think that theyre good picks for a long-term investor. Billionaire David Shaws D.E. Shaw had nearly doubled its own holdings of Exxon Mobil during the second quarter of the year. Selling restaurants. Druckenmiller and his team were less bullish on quick service restaurants, closing its positions in both Yum! Brands and Chipotle Mexican Grill, Inc. (NYSE:CMG). Fellow billionaire David Einhorn of Greenlight Capital had listed Chipotle as one of his short picks at the Value Investing Congress in early October- after Druckenmiller would have sold his shares- and the stock is down 18% since then as the company has failed to meet the Streets growth targets. Chipotle now trades at 30 times trailing earnings, which seems appropriate for its growth prospects in bringing higher- end Mexican food to the quick service space. Yum, meanwhile, has been turning in strong growth rates and the owner of the Taco Bell, Pizza Hut, and KFC brands carries a trailing P/E of 21. We think that wed avoid the stock given how dependent it is on the Chinese market. Adding to homebuilders. Lennar Corporation (NYSE:LEN) and D.R. Horton, Inc. (NYSE:DHI) were two of the largest positions in the 13F portfolio at the end of June, and over the course of the third quarter Druckenmiller added to each. Each of these companies stock price has risen at least 60% in the last year as investors see improvement in the housing market; earnings at each company more than doubled in its most recent quarter compared to the same period in the previous year. The trailing P/Es at Lennar and DR Horton are actually quite low- 13 and 7, respectively- though sell-side analysts expect earnings at each company to decline in the next fiscal year resulting in considerably higher forward P/Es. We think that the homebuilding industry might be worth a closer look to see how well these companies and their
peers can sustain their businesses, since historical earnings seem to be suggesting that they are far from speculative investments. We think that Druckenmiller was probably right to sell out of his restaurant stocks, as Yum and Chipotle dont look like good values at their current prices. As weve mentioned, we like his move into Exxon Mobil and Chevron and think that even if oil prices remain about flat these companies should continue to generate plenty of earnings to justify their current valuations. The homebuilding theme is also interestingwith the stock prices rising, Druckenmiller is confident enough in their prospects to add shares rather than take profits- and the industry as a whole is likely worth investigating.
Hedge 10
Fund Alpha Stanley Druckenmillers Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio EXXON MOBIL CORP XOM SH N 123,137 New 6.8% LENNAR CORP LEN SH N 121,827 5% 6.7% D R HORTON INC DHI SH N 111,705 15% 6.1% CHEVRON CORP NEW CVX SH N 88,411 New 4.9% MERCK & CO INC NEW MRK SH N 87,066 43% 4.8% PFIZER INC PFE SH N 84,987 46% 4.7% LILLY ELI & CO LLY SH N 83,773 48% 4.6% WELLS FARGO & CO NEW WFC SH N 83,614 66% 4.6% TARGET CORP TGT SH N 77,306 New 4.2% GOOGLE INC GOOG SH N 62,435 New 3.4% TIME WARNER INC NEW TWX SH N 56,209 New 3.1% KRAFT FOODS INC KFT SH N 54,375 0% 3.0% SUNTRUST BANKS INC STI SH N 51,579 New 2.8% ISHARES TRUST EEM SH N 49,997 New 2.7% ABBOTT LABORATORIES ABT SH N 45,627 0% 2.5% NOBLE CORP BAAR NE SH N 44,993 New 2.5% CHENIERE ENERGY INC LNG SH N 41,427 0% 2.3% HALLIBURTON COMPANY HAL SH N 35,459 New 1.9% ELAN PLC ELN SH N 34,467 -36% 1.9% BIOGEN IDEC INC BIIB SH N 30,096 0% 1.7% INCYTE CORP INCY SH N 30,089 0% 1.7% TOLL BROTHERS INC TOL SH N 28,777 0% 1.6% GILEAD SCIENCES INC GILD SH N 27,991 -11% 1.5% VALERO ENERGY CORP NEW VLO SH N 27,166 New 1.5% PIONEER NATURAL RESOURCES CO PXD SH N 26,048 New 1.4% PARKER HANNIFIN CORP PH SH N 25,325 New 1.4% PLAINS EXPLORATION & PROD CO PXP SH N 24,356 New 1.3% KEYCORP NEW KEY SH N 23,336 New 1.3% MARATHON OIL CORP MRO SH N 21,394 New 1.2% H C A HOLDINGS INC HCA SH N 20,416 New 1.1% DISH NETWORK CORPORATION DISH SH N 19,499 0% 1.1% ITAU UNIBANCO HLDNG-PREF ADR ITUB SH N 18,076 New 1.0% ARCOS DORADOS HOLDINGS INC ARCO SH N 16,433 New 0.9% PULTE GROUP INC PHM SH N 15,283 0% 0.8% CROWN CASTLE INTERNATIONAL CORP CCI SH N 15,128 New 0.8% SPDR GOLD TRUST GLD SH CALL Sold out 0.0% ALTRIA GROUP INC MO SH N Sold out 0.0% CHIPOTLE MEXICAN GRILL INC CMG SH N Sold out 0.0% YUM BRANDS INC YUM SH N Sold out 0.0%
Hedge Fund Alpha 11
T. Boone PickensBP Capital New Positions -Anadarko (APC) -Halliburton (HAL) Increased Positions -Valero (VLO) -Southwestern (SWN) Reduced Positions -Transocean (RIG) -McMoRan (MMR) Sold Out -Encana (ECA) -Cabot Oil (COG)
Brief Discussion: T. Boone Pickens became a billionaire through his operations in oil, and now manages a fund which primarily invests in energy. Read on for our evaluation of some of Pickenss investment themes and compare his activity to previous filings. Halliburton. Pickens hadnt owned any shares of Halliburton (HAL) at the end of June, but had initiated a position of about 150,000 shares by the end of the third quarter. The equipment and services company looks cheap to us at 10 times earnings (on either a trailing or a forward basis) with the sell-side expecting enough growth over the next several years to generate a five-year PEG ratio of 0.6. The business has been struggling a bit, but when we had looked at its larger peer Schlumberger we come to the conclusion that Halliburton was a better value play (find out why). Valero. For the third quarter in a row, Pickens increased his stake in Valero Energy (VLO) and it is now the largest position in his 13F portfolio. Valero is a refining and marketing company- little drilling exposure here- which produces gasoline, ethanol, and other fuels and compounds. At a market capitalization of over $16 billion, it trades at 15 times trailing earnings but Wall Street analysts expect strong growth in 2013 and so the forward P/E is only 6. Fellow billionaire Israel Englanders Millennium Management had owned the stock during the second quarter of the year. However, earnings have been slipping and the company is therefore dependent on seeing a strong reversal in its business prospects. Less drilling. Pickens cut his stake in Transocean (RIG), an offshore contract driller, in half; he also sold about half his shares of independent integrated oil company McMoRan Exploration (MMR); he sold out of oil major EnCana Corporation (ECA), which had been one of his top ten holdings. Its possible that he decided against these names in particular, but coupled with the addition to Valero our interpretation is that Pickens and his team are trying to move their dollars further downstream. Transocean actually seems to be in a decent place- its revenue was up in the third quarter from a year earlier, and the forward P/E of 9 suggests that analysts consider it a good value- so perhaps investors should be looking at that as a potential long. Were more sour on the other two oil companies; sales at each were down over 30% during the same time frame. McMoRan is widely shorted, with 22% of the outstanding shares held short as of the most recent data, and traders might look to join that side of the market as the sell-side doesnt expect it to be profitable this year or next year. Encana also looks high priced, at 28 times consensus earnings for 2013, though it has a high dividend yield. We think that wed avoid it. Wed note that supermajors Exxon Mobil, BP, and Chevron are absent from Pickens 13F entirely; its possible that this ties in to a negative attitude towards drilling. Weve mentioned that we think investors should be taking a look at Halliburton if they want to buy a good long-term energy stock. Valero would
require considerably more review; certainly if it hits analyst targets it will prove undervalued at the current price, but that would require much better performance than what the company has done recently.
Hedge 12
Fund Alpha T. Boone Pickens Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio VALERO ENERGY CORP NEW VLO SH N 11,245 49% 11.4% SOUTHWESTERN ENERGY CO SWN SH N 10,711 17% 10.8% PIONEER NATURAL RESOURCES CO PXD SH N 10,450 -1% 10.6% EOG RESOURCES INC EOG SH N 8,183 -1% 8.3% DEVON ENERGY CORP NEW DVN SH N 7,455 -1% 7.5% ANADARKO PETROLEUM CORP APC SH N 6,436 New 6.5% RANGE RESOURCES CORP RRC SH N 5,826 -1% 5.9% HALLIBURTON COMPANY HAL SH N 5,132 New 5.2% TRANSOCEAN LTD RIG SH N 5,080 -51% 5.1% SANDRIDGE ENERGY INC SD SH N 4,931 154% 5.0% QUICKSILVER RESOURCES INC KWK SH N 4,914 -1% 5.0% WHITING PETROLEUM CORP WLL SH N 4,772 -1% 4.8% MCMORAN EXPLORATION CO MMR SH N 3,927 -51% 4.0% GOODRICH PETROLEUM CORP GDP SH N 2,955 -1% 3.0% NATIONAL OILWELL VARCO INC NOV SH N 1,947 76% 2.0% GASTAR EXPLORATION LTD GST SH N 1,907 -1% 1.9% ARCH COAL INC ACI SH N 1,505 New 1.5% CONSOL ENERGY INC CNX SH N 1,445 New 1.5% ENCANA CORP ECA SH N Sold out 0.0% CABOT OIL & GAS CORP COG SH N Sold out 0.0% CANADIAN NATURAL RESOURCES LTD CNQ SH N Sold out 0.0% ANADARKO PETROLEUM CORP APC SH N Sold out 0.0% WEATHERFORD INTL LTD NEW WFT SH N Sold out 0.0% APACHE CORP APA SH N Sold out 0.0% OCCIDENTAL PETROLEUM CORP OXY SH N Sold out 0.0% DAWSON GEOPHYSICAL CO DWSN SH N Sold out 0.0% N R G ENERGY INC NRG SH N Sold out 0.0% CALPINE CORP CPN SH N Sold out 0.0% LAREDO PETROLEUM HOLDINGS INC LPI SH N Sold out 0.0%
Hedge Fund Alpha 13
Stephen MandelLone Pine Capital New Positions -Schlumberger (SLB) -Verisign (VRSN) Increased Positions -Priceline (PCLN) -Cognizant (CTSH) Reduced Positions -Apple (AAPL) -Google (GOOG) Sold Out
-Teradata (TDC) -Ross Stores (ROST)
Brief Discussion: Apple (AAPL) was one of billionaire Stephen Mandels big sells during 3Q. Mandel decided to dump over 40% of his firm's 2Q Apple shares during the third quarter, removing the tech giant as Mandel's largest 13F holding and dropping it down to ninth. Mandel, a Tiger cub, left Robertson in 1997 to launch Lone Pine Capital and now manages some $17 billion in assets. Lone Pine prides itself on focusing on bottom-up investing, and has returned about 23% over the last eleven years, beating the S&P 500 by over 20% per year. Mandel is a believer in the future of the Internet and its disruptive capabilities. Mandel reiterated these thoughts at this year's Invest For Kids Conference, where he touted Verisign as a stock to watch. Even so, there appears to be a point where even a market-leading tech company can get ahead of itself, as it appears this has happened with Apple and Google (GOOG). Mandels 13F shows him losing interest in the once favorite big-name tech stocks and looking to other areas of technology for the sector's next rapid growers. Apple slightly missed EPS consensus for last quarter and guided down next quarter's EPS on higher product costs. Concerns over growth have pressured the stock of late, with a 10% slide from September through October. The tech giant has missed earnings in two consecutive quarters for the first time in ten years, where iPhone results came in as expected, but iPad sales were off. Although there is no denying Apples dominant position in various tech markets, we believe that questions about its ability to continue to redefine products now pressure the stock. Apple managed to grow EPS at an annual rate in excess of 100% over the last five years, but sell-side analysts only expect 20% annual growth over the next half-decade. Google is another company that like Apple, is an undeniable industry leader, but has become so big that future growth capabilities are being questioned. Google recently posted worse than expected revenue and earnings numbers as it continues to face struggles with the Motorola integration. Although the search giant has a dominant search market share position, the online advertising business is becoming increasingly competitive. One such change to the advertising game is the importance of mobile search ads, which currently yield less profitable margins than PC search ads do. Another headwind for Google and its ad revenues is the increasing competition from social networks. Although Google has its own social network, Google Plus has not managed to catch the attention of Internet users like that of Facebook. Google trades at 21x earnings, well above Apple's 12x, and above its major search peers - Microsoft (15x), Yahoo (5x), and AOL (3x). Google is also faced with a rapid slowdown in growth from its previous five-year earnings CAGR of 21% to only 13% for the next five years. Walt Disney (DIS) was another victim of Mandels downsizingLone Pine dropped 20% of its shares in 3Q, dropping Disney out of Lone Pines top ten holdings, from ninth at the end of 2Q to eleventh at the end of 3Q. The entertainment company is a bit more diversified than some of its industry peers, such as News Corp and Viacom. Disney managed to post last quarter earnings that were 15% above 3Q 2011, as TV networks - ESPN and Disney Channel - fueled growth. Disney's theme park units also continue to perform well amid a weak economy. Although Mandel found a reason to sell, we see the acquisition of Lucasfilm, known for the Star Wars franchise, as a key driver of future growth with various cross-platform and cross-selling opportunities. Disney currently trades in between News
Corp (21x) and Viacom (12x) at 15x, but we believe the argument can be made that Disney's product mix warrants a premium multiple. Mandel made a 25% increase in shares of Priceline.com (PCLN), and the stock now sits atop Mandel's 13F worth over 5.3% of his firm's 13F. After the travel site announced it was purchasing rival Kayak, its shares jumped over 9%. Priceline now trades more in line with key rivals at an earnings multiple of 23x, compared to TripAdvisors 28x and Expedias 22x, but is cheap when looking at its forward P/E of 16x (check out our other thoughts on Priceline). This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge Fund Alpha 14
Stephen MandelLone Pine Capital New Positions -Schlumberger (SLB) -Verisign (VRSN) Increased Positions -Priceline (PCLN) -Cognizant (CTSH) Reduced Positions -Apple (AAPL) -Google (GOOG) Sold Out
-Teradata (TDC) -Ross Stores (ROST)
Brief Discussion: Revenues are expected to be up 15% in 2013 on market share gains, not including revenue additions from newly acquired Kayak. We are intrigued by Mandel's investment and cannot help but agree that Priceline is a stock worth taking a look at. The global travel service leader gets over half of its bookings from international markets, and the addition of Kayak will give Priceline a more prominent mobile presence and mobile offering. Although Apple and Google might be losing luster in the eyes of Mandel, a tech company Lone Pine is taking an increasing interest in is Cognizant Technology Solutions (CTSH), upping his stake 24% in 3Q, and pushing Cognizant up from Lone Pines 13th largest 13F holding to its third largest. This 24% share increase from 2Q to 3Q comes on the back of a 46% increase from 1Q to 2Q. Cognizant is expected to grow revenues 17% in 2013 and has a diverse customer base, with clients operating in industries such as insurance, manufacturing and healthcare. Part of what will be the key driver for Cognizant's robust 18% five-year EPS CAGR will be an increase in demand for custom IT services, particularly in the financial services and healthcare segments. Cognizant warrants a premium valuation, trading at 18x, given its industry-leading position and its spot as a top player with an almost $20 billion market cap. As top fund managers continue file their third quarter 13Fs, one overwhelming theme we have seen is that billionaires are falling out of love with Apple and Google; we tend to agree that the hype and growth might be cooling for these tech giants. We do find hope in some of the smaller tech companies, such as Cognizant and Priceline. The one bet we are making against Mandel is in Disney. Mandel sold off a large portion of his shares, but this may well have been before the Star Wars deal and perhaps Mandel will reconsider once the deal is finalized. Be sure to check out Mandel's profile and holdings. This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge 15
Fund Alpha Stephen Mandels Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio PRICELINE COM INC PCLN SH N 876,887 26% 5.3% GOOGLE INC GOOG SH N 806,009 -20% 4.9% COGNIZANT TECHNOLOGY SOLS CORP CTSH SH N 740,260 25% 4.5% RALPH LAUREN CORP RL SH N 653,752 -2% 4.0% KINDER MORGAN INC KMI SH N 626,025 0% 3.8% EBAY INC EBAY SH N 607,562 -10% 3.7% GAP INC GPS SH N 586,165 -24% 3.6% MONSANTO CO NEW MON SH N 576,054 -21% 3.5% APPLE INC AAPL SH N 537,199 -43% 3.3% TRANSDIGM GROUP INC TDG SH N 492,586 0% 3.0% DISNEY WALT CO DIS SH N 489,473 -21% 3.0% MICHAEL KORS HOLDINGS LIMITED KORS SH N 465,510 -5% 2.8% SCHLUMBERGER LTD SLB SH N 464,405 New 2.8% VERISIGN INC VRSN SH N 459,702 New 2.8% SPDR GOLD TRUST GLD SH N 445,053 -31% 2.7% EQUINIX INC EQIX SH N 429,618 -34% 2.6% QUALCOMM INC QCOM SH N 429,584 -10% 2.6% DOLLAR GENERAL CORP NEW DG SH N 426,849 124% 2.6% VISA INC V SH N 390,406 -12% 2.4% LULULEMON ATHLETICA INC LULU SH N 352,648 13% 2.1% NETEASE COM INC NTES SH N 348,610 -29% 2.1% NEWS CORP NWSA SH N 344,106 3% 2.1% ULTA SALON COSMETICS & FRAG INC ULTA SH N 322,009 -4% 2.0% AUTOZONE INC AZO SH N 319,487 -8% 1.9% DAVITA INC DVA SH N 314,999 0% 1.9% WYNDHAM WORLDWIDE CORP WYN SH N 311,339 -19% 1.9% TRACTOR SUPPLY CO TSCO SH N 288,609 -1% 1.8% OCEANEERING INTERNATIONAL INC OII SH N 281,612 30% 1.7% LIBERTY GLOBAL INC LBTYA SH N 269,887 -27% 1.6% EXPRESS SCRIPTS INC ESRX SH N 269,877 -40% 1.6% DUNKIN BRANDS GROUP INC DNKN SH N 210,823 New 1.3% CROWN CASTLE INTERNATIONAL CORP CCI SH N 209,654 -58% 1.3% B E AEROSPACE INC BEAV SH N 208,883 10% 1.3% WABCO HOLDINGS INC WBC SH N 202,707 -16% 1.2% HUNT J B TRANSPORT SERVICES INC JBHT SH N 196,801 New 1.2% TERADATA CORP DE TDC SH N Sold out 0.0% ROSS STORES INC ROST SH N Sold out 0.0% H C A HOLDINGS INC HCA SH N Sold out 0.0% NEW ORIENTAL EDUC & TECH GP INC EDU SH N Sold out 0.0%
Hedge Fund Alpha 16
Ray DalioBridgewater Associates
New Positions -Berkshire Hathaway (BRK-B) -BCE, Inc. (BCE) Increased Positions -Dell (DELL) -Safeway (SWY) Reduced Positions -Brazil ETF (EWZ) -Oracle (ORCL) Sold Out -Best Buy (BBY) -Symantec (SYMC)
Brief Discussion:
Ray Dalios Bridgewater Associates is an extremely large and extremely successful hedge fund. Based in Westport and known for its extremely strong- some would say cultish- culture, it has grown to well over $100 billion in assets under management with little negative impact on its returns. Dalio himself has become a billionaire several times over due to the funds performance. We have gone through the funds recent 13F filing, which reports some of its equity positions from the end of September, and compared it to previous filings (see what Bridgewater has reported owning in the past) to get an idea of what Dalio and his team are thinking. Here are some themes that weve noticed in the funds portfolio: Hardware. Hewlett-Packard Company (HPQ) and Dell Inc. (DELL) were among Bridgewaters top five stock picks at the end of June, and even with both stocks down during the third quarter- HP by 14% and Dell by over 20%- they remained at the top of the hedge funds portfolio as the stake in HP was increased by over 10% and the stake in Dell grew by over 60%. These companies are both trying to move away from PCs into more services-oriented businesses, but the market has been dissatisfied with their progress. It looks to us like Bridgewater believes that HPs and Dells hardware businesses wont do as poorly in the future as the market expects. Its possible that the fund is in fact more confident that these players will make a successful transition to software and services, but wed note that while Bridgewater did also report a sizable position in Oracle it had sold shares in that company during the third quarter. A hardware play seems to be more likely. We'd looked at Dell and Hewlett Packard recently and hadnt considered either to be a good stock to buy despite forward P/Es in the 4-5 range. Retail. This one we may be stretching a bit, but Bridgewater did add shares to its position in Staples- vaulting that to the #6 slot in its 13F portfolio- as well as increasing its holdings of Safeway Inc. (SWY) by about a third to make that the second largest stock holding by market value in its 13F portfolio. The trailing, and forward, P/E multiples at these two companies all come out to 8x, which normally represents value territory. Both stocks also pay dividend yields of about 4%. Staples seems to be struggling more in terms of its business, as competition with Amazon likely helped drive its earnings down 32% in its second fiscal quarter versus a year earlier, but its Safeway- where net income has actually been up- that is the more popular short selling target with 30% of the outstanding shares held short. Safeway looks like a good potential value play, and while were considerably more cautious on Staples we could see an investor looking at that as well. Uncool tech companies. Apple and Google are favorites of hedge funds (they'd topped our list of the most popular stocks among hedge funds for the second quarter), tech watchers, and consumers, but neither of those companies were to be found in Bridgewaters 13F at all, let alone in its top holdings. It did own Microsoft Corporation (MSFT) (the funds largest equity position by market value; to be fair, it too had been a widely held stock by hedge funds) and Yahoo! Inc. (YHOO) (a position that it significantly increased to 1.3 million shares). Microsoft and Yahoo carry forward P/Es of 8 and 16 respectively, with Microsofts multiple being artificially low due to the release of new versions of Windows and Office. As such we cant really say that that they are cheap, especially compared to Apple.
Bridgewater, at least in terms of its 13F portfolio, seems to be quite contrarian here. Thats paid off in some ways- its missed the recent correction at Apple and Google- but not so much in others (as HP and Dell have continued to drop so far this quarter). Potentially the most interesting ideas for investors are its larger positions in Safeway and Staples. This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge 17
Fund Alpha Ray Dalios Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio SPDR S & P 500 E T F TRUST SPY SH N 2,629,612 1% 35.4% VANGUARD INTL EQUITY INDEX FUNDS VWO SH N 2,055,957 27% 27.7% ISHARES TRUST EEM SH N 1,376,225 5% 18.5% ISHARES INC EWZ SH N 62,330 -42% 0.8% MICROSOFT CORP MSFT SH N 44,465 -3% 0.6% ISHARES TRUST LQD SH N 43,466 5% 0.6% SAFEWAY INC SWY SH N 42,523 41% 0.6% HEWLETT PACKARD CO HPQ SH N 39,392 18% 0.5% DELL INC DELL SH N 37,508 66% 0.5% APOLLO GROUP INC APOL SH N 28,543 113% 0.4% ORACLE CORP ORCL SH N 26,609 -31% 0.4% ISHARES TRUST IVV SH N 25,270 0% 0.3% STAPLES INC SPLS SH N 22,224 13% 0.3% BERKSHIRE HATHAWAY INC DEL BRK-B SH N 21,027 New 0.3% YAHOO INC YHOO SH N 20,953 54% 0.3% VERIZON COMMUNICATIONS INC VZ SH N 20,566 6% 0.3% B C E INC BCE SH N 18,898 New 0.3% JOHNSON & JOHNSON JNJ SH N 18,585 -18% 0.2% TESORO CORP TSO SH N 18,131 -28% 0.2% ALLERGAN INC AGN SH N 15,331 16% 0.2% HOLLYFRONTIER CORP HFC SH N 15,322 -1% 0.2% 3M CO MMM SH N 14,963 16% 0.2% KROGER COMPANY KR SH N 14,759 24% 0.2% ELECTRONIC ARTS INC EA SH N 14,650 61% 0.2% O REILLY AUTOMOTIVE INC NEW ORLY SH N 14,420 146% 0.2% BED BATH & BEYOND INC BBBY SH N 14,300 214% 0.2% MICROCHIP TECHNOLOGY INC MCHP SH N 13,829 New 0.2% CELGENE CORP CELG SH N 13,628 23% 0.2% BOEING CO BA SH N 13,435 403% 0.2% A T & T INC T SH N 12,773 -15% 0.2% NUCOR CORP NUE SH N 12,615 New 0.2% COCA COLA CO KO SH N 12,578 124% 0.2% VIRGIN MEDIA INC VMED SH N 11,570 -31% 0.2% ROGERS COMMUNICATIONS INC RCI SH N 11,530 New 0.2% BEST BUY COMPANY INC BBY SH N Sold out 0.0% SYMANTEC CORP SYMC SH N Sold out 0.0% APPLIED MATERIALS INC AMAT SH N Sold out 0.0% EATON CORP ETN SH N Sold out 0.0% INTEL CORP INTC SH N Sold out 0.0%
Hedge Fund Alpha 18
Bill AckmanPershing Square
New Positions -Burger King (BKW) -Matson (MATX) Increased Positions -Proctor & Gamble (PG) -General Growth Properties (GGP) Reduced Positions -Proctor & Gamble Calls (PG) -Alexander & Baldwin (ALEX) Sold Out -Citigroup (C)
Brief Discussion: Bill Ackman doesnt do much turnover in Pershing Squares portfolio: a small number of concentrated positions, with little change from quarter to quarter (see Pershing Square's stock picks over time). This is partly because of his long-term, special situations emphasis. The fund recently filed its 13F for the third quarter of 2012, disclosing many of its long equity positions as of the end of September. Here are some of the changes that Pershing Square did make over the previous three months: Burger King. Pershing Square took a position of about 38 million shares in Burger King Worldwide (BKW), which is up about 2% from its June IPO. Burger King is trying to create value by converting many of its restaurants to franchises, which has led to lower revenues and only somewhat lower costs. Its trailing earnings multiple is quite high, suggesting that the market is depending on much better results from this shift in ownership (though the forward P/E of 22 is still higher than at many other restaurants). We think that investors should probably be looking at other restaurants instead, with McDonalds for example being a considerably cheaper stock. Alexander/Matson. In mid-2012 shipping and logistics company Alexander & Baldwin Holdings changed its name to Matson Inc (MATX) and spun out its real estate property operation as Alexander & Baldwin (ALEX). Ackman now has positions in both stocks after having previously owned the old Alexander stock. Hedge funds like to invest in spinouts because management of each company can now focus more on the specifics of what had formerly been one of a larger companys business segments (read more about spinouts). Our read on the two companies is that Alexander, at 47 times consensus earnings for 2013, doesnt look like a good value while Matson seems to be improving as a more focused business. Matsons forward P/E of 15 warrants caution, however, as it is based on high expectations for next year. The spinout story complicates the analysis and so if investors are interested they should definitely look at a company much more closely before buying. Building positions. Ackman is closely identified with shopping mall operator General Growth Properties (GGP), which he had recommended in May 2009 and earned strong returns on; he is currently urging management to sell the company to Simon Property Group though he has been unsuccessful so far. Pershing Squares ownership of the company ticked up slightly during Q3. General Growth Properties business has been about stagnant recently, and were not particularly bullish on the shopping mall industry. We think that wed avoid the stock. Pershing Square also added to its position in Procter & Gamble (PG) with about 28 million shares in its portfolio at the end of September. Procter & Gamble looks good from a defensive perspective- the stocks beta is 0.3, and the dividend yield is above 3%- but its business has been down. Sell- side analysts expect better results in the next couple years, with expected earnings coming in higher on a forward basis, but were not particularly confident in those projections given the companys recent performance. At a trailing P/E of 18, were not sure that its a good deal either. Warren Buffetts Berkshire Hathaway has owned a large position in Procter & Gamble but has been selling share more recently. We dont think that any of these moves by Pershing Square necessarily make for good picks. Burger King seems overvalued, and Procter & Gamble looks to be priced pretty fairly- not much value opportunity there either. The other three companies weve noted here are tough to evaluate, but certainly none of them stand out as screaming buys. This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge 19
Fund Alpha Bill Ackmans Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio CANADIAN PACIFIC RAILWAY LTD CP SH N 2,002,613 0% 22.5% PROCTER & GAMBLE CO PG SH N 1,938,397 28% 21.8% GENERAL GROWTH PPTYS INC NEW GGP SH N 1,455,812 3% 16.4% BEAM INC BEAM SH N 1,197,899 0% 13.5% PENNEY J C CO INC JCP SH N 949,151 0% 10.7% BURGER KING WORLDWIDE INC BKW SH N 534,757 New 6.0% PROCTER & GAMBLE CO PG SH CALL 447,559 -23% 5.0% HOWARD HUGHES CORP HHC SH N 253,508 0% 2.8% MATSON INC MATX SH N 76,214 New 0.9% ALEXANDER & BALDWIN INC ALEX SH N 41,544 61% 0.5% CITIGROUP INC C SH N Sold out 0.0%
Hedge Fund Alpha 20
Paul SingerElliott Management New Positions -France Telecom (FTE) -Reed Elsevier (ENL) Increased Positions -BMC Software (BMC) -News Corp. (NWSA) Reduced Positions -Delphi (DLPH) -Brocade (BRCD) Sold Out -VMware (VMW) -QLogic (QLGC)
Brief Discussion: Paul Singer founded Elliott Associates in 1977, making Elliott quite old when compared to the rest of the hedge fund industry. The fund recently filed its 13F with the SEC, disclosing many of the long equity positions in its portfolio as of the end of September. We have gone through the filing and identified some of the moves that Elliott made during the third quarter by comparing its positions to those disclosed in previous filings. Here are some increases and decreases in its holdings that we noticed: Selling Delphi. Singer and his team cut their stake in Delphi Automotive (DLPH), a $10 billion auto parts company which manufactures electrical, power, and safety components. The entire auto ecosystem- not just the automakers, but parts companies and auto-related retailers as well, are seeing low pricing as demand remains low. Delphis stock price is actually up 51% in the last year as that company has proven more resistant to macro trends- its earnings were actually higher last quarter than in the third quarter of 2011- but it still trades at a fairly low trailing P/E of 9. Fellow billionaire John Paulsons Paulson & Co. had owned over 32 million shares of Delphi at the end of June. It looks like a relatively safe auto investment, and seems like it could be a value play, though we understand that Elliott may have wanted to take some profits. Reed Elsevier. Elliott also initiated a position in Reed Elsevier NV (ENL) during the third quarter of the year, with 4.5 million shares in its portfolio at the end of September. The publishing company focuses on research books and journals, and also owns the LexisNexis brand. At a market capitalization of $9.7 billion, the stock trades at trailing and forward P/E multiples of 13 and 10, respectively. Were not particularly bullish on the publishing industry, but that valuation looks fairly cheap and we might be convinced to take a closer look at the company. Buying, and selling, tech stocks. The fund made some considerable moves in tech stocks, buying more shares of software company BMC Software (BMC) but selling part of its positions in data storage company Brocade Communications Systems (BRCD) and software provider Compuware Corporation (CPWR). BMCs earnings have been down, but Wall Street analysts expect a strong rebound in net income and so the forward P/E multiple is only 10- about half of where the company trades on a trailing basis. We think that wed avoid a stock that is so dependent on a strong reversal of current trends. See our previous discussion of BMC. Brocades earnings multiples actually strongly resemble BMCs: a trailing P/E in the high teens, and a forward P/E of 9. That company, however, has been converting moderately higher revenues into strong growth in net income. We wouldnt be sure that it can continue these growth rates, but it could be worth investigating further. Compuware, meanwhile, looks overvalued. It carries a trailing P/E of 26, which wed normally expect to be accompanied by considerable growth, but earnings actually declined by more than 50% in the third quarter of 2012 compared to a year earlier. We think that
selling the stock was a good move on Elliotts part, and for investors who arent involved it could be a short candidate. We can see why Elliott liked Reed Elsevier, as at least at first glance the stock looks like a good value. Wed say the same about Delphi, and investors who dont own the stock should consider it, but as weve mentioned its possible that the fund wanted to lock in some of its gains here. The sale of Compuware also makes sense, but between the other two tech companies weve covered here wed be more interested in looking into an investment in Brocade than in BMC.
Hedge 21
Fund Alpha Paul Singers Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio DELPHI AUTOMOTIVE PLC DLPH SH N 883,747 -17% 27.8% B M C SOFTWARE INC BMC SH N 522,647 21% 16.4% SPDR S & P 500 E T F TRUST SPY SH PUT 287,940 -33% 9.1% NEWS CORP NWSA SH N 250,174 5% 7.9% BROCADE COMMUNICATIONS SYS INC BRCD SH N 157,540 -36% 5.0% POWERSHARES QQQ TRUST QQQ SH PUT 119,996 -38% 3.8% ENERGY XXI LTD EXXI SH N 104,678 -9% 3.3% FRANCE TELECOM FTE SH N 88,944 New 2.8% REED ELSEVIER N V ENL SH N 59,113 New 1.9% ISHARES TRUST OEF SH PUT 58,824 -50% 1.9% COMPUWARE CORP CPWR SH N 56,723 -33% 1.8% MELCO CROWN ENTERTAINMENT LTD MPEL SH N 55,789 42% 1.8% SANDRIDGE ENERGY INC SD SH N 53,380 0% 1.7% FLAGSTONE REINSURANCE HLDGS S A FSR SH N 52,900 0% 1.7% NEXEN INC NXY SH N 49,412 New 1.6% SANDRIDGE ENERGY INC SD SH PUT 35,402 0% 1.1% AMERICAN CAPITAL AGENCY CORP AGNC SH N 35,153 New 1.1% EMULEX CORP ELX SH N 33,917 40% 1.1% JUNIPER NETWORKS INC JNPR SH CALL 21,387 0% 0.7% CHIMERA INVESTMENT CORP CIM SH N 20,395 New 0.6% CORONADO BIOSCIENCES INC CNDO SH N 19,401 0% 0.6% NETAPP INC NTAP SH N 16,429 New 0.5% ORACLE CORP ORCL SH PUT 16,273 22% 0.5% SPDR SERIES TRUST XHB SH PUT 16,138 44% 0.5% TELECOM ITALIA S P A NEW TI SH N 14,812 New 0.5% DIGITAL REALTY TRUST INC DLR SH PUT 13,969 New 0.4% VIRGIN MEDIA INC VMED PRN N 13,752 -20% 0.4% UNITED STATES STEEL CORP NEW X PRN N 13,623 0% 0.4% KRAFT FOODS INC KFT SH CALL 13,389 New 0.4% GENERAL MOTORS CO GM SH PUT 11,888 New 0.4% QLOGIC CORP QLGC SH CALL 10,670 New 0.3% CADENCE DESIGN SYSTEMS INC CDNS PRN N 8,855 0% 0.3% MCMORAN EXPLORATION CO MMR SH N 8,812 -10% 0.3% SPRINT NEXTEL CORP S SH PUT 6,900 -86% 0.2% GENERAL MOTORS CO GM SH N 5,567 0% 0.2% VMWARE INC VMW SH N Sold out 0.0% AMYLIN PHARMACEUTICALS INC AMLN SH N Sold out 0.0% VMWARE INC VMW SH PUT Sold out 0.0% QLOGIC CORP QLGC SH N Sold out 0.0%
Hedge Fund Alpha 22
Nelson Peltz Trian Partners New Positions -S&P 500 ETF Puts (SPY) Increased Positions NA Reduced Positions -Kraft (KFT) -Family Dollar (FDO) Sold Out NA
Brief Discussion: Trian Partners is an activist hedge fund headed by Nelson Peltz and his partner Peter May. In November the fund filed its 13F with the SEC, disclosing many of its long equity positions to the general public. Investors can use 13F filings as a source of stock ideas for further research or simply to better understand what top investors were thinking about the markets last quarter. Read on for our analysis of a few trends in Trians portfolio and compare its positions to previous filings. Selling retailers- upscale and downscale. Whats the most upscale retail store available in the public markets? Tiffany & Co. (TIF) at least comes close. Meanwhile, at the discount end of retail, its hard to beat Family Dollar Stores (FDO). Trian owned both of these stocks at the end of September, but it had reduced its stake in each. The commonalities keep coming: Tiffany and Family Dollar both trade at 14 times forward earnings estimates (though this is based on the January 2014 fiscal year for Tiffany and the August 2014 one for Family Dollar) and are even close on a trailing basis with those P/Es in the 17-18 range. They also both saw very low earnings growth in their most recent quarter compared to the same period in the previous year. We like the discount retail industry better, but Family Dollar seems to have considerably more competition from the other dollar stores and from big box retailers such as Wal-Mart and Target. With decent though not spectacular multiples either company could be worth looking at to see if it can somehow get a better earnings growth rate. Selling asset managers. Peltz and his team also cut their stakes in State Street Corporation (STT), a combined asset manager and custodian bank, and asset manager Legg Mason, Inc. (LM). Legg Mason looks cheap on a book basis, at a P/B ratio of 0.6, but apparently hasnt been doing quite so well in monetizing its assets given the trailing P/E of 20. Wall Street analysts do expect the company to become more efficient, bringing the P/E down to 11 when looking at consensus earnings for the fiscal year ending in March 2014, but wed be a bit concerned about a company depending on that much earnings growth. Its bottom line has been improving- earnings were up strongly last quarter versus the third quarter of 2011- but with lower revenue were not sure that the strong growth will continue. State Street is about the opposite in terms of valuation: cheap in the sense that it trades at 11 times trailing earnings, but not as good a deal given that the P/B is 1. Like Legg Mason, it has converted a small decline in sales into a doubledigit percentage increase in net income. Viking Global, which is managed by Tiger Cub Andreas Halvorsen, had initiated a position of 7.5 million shares between April and June. If investors want to look at the asset management industry, we dont think that State Street actually looks like that bad a deal but would certainly want to learn more about what is driving that companys lower revenues. Ingersoll-Rand. While Trian was generally selling its top holdings from last quarter, it did hold steady in diversified machinery company Ingersoll-Rand PLC (IR). The stock has risen 41% year to date, possibly because of its products exposure to construction (movements in the stock price look fairly well correlated with those of homebuilder Lennar, for example). Ingersoll- Rands earnings were up strongly in the third quarter of 2012 from a year earlier, though revenue was actually down slightly. It carries earnings multiples in the low teens, suggesting that investors dont expect much more growth at the company. It probably deserves a closer look due to its pricing. Billionaire Ken Griffins Citadel Investment Group had bought the stock during the second quarter.
Peltz didnt buy much during the third quarter, generally either selling some shares-as he did with the retailers and asset managers- or keeping his position about flat as at Ingersoll-Rand. We think that many of these companies could be good values (leaving out Legg Mason, which seems a bit too dependent on stronger forward earnings given how much the business has been struggling) if they survive due diligence. This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge 23
Fund Alpha Nelson Peltzs Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio SPDR S & P 500 E T F TRUST SPY SH PUT 669,461 New 19.1% INGERSOLL RAND PLC IR SH N 603,756 0% 17.2% FAMILY DOLLAR STORES INC FDO SH N 594,549 -10% 16.9% STATE STREET CORP STT SH N 383,519 -7% 10.9% WENDYS CO WEN SH N 375,576 0% 10.7% KRAFT FOODS INC KFT SH N 336,249 -22% 9.6% LEGG MASON INC LM SH N 317,985 -12% 9.1% LAZARD LTD LAZ SH N 163,658 0% 4.7% TIFFANY & CO NEW TIF SH N 62,137 -28% 1.8% HEINZ H J CO HNZ SH N 5,959 -82% 0.2%
Hedge Fund Alpha 24
Seth KlarmanBaupost New Positions -Rovi Corp. (ROVI) Increased Positions -NovaGold (NG) -Idenix (IDIX) Reduced Positions -BP Plc (BP) -HP (HPQ) Sold Out -Hess (HES)
Brief Discussion:
Seth Klarmans book Margin of Safety sells at prices up to $1,500- thats how much the investing community thinks its worth just to read his thoughts on investing that were published in 1991. Obviously his more recent stock picks, and what we can learn about his view on the markets from them, should be of interest as well and thanks to 13F filing requirements we can get those six to seven weeks after the end of every quarter for free. Here are some themes that we noticed when we analyzed the Baupost Groups 13F for the end of September compared to previous filings. Gold. Klarman and his team held their position in Allied Nevada Gold Corp. (ANV) steady, and increased their stake in NovaGold Resources Inc. (NG). These are smaller gold miners, with market capitalizations less than $5 billion compared to much larger companies such as Barrick Gold, and are principally located in North America. Theyve also turned in low net income recently, as Novagold is unprofitable on a trailing basis (and is expected to be in the red next year as well) while Allied Nevada trades at a high trailing P/E and at 17 times forward earnings estimates even with analysts expecting strong improvement at the company. Were not sure why Baupost likes these companies even if it wants to buy stocks that benefit from high gold prices. News Corp. Baupost trimmed its holdings of News Corp (NWSA) but the large media company and owner of Fox properties continued to occupy a prime place in the funds portfolio. Despite certain legal problems at News Corp the company has been watched closely due to its plans to split into two. The breakup should create many of the same opportunities inherent in a spinout, an event that many value and special situations investors like to look at as an investment. Here's why hedge funds like to invest in spinouts. For the moment, News Corp carries a trailing P/E of 22, which is a bit high, and the details of any breakup would be difficult to model. We think that investors should become more familiar with spinouts for now and decide on whether or not to make a play when the company is closer to breaking up. Dumping tech. Bauposts position in Microsoft was cut to 1.4 million shares from 7 million three months earlier, the funds stake in Hewlett-Packard Company (HPQ) was cut nearly in half, and it also sold over 2 million shares of Oracle Corporation (ORCL) (though these latter two remained among its top ten positions by market value). Billionaire David Einhorns Greenlight Capital sold out of HP recently. HP has been suffering recently as consumers move away from PCs and other hardware into tablets and even smartphones, which has left it unprofitable for now. The sell-side does insist that the company will recover- that it is trading at only 4 times next years earnings!- but were skeptical that the value opportunity is worth the risk. Microsofts another understandable sell as the company tries to move new
versions of Windows and Office along with its Surface line of tablets- we actually think that it might be undervalued, but we can see why investors would avoid it. The interesting bit is to see Klarman also selling some shares of Oracle, whose business software and services focus helped it to an 11% earnings increase in its most recent quarterly report compared to the same period a year ago. It trades at 15 times trailing earnings with solid growth expectations going forward. Were left to conclude that Baupost is likely sour on the technology sector as a whole. Does this necessarily mean that investors should sell all their tech stocks? We dont think so. Bauposts bearishness on the sector should be just another tidbit of information used to make decisions. The same is true for its moves in News Corp and the small gold miners- we think that the miners should be avoided, with better values in the industry, and News Corp is best left on a watch list for now.
Hedge 25
Fund Alpha Seth Klarmans Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio B P PLC BP SH N 477,028 -16% 14.4% ORACLE CORP ORCL SH N 424,710 -15% 12.8% VIASAT INC VSAT SH N 401,835 1% 12.1% THERAVANCE INC THRX SH N 351,179 -7% 10.6% NEWS CORP NWSA SH N 319,586 -13% 9.6% HEWLETT PACKARD CO HPQ SH N 245,260 -46% 7.4% NEWS CORP NWS SH N 239,430 -9% 7.2% ALLIED NEVADA GOLD CORP ANV SH N 197,392 0% 6.0% NOVAGOLD RESOURCES INC NG SH N 117,600 31% 3.5% GENWORTH FINANCIAL INC GNW SH N 78,450 0% 2.4% ENZON PHARMACEUTICALS INC ENZN SH N 62,646 0% 1.9% THERAVANCE INC THRX PRN N 60,690 0% 1.8% ROVI CORP ROVI SH N 59,998 New 1.8% IDENIX PHARMACEUTICALS INC IDIX SH N 54,720 20% 1.7% A V E O PHARMACEUTICALS INC AVEO SH N 52,931 0% 1.6% MICROSOFT CORP MSFT SH N 41,664 -80% 1.3% SYNERON MEDICAL LTD ELOS SH N 39,000 0% 1.2% ALLIANCE ONE INTERNATIONAL INC AOI SH N 28,381 0% 0.9% CENTRAL PACIFIC FINANCIAL CORP CPF SH N 25,740 0% 0.8% ITURAN LOCATION & CONTROL LTD ITRN SH N 19,655 0% 0.6% NOVACOPPER INC NCQ SH N 9,890 46% 0.3% SYCAMORE NETWORKS INC SCMR SH N 8,175 0% 0.2% HESS CORP HES SH N Sold out 0.0%
Hedge Fund Alpha 26
Leon Cooperman Omega Advisors New Positions -Sirius XM (SIRI) -Express Scripts (ESRX) Increased Positions -Kinder Morgan (KMI) -AIG (AIG) Reduced Positions -SLM Corp (SLM) -Apple (AAPL) Sold Out -SPDR Gold (GLD) -Bank of America (BAC)
Brief Discussion:
Leon Cooperman, former head of Goldman Sachs Asset Management and current manager of Omega Advisors, has had his net worth estimated at about $2 billion. Omega files a quarterly 13F with the SEC, giving market watchers the opportunity to review many of the funds long equity positions and decide whether or not each is appropriate for their own portfolio. In addition to that kind of name-by-name look, we can compare the filing from the end of September to previous filings to see what the fund is thinking about the markets. Here are some points we picked up on: AIG. Omega increased its stake in American International Group, Inc. (AIG) by about 75% to a total of 8.1 million shares; according to the 13F, the bailed-out insurer is now the funds largest holding. AIG has been talked about as a value stock for several months, and even after rallying 38% over the last year it is valued at only half the book value of its equity. We certainly think that the books shouldnt be treated as clean yet, and so that the stock should trade at a discount, but probably not one that low. At 9 times forward earnings estimates, it looks like a value play in those terms as well. The government is reportedly on the way out of the stock, and Wall Street analysts expect considerable growth in net income over the next several years that brings the five-year PEG ratio well below 1. See more of our analysis of AIG. Dividends. None of them were a large change from the previous quarter, but the fact that Cooperman and his team kept Linn Energy LLC (LINE), Atlas Pipeline Partners, L.P. (APL), and Kinder Morgan Inc (KMI) around near the top of its 13F portfolio suggested that they still think that it's a good idea to own high yield stocks. Linn is an exploration and production company operating across the U.S. while Atlas and Kinder Morgan are pipeline companies focused on the transportation of natural gas. Much of the focus among investors who like the prospects for natural gas development has been on producers such as Chesapeake, but Cooperman seems to like midstream opportunities at least as much due to the high yields they offer. Linn also pays a very high dividend yield- 8% at current prices- so income investors may want to take a look at it as well, even though in value terms it doesnt look particularly attractive at 16 times consensus earnings for 2013. Sallie Mae. SLM Corp (SLM) had been Omegas largest 13F position by market value at the end of June, and the fund actually bought additional shares in the student loan manager during the third quarter. SLM carries trailing and forward P/Es of 8 and 7, respectively, and so we can see why value investors might like it if they can accept the significant regulation in the market and other government policies which might impact the company. SLM had been one of Highfields Capital Managements top picks at the end of June
as well; Harvard Management had invested $500 million in the fund when its former employee Jonathan Jacobson founded Highfields in 1998. Find more stock picks from Highfields Capital Management. We like Coopermans purchases of AIG, and think that its a good stock for investors to consider. Sallie Mae looks cheap as well but wed have to do considerably more research into the student loan market going forward before buying. We do like energy, and while in the past weve been more favorable towards large exploration and production companies we may try to look more closely at pipeline stocks in the future given that the billionaire seems to consider them better investments.
Hedge 27
Fund Alpha Leon Coopermans Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio AMERICAN INTERNATIONAL GROUP INC AIG SH N 264,110 76% 5.3% S L M CORP SLM SH N 245,085 3% 4.9% SPRINT NEXTEL CORP S SH N 236,168 -1% 4.7% LINN ENERGY LLC LINE SH N 193,728 0% 3.9% APPLE INC AAPL SH N 177,719 0% 3.6% ATLAS PIPELINE PARTNERS L P APL SH N 170,643 -3% 3.4% SIRIUS X M RADIO INC SIRI SH N 165,585 9% 3.3% KINDER MORGAN INC KMI SH N 165,386 1% 3.3% QUALCOMM INC QCOM SH N 149,497 9% 3.0% K K R FINANCIAL HOLDINGS L L C KFN SH N 139,527 -2% 2.8% DISH NETWORK CORPORATION DISH SH N 138,170 39% 2.8% TRANSOCEAN LTD RIG SH N 136,607 19% 2.7% ATLAS ENERGY L P ATLS SH N 133,382 1% 2.7% EXPRESS SCRIPTS INC ESRX SH N 121,477 8% 2.4% ALTISOURCE PORTFOLIO SLTNS S A ASPS SH N 115,506 -20% 2.3% HALLIBURTON COMPANY HAL SH N 109,651 26% 2.2% UNITEDHEALTH GROUP INC UNH SH N 108,916 -3% 2.2% ENERGY XXI LTD EXXI SH N 102,004 -2% 2.0% MOTOROLA SOLUTIONS INC MSI SH N 101,980 55% 2.0% WILLIAMS COS WMB SH N 100,473 -2% 2.0% X L GROUP PLC XL SH N 97,147 0% 1.9% METLIFE INC MET SH N 90,112 3% 1.8% HUMANA INC HUM SH N 87,358 66% 1.8% MCMORAN EXPLORATION CO MMR SH N 85,887 2% 1.7% BOSTON SCIENTIFIC CORP BSX SH N 82,265 24% 1.7% WESTERN UNION CO WU SH N 79,713 1% 1.6% WATSON PHARMACEUTICALS INC WPI SH N 79,310 -1% 1.6% GANNETT INC GCI SH N 78,301 6% 1.6% WELLPOINT INC WLP SH N 74,573 -37% 1.5% K K R & CO L P KKR SH N 73,821 0% 1.5% CAPITAL ONE FINANCIAL CORP COF SH N 70,402 46% 1.4% WALGREEN CO WAG SH N 68,660 New 1.4% P V H CORP PVH SH N 64,104 -1% 1.3% E TRADE FINANCIAL CORP ETFC SH N 52,142 -19% 1.0% GOOGLE INC GOOG SH N 50,231 9% 1.0% CITRIX SYSTEMS INC CTXS SH N Sold out 0.0% UNITED CONTINENTAL HOLDINGS INC UAL SH N Sold out 0.0% LAM RESH CORP LRCX SH N Sold out 0.0% MCGRAW HILL COS INC MHP SH N Sold out 0.0%
Hedge Fund Alpha 28
Ken GriffinCitadel Investment Gr.
New Positions -Capital One (COF) -Simon Property Group -(SPG) Increased Positions -Proctor & Gamble (PG) -Google (GOOG) Reduced Positions -Apple (AAPL) -TJX Companies (TJX) Sold Out -Pepsi (PEP) -Kimberly Clark (KMB)
Brief Discussion: Ken Griffin has worked himself up from trading options in his college dorm room to managing one of the largest hedge funds in the world. The financial crisis was a huge setback for Citadel, but Griffin and his team successfully recovered their losses and pulled the fund above its high water mark. Wed note that Citadel often makes big moves, and so were not sure that any of the positions that we see on the 13F represent what the fund actually owns right now. However, based on the information we have and on previous filings heres what Griffin seems to have been doing: Changing personal products companies. Citadels new favorite stock, according to the 13F, was Procter & Gamble (PG) with the fund increasing the number of shares in its portfolio by over 300% to 6.5 million. Interestingly, over the same period it sold almost all of what had been a 3.3 million-share position in Kimberly Clark (KMB). These are both personal products companies: Kleenex and Huggies for Kimberly Clark, Gillette and Pantene for Procter & Gamble (along with many other consumer brands, in both cases). Procter & Gamble, which is five to six times Kimberly Clarks size in terms of market cap, trades at slight premiums when looking at either the trailing or forward P/E multiple. Its earnings have also been down, while Kimberly Clarks have been up. Were not sure that he made the right call here, as Kimberly Clark appears to be a marginally better value. Selling Pepsi. PepsiCo (PEP) had been one of Griffins largest holdings last quarter, but Citadel cut its stake from 4 million shares to about 60,000. Pepsi- along with its competitor Coca-Cola- is generally considered to be a safe, stable investment with a fairly low beta and a dividend yield above 3% at current prices. As a value stock, though, it doesnt look that good: Pepsis trailing P/E multiple is 18 even though in the third quarter its earnings were down 5% from the same period in 2011. Wed be looking for at least modest growth rates at a P/E that high. Read our analysis of Pepsico compared to its peers. Capital One. Citadel had a small position in Capital One Financial (COF) at the beginning of July, and increased its holdings during the third quarter to a total of nearly 5 million shares. This made it the third largest equity position in the funds 13F portfolio. Compared to other credit card companies, Capital One admittedly has a less attractive brand but is quite cheap at 8 times trailing earnings. Fellow billionaire Eddie Lamperts ESL Investments sold shares of Capital One during the quarter (see more activity at ESL Investments) but we agree more with Griffin here. Retail. The 13F shows Citadel initiating a position of 1.4 million shares in Simon Property Group (SPG), a $45 billion REIT that owns mall complexes and is thus seen as being highly sensitive to brick-and-mortar retail sales. Lower retail sales, or more customers moving online, reduces the demand for mall space and so both rates and capacity utilization can decline. Simon pays a dividend yield of about 3% at current
prices (earnings analysis is not as meaningful for REITs). Were skeptical of this move. The fund also added to its position in Michael Kors, an upscale apparel retailer which is dependent on growth (and, likely, better economic numbers as well as increased market penetration). That companys trailing and forward P/E multiples are 40 and 25, respectively, but it more than doubled earnings in its most recent quarter compared to the same period in the previous year. Wed avoid that stock as well- the multiples are more high than were comfortable with, though the rapid growth rate keeps us away from short selling. We think that Capital One is cheap and that Pepsi is at about the right price, but wed advise against following the rest of Citadels moves from last quarter. There are almost certainly cheaper and more reliable ways to play retail than Griffins picks, and selling out of Kimberly Clark to buy more Procter & Gamble doesnt seem like a good trade to us.
Hedge 29
Fund Alpha Ken Griffins Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio APPLE INC AAPL SH CALL 4,860,322 -4% 8.7% APPLE INC AAPL SH PUT 4,083,698 5% 7.3% GOOGLE INC GOOG SH CALL 700,101 31% 1.2% GOOGLE INC GOOG SH PUT 662,904 43% 1.2% PROCTER & GAMBLE CO PG SH N 450,222 313% 0.8% APPLE INC AAPL SH N 363,853 -19% 0.6% CAPITAL ONE FINANCIAL CORP COF SH N 282,534 30119% 0.5% PRICELINE COM INC PCLN SH PUT 246,069 20% 0.4% COSTCO WHOLESALE CORP NEW COST SH N 243,296 149% 0.4% E TRADE FINANCIAL CORP ETFC SH N 241,622 0% 0.4% PRICELINE COM INC PCLN SH CALL 238,149 -14% 0.4% VERISIGN INC VRSN PRN N 229,614 0% 0.4% MICHAEL KORS HOLDINGS LIMITED KORS SH N 224,336 26% 0.4% INVESCO LTD IVZ SH N 216,785 0% 0.4% SIMON PROPERTY GROUP INC NEW SPG SH N 205,764 New 0.4% DICKS SPORTING GOODS INC DKS SH N 205,331 6% 0.4% MICROCHIP TECHNOLOGY INC MCHP PRN N 194,259 0% 0.3% BOSTON PROPERTIES INC BXP SH N 189,717 50% 0.3% TYCO INTERNATIONAL LTD SWTZLND TYC SH N 182,564 38% 0.3% CONAGRA INC CAG SH N 179,275 -2% 0.3% WELLS FARGO & CO NEW WFC SH N 178,970 22865% 0.3% TIME WARNER INC NEW TWX SH N 175,233 83% 0.3% XILINX INC XLNX PRN N 169,834 0% 0.3% AMAZON COM INC AMZN SH CALL 169,123 -13% 0.3% COGNIZANT TECHNOLOGY SOLS CORP CTSH SH N 166,371 122% 0.3% PRECISION CASTPARTS CORP PCP SH N 164,828 2% 0.3% L S I CORP LSI SH N 164,342 -5% 0.3% P N C FINANCIAL SERVICES GRP INC PNC SH N 162,089 40% 0.3% COMCAST CORP NEW CMCSA SH N 160,293 11563% 0.3% GENERAL ELECTRIC CO GE SH N 159,178 3633% 0.3% ANADARKO PETROLEUM CORP APC SH N 155,869 -20% 0.3% ALLSTATE CORP ALL SH N 154,907 174% 0.3% A T & T INC T SH CALL 153,126 113% 0.3% DOLLAR GENERAL CORP NEW DG SH N 150,727 7% 0.3% KNIGHT CAPITAL GROUP INC KCG PRN N Sold out 0.0% TRIPADVISOR INC TRIP SH N Sold out 0.0% PHH CORP PHH PRN N Sold out 0.0% L P L INVESTMENT HOLDINGS INC LPLA SH N Sold out 0.0% GOODRICH CORP GR SH N Sold out 0.0%
Hedge Fund Alpha 30
Julian Robertson Tiger Management New Positions -Charter (CHTR) -Priceline (PCLN) Increased Positions -Google (GOOG) -Ocwen Financial (OCN) Reduced Positions -JP Morgan (JPM) -Kinder Morgan (KMI) Sold Out NA
Brief Discussion:
Julian Robertson is quite the legend in the hedge fund space. Robertson stopped managing money for clients a decade ago, but is still widely followed in the media and his comments attract a lot of attention. Robertson returned 31.7% per year after fees between 1980 and 1998, beating the S&P 500's 12.7% annual return by a huge margin. Robertson has bred many hedge fund managers, dubbed Tiger cubs that have studied under Robertson before venturing off to start their own funds, some of which were seeded by Robertson himself. Robertson's fund, now managed by a diversified investment team, appears to be making the move from big name investment banks to gold. Tiger Management downsized its Goldman Sachs Group (GS) position by 80% and JPMorgan Chase (JPM) position by over 15%. The fund's steep sell-off of Goldman shares could be attributed to the uncertainty of Goldman's business model going forward. The ultimate impact from the Volcker rule remains to be seen. Goldman revenues are expected to grow 12% in 2012, after a 26% decline in 2011, where the swings in market conditions generally have a big impact on Goldman revenues, making them hard to forecast. We see Goldman as currently trading in line with its historical P/E at 12x, and its return on equity remains strained at only 9% over the trailing twelve months, reaffirming out questionable outlook. JPMorgan has been considered one of the best-in-breed of the major banks and is up only 20% year to date, well below many of its peers. JPMorgan also appears to be trading very cheap at 9x earnings, especially compared to Bank of America's 25x and Citi's 15x. We take solace in the fact that Robertson's fund only dumped 15%, and perhaps it sees the low rate environment being more profitable for gold versus banks - hence it is positioning its portfolio accordingly. Possible near-term headwinds that could justify the bank's discount to peers is the meager expected increase in revenues for 2012 of 0.5%, while net interest income is expected to be down 7%. Robertson's fund also appears to have become a gold bull. With the announcement of QE3 a couple of months ago, where the Fed plans to keep near zero through mid-2015, we also see gold as an solid investment during this time of uncertain global economic growth. Tiger Management increased its position in Barrick Gold (ABX) during 3Q by 45%. Barrick gold is one of our five stocks to buy as gold prices continue to move higher. Barrick is not the only way that Robertson's fund is playing gold, though, it increased their stake in two key gold ETFs, Market Vectors Junior Gold Miners by 50% from 2Q and Market Vectors Gold Miners by
35%. Barrick is the world's largest gold company by production and reserves. We see this gold company as one of the cheapest in the industry from a valuation standpoint, trading at 9x earnings, compared to other major gold producers Kinross Gold at 17x and Goldcorp 20x. The 2012 outlook for Barrick is positive with both production and revenue expected to be up 7% from 2012. The long-term growth will be driven by higher gold prices and lower-cost mine operations. Although Tiger Management grew hesitant of investment banks, it did find reason to invest in the mortgage servicing business, with an increase of 67% in his Ocwen Financial (OCN) 2Q position. At first glance Ocwen has a high P/E of 37x earnings, versus New York Community Bancorp and People's United Financial at 11x and 17x, respectively, but we believe Ocwen's best-in-industry five year expected earnings growth of 23% warrants such a premium P/E.
Hedge 31 Fund Alpha Julian Robertson -
Tiger Management New Positions
Brief Discussion:
Ocwen has made several acquisitions over the past year, looking to buy up bank assets to beef up on loan servicing. This includes teaming with Walter Investment Corp to make a $3 billion bid for Rescap's mortgage servicing business. The winning bid by Ocwen announced last month will be another key driver for Ocwen's long term growth. Last month Robertson called out Ocwen in a CNBC interview as a stock to watch. One of Tiger Management's newest picks was a big investment for the firm, making up over 3.8% of its 3Q 13F holdings. Robertson's fund bought over $18 million worth of Charter Communications (CHTR) during 3Q. Charter's revenue growth is respected to only be modest in 2012 and 2013 at 3% each year. Charter's 3Q earnings were generally in line with estimates as the cable service company continues its turnaround. Capital expenditures have been on the rise as Charter spends more on labor and infrastructure, but these should assist in higher long term growth rates with Charter's eventual ability to offer broadband and video bundled services to more market segments.
-Charter (CHTR) -Priceline (PCLN)

We agree with Tiger Management that there is a lot of uncertainty with Goldman's business model, and would like a bit more clarity before investing. We are intrigued by JPMorgan's current valuation and would be interested in taking a closer look. We also agree with Robertson's gold pick and bullish outlook. Ocwen is a key player in a niche market that has been securing key assets that will help the company perform well in the future. Charter remains a bit too speculative for us with an incalculable P/E and intense
Increased Positions
competition Hulu. from the streaming market and online platforms, such as Netflix, Amazon and
-Google (GOOG) -Ocwen Financial (OCN) Reduced Positions -JP Morgan (JPM) -Kinder Morgan (KMI) Sold Out NA
Hedge 32
Fund Alpha Julian Robertsons Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio APPLE INC AAPL SH N 67,331 0% 14.1% GOOGLE INC GOOG SH N 27,388 15% 5.7% MASTERCARD INC MA SH N 25,580 12% 5.3% LIBERTY GLOBAL INC LBTYA SH N 24,761 0% 5.2% QUALCOMM INC QCOM SH N 21,304 0% 4.5% VISA INC V SH N 20,928 8% 4.4% OCWEN FINANCIAL CORP OCN SH N 20,903 68% 4.4% MARKET VECTORS E T F TRUST GDX SH N 18,765 37% 3.9% H C A HOLDINGS INC HCA SH N 18,633 7% 3.9% CHARTER COMMUNICATIONS INC CHTR SH N 18,495 New 3.9% KINDER MORGAN INC KMI SH N 17,422 -31% 3.6% WUXI PHARMATECH CAYMAN INC WX SH N 17,235 0% 3.6% AMERICAN INTERNATIONAL GROUP INC AIG SH N 17,149 0% 3.6% BARRICK GOLD CORP ABX SH N 16,015 46% 3.3% VERISIGN INC VRSN SH N 15,727 16% 3.3% SIRIUS X M RADIO INC SIRI SH N 15,245 16% 3.2% PRICELINE COM INC PCLN SH N 14,734 New 3.1% MARKET VECTORS E T F TRUST GDXJ SH N 14,607 54% 3.1% JPMORGAN CHASE & CO JPM SH N 12,954 -16% 2.7% SHERWIN WILLIAMS CO SHW SH N 9,530 0% 2.0% CABLEVISION SYSTEMS CORP CVC SH N 8,649 0% 1.8% X P O LOGISTICS INC XPO SH N 7,283 0% 1.5% SEACHANGE INTERNATIONAL INC SEAC SH N 6,610 0% 1.4% AUTONAVI HOLDINGS LIMITED AMAP SH N 5,978 0% 1.3% TRIPADVISOR INC TRIP SH N 5,763 New 1.2% L C A VISION INC LCAV SH N 4,956 0% 1.0% GOLAR L N G LTD GLNG SH N 4,747 New 1.0% BLACKSTONE GROUP L P BX SH N 4,684 New 1.0% RYANAIR HOLDINGS PLC RYAAY SH N 3,967 0% 0.8% CALLIDUS SOFTWARE INC CALD SH N 3,722 0% 0.8% SUNCOR ENERGY INC NEW SU SH N 2,250 0% 0.5% GOLDMAN SACHS GROUP INC GS SH N 1,745 -83% 0.4% SOUFUN HOLDINGS LTD SFUN SH N 792 New 0.2% SEALED AIR CORP NEW SEE SH N 751 0% 0.2% NEXEN INC NXY SH N 708 0% 0.1% CARDIOME PHARMA CORP CRME SH N 528 0% 0.1% CARNIVAL CORP CCL SH N 362 0% 0.1%
Hedge Fund Alpha 33
John Paulson Paulson & Co. New Positions -Grifols (GRFS) -MetroPCS (PCS) Increased Positions -Life Technologies (LIFE) -Equinix (EQIX) Reduced Positions -AngloGold Ashanti (AU) -Delphi Automotive (DLPH) Sold Out -CNO Financial (CNO) -Goodrich Corp. (GR)
Brief Discussion:
One of the most revered names in the business, billionaire hedge fund manager John Paulson is famous for his lucrative bets against subprime mortgages in the mid-2000s. Paulson earned a $4.9 billion payout in 2010, breaking records in the hedge fund industry. Lately, however, Paulson has had to convince investors that his fund is still on the straight and narrow pathhis major funds posted double-digit losses over the past year and change. The funds economic outlook in 2011 was rather sunny, costing the fund billions as it took on significant amounts of risk in its investments. We will take a look here at how Paulsons major stock picks, as disclosed in Paulson & Co.s 13F regulatory filing, compare to his past filings, particularly looking at major up and down movements in the portfolio. Gold is still king. John Paulson continues to load quite a bit of his portfolio with gold- related equities. His SPDR Gold Trust (GLD) is valued at $3.7 billion dollars, or about a quarter of the total value of his 13F portfolio. But thats not all: the top equity holding in the portfolio remains AngloGold Ashanti Limited (AU), which, along with convertible bond issues, totals slightly over $1 billion. We explained that, in the wake of the third round of quantitative easing (QE3), gold and a variety of different commodities make ideal hedges against currency debasement and inflation. Essentially, Paulson has put his chips down on a gold ETF and a gold production companytwo ways to play gold that have underperformed buying physical gold since the beginning of the year. AngloGold is down 35 percent year-over-year, and we note that it derives its revenue not only from gold but also from silver, sulfuric acid, and uranium production. The company produced about 4.3 million ounces of gold in 2011, and though its performance has not been inspiring over the past year, we are more optimistic about demand levels for gold going forward as gold becomes a more common monetary reserve asset. More lightweight on Hartford and Delphi. Paulsons fund decreased its holdings in Delphi Automotive PLC (DLPH), which Paulson initiated as a top 5 holding in the fourth quarter 2011. Since the beginning of 2012, shares of the company are up 47 percent. The company issued a positive third-quarter earnings report of 84 cents per share, up from 79 cents from a year ago. This comes, however, as top line growth is starting to pressure earnings (revenue fell 6 percent) and as the company begins significant strategic readjustments in the slow European markets, so Paulsons move to take profits here makes sense. Paulson still has a significant stake in the company, though, and other optimists like billionaire hedge fund manager Steven Cohen are also keen on Delphi and the automotive industry generally, as we noted in a previous article.
Paulson also cashed in nearly 12 million shares of Hartford Financial Services Group Inc (HIG), a major insurance provider for individuals and businesses in the United States. With shares of the company up about 26 percent year-to-date, we also see a rationale for profit-taking in this still sizable holding. However, Hartford still looks like a good value play according to historical valuations. Shares are trading at about 6 times forward consensus earnings estimates, which is well below the 10-year range of 7 to 28. Shares are trading at their lowest valuations on a P/E basis since 2002. If you add in a successful reconstructionwhich is already well underwaywe could see a significant bump in Hartford shares.
Hedge 34 Fund Alpha John Paulson -
Paulson & Co. New Positions
Brief Discussion:
More heavyweight in technology. Paulsons portfolio has beefed up some of its top 10 technology holdings. Particularly, his holdings of Life Technologies Corp. (LIFE) have increased to 13.5 million shares valued at a total $660 million. Another mid-cap like Delphi, Hartford, and AngloGold Ashanti, Life Technologies Corp. produces a number of specialty products for use the life sciences and life science research. Up 18 percent year-to-date, shares are still only trading at 11 times forward consensus earnings, and Paulson likely sees several catalysts for growth. The company stands to make considerable headway in genomics and molecular diagnostics markets, though, as S&P notes, its nextgeneration sequencing platform SOLiD sells a significantly higher price point than that of many of its major competitors. Illumina, Inc. (ILMN) is also expected to come out with a sequencing platform by years end, adding to competition in this areaa source of caution for investors. Computer and internet technology firm Equinix Inc (EQIX) also received a significant boost in Paulsons portfolio for the third quarter; Paulson doubled his stake. Having -Grifols (GRFS) -MetroPCS (PCS) peaked at the end of September, shares of the company have since retreated slightly to around $170 per share. Tech hedge fund guru Philippe Laffont remarked that Equinix Inc has the equivalent of beachfront property in the worldwide internet infrastructure (view Laffonts portfolio here). The recent dip in the companys shares might be an opportunity to take advantage of the secular growth in internet infrastructure services and solutions.
Increased Positions
In the rough waters ahead for the stock marketthe fiscal cliff, wavering European
-Life Technologies (LIFE) -Equinix (EQIX)

and U.S. economies, and mixed earnings reportsJohn Paulson is definitely a person to keep an eye on amidst the choppy waves. Despite his funds mediocre performance over the past two years, we could yet see the same virtuosity that led Paulsons funds to record returns from 2007 to 2010.
Reduced Positions -AngloGold Ashanti (AU) -Delphi Automotive (DLPH) Sold Out -CNO Financial (CNO) -Goodrich Corp. (GR)
Hedge 35
Fund Alpha John Paulsons Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio SPDR GOLD TRUST GLD SH N 3,753,657 0% 29.5% ANGLOGOLD ASHANTI LTD AU SH N 995,544 -13% 7.8% DELPHI AUTOMOTIVE PLC DLPH SH N 777,782 -22% 6.1% LIFE TECHNOLOGIES CORP LIFE SH N 660,217 171% 5.2% MYLAN INC MYL SH N 597,190 0% 4.7% EQUINIX INC EQIX SH N 432,705 107% 3.4% M G M RESORTS INTERNATIONAL MGM SH N 404,690 0% 3.2% HARTFORD FINANCIAL SVCS GRP INC HIG SH N 379,844 -38% 3.0% GRIFOLS S A GRFS SH N 374,088 New 2.9% METROPCS COMMUNICATIONS INC PCS SH N 278,698 New 2.2% H C A HOLDINGS INC HCA SH N 264,338 0% 2.1% A M C NETWORKS INC AMCX SH N 258,074 3% 2.0% C N O FINANCIAL GROUP INC CNO SH N 217,235 -1% 1.7% NOVAGOLD RESOURCES INC NG SH N 200,795 0% 1.6% NEXEN INC NXY SH N 153,176 New 1.2% GAYLORD ENTERTAINMENT CO NEW GET SH N 150,214 90% 1.2% SCRIPPS NETWORKS INTERACTIVE INC SNI SH N 128,583 0% 1.0% ANGLOGOLD ASHANTI LTD AU SH N 127,062 0% 1.0% CAPITAL ONE FINANCIAL CORP COF SH N 125,422 -48% 1.0% SHIRE PLC SHPG SH N 121,590 New 1.0% WELLS FARGO & CO NEW WFC SH N 120,544 0% 0.9% RANDGOLD RESOURCES LTD GOLD SH N 114,447 0% 0.9% HILLSHIRE BRANDS CO HSH SH N 114,093 44% 0.9% INTERDIGITAL INC IDCC SH N 111,810 -25% 0.9% GENON ENERGY INC GEN SH N 111,502 40% 0.9% RALCORP HOLDINGS INC NEW RAH SH N 109,500 0% 0.9% BANK OF AMERICA CORP BAC SH N 97,275 -10% 0.8% ROCK TENN CO RKT SH N 94,556 -32% 0.7% AMERIGROUP CORP AGP SH N 91,430 New 0.7% POPULAR INC BPOP SH N 90,883 -2% 0.7% CAESARS ENTMT CORP CZR SH N 84,135 0% 0.7% GOLD FIELDS LTD NEW GFI SH N 84,060 -64% 0.7% CAPITAL ONE FINANCIAL CORP COF SH N 77,295 -6% 0.6% COOPER INDUSTRIES PLC CBE SH N 75,060 0% 0.6% C N O FINANCIAL GROUP INC CNO SH N Sold out 0.0% GOODRICH CORP GR SH N Sold out 0.0% BAXTER INTERNATIONAL INC BAX SH N Sold out 0.0% JPMORGAN CHASE & CO JPM SH N Sold out 0.0% QUEST SOFTWARE INC QSFT SH N Sold out 0.0%
Hedge Fund Alpha 36
Jim SimonsRenaissance Tech. New Positions -Cisco (CSCO) -Duke Energy (DUK) Increased Positions -Intel (INTC) -Colgate Palmolive (CL) Reduced Positions -Eli Lilly (LLY) -McDonalds (MCD) Sold Out -Kraft (KFT) -Gilead Sciences (GILD)
Brief Discussion: Apple (AAPL) was just one of the top-name stocks that Renaissance Technologies was dumping during the third quarter. Other big names that Jim Simons's former fund was downsizing include McDonalds (MCD) and Wal-Mart Stores (WMT). Simons founded Renaissance Technologies in 1982 and now has over $15 billion of assets under management; he retired in early 2010, but still has some capital invested in the fund. The hedge funds ran by Renaissance Technologies employ various mathematical models to execute and automate trades. One of Renaissances prized funds is the Medallion Fund, which is one of the best hedge funds we have come acrossthis fund also charges above average fees due to its stellar performance5% fixed fee and a 44% performance fee. In looking through Renaissances most recent 13F filing we find that Renaissance might be seeing many of the top large-cap stocks as overvalued, but the firm is finding value in certain tech companies, such as Microsoft and Intel, and certain pharma stocks, such as Eli Lilly and Bristol-Myers Squibball four are top five holdings in Renaissances 3Q 13F. As noted, Apple was one of the top stocks RenTech was dumping during the third quarter, which ended on September 30th, having reduced its 2Q Apple stake by 60%, from 968,000 shares to 372,000. This move drops Apple from the top spot of Renaissances 13F and out of the top five. Being up over 45% year to date through 3Q, RenTech may well see Apple as having reached its peak for the time being, though the obvious tax-related play isn't out of the question either. Although the tech giant seems cheap at 12x earnings, Apple's $500+ billion market cap means growth is increasingly hard to achieve. Sales growth is expected to slow from 45% in 2012, to 25% in 2013 and then 15% in 2014. In the years prior to 2009, Apple was awarded with a higher P/E multiple, but since this time a P/E of 12x-15x has become its historical norm. We believe that RenTech sees Apple shares as having reached a near-term top with sales of its iPad mini and iPhone 5 already heavily baked into the stock. McDonalds is another big name stock, and one of the most popular restaurant stocks amongst hedge funds that RenTech has decided to reduce its position in. The fund's 2Q McDonalds position included 5.2 million shares, but its latest 13F shows a 20% share reduction to 4.1 million shares, not quite as large as its Apple sale. McDonalds, the largest fast-foot chain in the world, at 16x earnings appears cheap when compared to its top competitor Yum Brands, which trades at 21x. Unlike Yums beta of 0.9, McDonalds has a beta of 0.4 that is indicative of its geographical diversification; this indicates the company can perform irrespective of a weak economy. The fund likely sees slowing growth in Asia as a headwind, but
we see consumers' caution leading to further 'trade-down' behavior, which would obviously help McDonalds. RenTech decided that Wal-Marts run up in 2Q, putting the retailers stock up over 15% year to date through 2Q, was good enough to lock in some gains. The fund sold over 50% of the shares owned at the end of 2Q during the third quarter, taking its ownership down to 1.7 million shares. We think Wal-Mart could be a good buy based on Sam Zells outlook at the Invest for Kids Conference. Based on Zells dismal outlook for the global economy, the investment thesis for Wal-Marts is driven by its 0.3 beta and low-priced discretionary and staple products. Helping sustain growth will be Wal-Marts plan to increase square footage through next year at 3-4%, with a renewed focus on smaller formats such as Neighborhood Markets. We believe that Wal-Marts ability to continue to grow and capture market share is not fully reflected in the shares, with Wal-Mart currently trading at 15x trailing earnings and only 13x forward earnings.
Hedge 37 Fund Alpha Jim Simons-
Renaissance Tech. New Positions

Brief Discussion: Although Simons's former fund was relatively bullish on the pharma industry in 3Q, with prominent stakes in Eli Lilly and Bristol-Myers, it made a substantial sell of its Johnson & Johnson (JNJ) position. RenTech sold off over 99% of its 2Q Johnson & Johnson shares, now owning only 46,000 shares compared to a previous 6.7 million. We agree that Johnson & Johnson might be overvalued at current levels. The healthcare company got a nice boost in its stock on the news it was acquiring Synthes Inc, but it now trades at 23x earnings, above major competitors Pfizer and Merck who trade around 19x. Johnson & Johnsons current P/E is also well above its historical P/E of 15x. Assuming valuation levels come more in line, Johnson & Johnson would be a company worth considering, with a strong R&D pipeline and growing medical device and consumer products offerings. Google (GOOG), much like the Apple selloff, was a large downsize for RenTech. In the third quarter, the fund sold off over 70% of its shares and now owns only 95,000, compared to 349,000 at the end of 2Q. If the fund's behavior is any indication, management likely holds our concerns of Googles slowing revenue growth and Motorolas continued drag on
-Cisco (CSCO) -Duke Energy (DUK)

earnings. The search company is trading in line on a historical P/E basis, but overall growth is the larger concern. Google grew earnings 21% annually over the last five years, but is only expected to growth EPS by 13% over the next half-decade. Notable headwinds include a rising cost of traffic acquisition and narrowing margins, both at Motorola and the overall lower ad margins received from mobile. While we agree with many of RenTech's moves to take some gains in what look to be Increased Positions decently valued companies, we believe that investors can still find solace in a couple of its selloffs. It appears that Apple, Johnson & Johnson and Google may be better off in -Intel (INTC) -Colgate Palmolive (CL) someone else's portfolio, but two stocks we like given their defensive nature and industry leading positions are McDonalds and Wal-Mart. McDonalds still appears to be cheap and also pays a 3.5% dividend yield. Wal-Mart is also another company we still see value in given its geographical diversification and 2.2% dividend yield. Check out all of RenTech's 13F portfolio holdings.
Reduced Positions -Eli Lilly (LLY) -McDonalds (MCD) Sold Out -Kraft (KFT) -Gilead Sciences (GILD)
Hedge 38
Fund Alpha Jim Simons Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio MICROSOFT CORP MSFT SH N 478,025 2% 1.5% LILLY ELI & CO LLY SH N 431,640 18% 1.3% INTEL CORP INTC SH N 423,501 10% 1.3% BRISTOL MYERS SQUIBB CO BMY SH N 422,722 -6% 1.3% MCDONALDS CORP MCD SH N 379,606 -20% 1.2% PHILIP MORRIS INTERNATIONAL INC PM SH N 318,253 -8% 1.0% NOVO NORDISK A S NVO SH N 317,277 14% 1.0% COLGATE PALMOLIVE CO CL SH N 291,403 20% 0.9% CISCO SYSTEMS INC CSCO SH N 261,158 New 0.8% APPLE INC AAPL SH N 248,566 -62% 0.8% MASTERCARD INC MA SH N 247,501 19% 0.8% LINEAR TECHNOLOGY CORP LLTC SH N 241,227 23% 0.7% VODAFONE GROUP PLC NEW VOD SH N 231,131 -4% 0.7% WHOLE FOODS MARKET INC WFM SH N 201,138 64% 0.6% LORILLARD INC LO SH N 193,016 -16% 0.6% COMPANHIA DE BEBIDAS DAS AMERS ABV SH N 183,809 -13% 0.6% MONSTER BEVERAGE CORP MNST SH N 180,825 18% 0.6% UNITED PARCEL SERVICE INC UPS SH N 179,261 62% 0.6% AUTOZONE INC AZO SH N 178,698 66% 0.5% HUMANA INC HUM SH N 176,722 14% 0.5% TAIWAN SEMICONDUCTOR MFG CO LTD TSM SH N 175,242 14% 0.5% DIRECTV DTV SH N 172,601 66% 0.5% LAUDER ESTEE COS INC EL SH N 157,330 35% 0.5% NETEASE COM INC NTES SH N 156,872 1% 0.5% DOLLAR TREE INC DLTR SH N 156,215 17% 0.5% PANERA BREAD CO PNRA SH N 148,946 -1% 0.5% ACCENTURE LTD IRELAND ACN SH N 148,331 28% 0.5% TYCO INTERNATIONAL LTD SWTZLND TYC SH N 147,901 1312% 0.5% CHIPOTLE MEXICAN GRILL INC CMG SH N 147,878 -23% 0.5% ANALOG DEVICES INC ADI SH N 145,692 3% 0.4% LINKEDIN CORP LNKD SH N 144,468 201% 0.4% C F INDUSTRIES HOLDINGS INC CF SH N 143,734 41% 0.4% HERSHEY CO HSY SH N 141,177 16% 0.4% FAMILY DOLLAR STORES INC FDO SH N 137,035 25% 0.4% KRAFT FOODS INC KFT SH N Sold out 0.0% GILEAD SCIENCES INC GILD SH N Sold out 0.0% DUKE ENERGY CORP NEW DUK SH N Sold out 0.0% PEPSICO INC PEP SH N Sold out 0.0% CUMMINS INC CMI SH N Sold out 0.0%
Hedge Fund Alpha 39
James DinanYork Capital Man. New Positions -Yahoo (YHOO) -General Grown Properties (GGP) Increased Positions -AIG (AIG) -Constellation Brands -(STZ) Reduced Positions -Bank of America (BAC) -Tyco (TYC) Sold Out -Dollar Thrifty (DTG) -Goodrich (GR)
Brief Discussion:
James Dinan is one of the hedge fund industry's best success stories, rising to be one of its highest paid earners after losing it all on one black Monday morning in 1987. An MBA graduate from Harvard Business School, Dinan started his career at Donaldson, Lufkin & Jenrette, working as an investment banker until 1983, before moving to merger arbitrage at Kellner DiLeo & Co. On what is now known as Black Monday, Dinan lost the entirety of his moderately sized fortune due to highly leveraged bets that lost, but he came back stronger than ever, founding his own investment management firm in 1991. Originally started with a mere $3.6 million, York Capital Management now manages close to $15 billion, and Dinan himself has accumulated a net worth of $1.4 billion. York Capital manages a diverse portfolio of investments, as evident that its domestic equity portion only makes up a quarter of its total holdings, according to 13F filings with the SEC. In the third quarter particularly, Dinan made a few surprising moves, including dumping his entire position in Dollar Thrifty Automotive (DTG), while cutting his stake in the tech giant Apple (AAPL). He wasn't all bearish though, as the fund manager did up his stakes in Hertz (HTZ), Kinder Morgan (KMI), and American International Group (AIG). Dumping Dollar Thrifty for Hertz. At the end of June, Dollar Thrifty was Dinan's top stock pick, amounting to nearly $430 million. As we mentioned a couple of months ago, Dinan's fund filed a 13G with the SEC just two weeks prior to the close of the third quarter, reducing his stake in the car rental company from 11.3% to 7.9%. In its latest 13F, York Capital curiously did not report a position in Dollar Thrifty, indicating that the fund had closed out its holdings entirely. In a downward move most likely related to Dinan's sale, shares of Thrifty stock took quite a dive at the end of Q3, falling by nearly 13% between October 25th and November 5th. York Capital sold its stake just weeks before the company was officially acquired by Hertz for $2.6 billion. In a deal that was originally shunned by antitrust regulators, Hertz will now assume control of Thrifty's airport service business, though it will be forced to sell 62 Advantage brand outlets to maintain competitive balance. On the whole, the move makes Hertz the car rental industry's second largest player, and will allow it to balance its premium rental options with the budget-focused portfolio that Dollar Thrifty provided.
Hertz's management has stated that it expects to save at least $160 million from the purchase of Thrifty by the end of 2013, and sell-side analysts are even more bullish, expecting earnings to average growth of 38.5% a year over the next half-decade. With a forward P/E below ten and a PEG close to 0.5, it's apparent that now may be a great time to get into Hertz post-merger, and it appears that Dinan agrees. Despite the fact that he sold Thrifty, the hedge fund manager did increase his position in the acquisitor by 3.6% last quarter, and now holds nearly $180 million worth of the stock. With the move, Hertz now slides nicely into York Capital's top five. Apple, the bear. Dinan was also bearish on Apple in the third quarter, electing to downsize his position in the tech giant by 37.2%. Over the past two months, shares of the company have lost more than 20%, as it seems that they just can't catch a break. While the value-hunters will focus on Apple's attractive multiples, including its forward P/E below nine and its favorable earnings growth valuation, this strategy hasn't worked too well recently.
Hedge 40 Fund Alpha James Dinan-
York Capital Man. New Positions
Brief Discussion:
Upcoming events that may have the markets feeling a bit better include: (1) a late- November release of iTunes 11 with Facebook integration, (2) a deal with China Mobile to sell the iPhone 5S to the carrier's 700 million subscribers, and (3) a positive earnings surprise in the first quarter, in which the Street is predicting $13.55 in earnings per share. From Canaccord Genuity to UBS, the majority of analysts still expect positive appreciation out of Apple in the intermediate term, each with a price target in the $650 to $790 range. When considering the growth drivers mentioned above, investors should look toward a China Mobile deal as the most bullish, followed by a Q1 outperformance. Now, long term earnings growth is expected to slow considerably over the next few years, with forecasts of 20%-21% that are far below Apple's historical five-year average (62.2%), but it's hard to ignore the blatant value play; it just needs a bit of a push, that's all. AIG is rolling. Dinan saw the third quarter a good time to buy into AIG, and he was not alone. In the funds we track, interest in the insurer increased by 80%, with 110 funds holding long positions at the end of Q3. Aside from the U.S. Treasury's latest sale that
-Yahoo (YHOO) -General Grown

pushed ownership down to 22% and moved its bailout into profitable territory, AIG has been in investors' good graces because of an exemplary financial performance last quarter. With earnings of $1.00 per share, Wall Street's earnings consensus was beaten Properties (GGP) by double-digits, and even better, AIG reported that Hurricane Sandy would not have a material impact on its bottom line next quarter. Fears over the superstorm pushed shares down a bit in late last month, and they still Increased Positions trade more than 15% below their all-time high of $37.67 in October. At a discount of nearly 50% in to its historical book value and an equally depressed forward earnings -AIG (AIG) -Constellation Brands -(STZ) multiple, there's not much to hate about AIG. The company is now a leaner insurer post- recession, and more share repurchases in proposal only sweeten the stock. AIG still faces risk from an over-dependence on property/casualty insurance which opens it up to more catastrophic losses.
Reduced Positions
Kinder Morgan, the bull. Dinan upped his stake in the natural gas utility company Kinder Morgan by more than 25% last quarter. Kinder Morgan completed its acquisition of El
-Bank of America (BAC) -Tyco (TYC)

Paso, a natural gas transporter, in August, and expects the move to boost long term growth while allowing it to expand its pipeline system extensively. The acquisition should improve cash flows from this segment by more than 50% over the next few years, and management forecasts initial synergies of at least $400 million. Additionally, a sale of El Paso's E&P business has given Kinder Morgan the ability to Sold Out "drop-down" these assets to Kinder Morgan Energy Partners and El Paso Pipeline Partners, two MLPs, while it avoids corporate taxation. -Dollar Thrifty (DTG) -Goodrich (GR)
Aside from Kinder Morgan, we like both master limited partnerships, as each sports an EV/EBITDA ratio below 14.o. At a sub-1.0 PEG, Kinder Morgan also offers investors value, despite the fact that it is expected to grow its bottom line by 33.6% a year over the next half-decade.
Hedge 41
Fund Alpha James Dinans Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio AMERICAN INTERNATIONAL GROUP INC AIG SH N 264,316 398% 8.1% GENERAL MOTORS CO GM SH CALL 200,557 -4% 6.2% YAHOO INC YHOO SH N 182,074 New 5.6% HERTZ GLOBAL HOLDINGS INC HTZ SH N 178,948 4% 5.5% GENERAL GROWTH PPTYS INC NEW GGP SH N 143,316 New 4.4% ISHARES TRUST IWM SH PUT 134,338 4% 4.1% DUN & BRADSTREET CORP DEL NEW DNB SH N 99,814 New 3.1% REGIONS FINANCIAL CORP NEW RF SH N 96,718 41% 3.0% VMWARE INC VMW SH PUT 82,819 New 2.5% MANITOWOC CO INC MTW SH N 82,057 -7% 2.5% TYCO INTERNATIONAL LTD SWTZLND TYC SH N 80,856 -47% 2.5% CONSTELLATION BRANDS INC STZ SH N 79,473 807% 2.4% METROPCS COMMUNICATIONS INC PCS SH N 72,844 New 2.2% NEXEN INC NXY SH N 69,048 New 2.1% CORRECTIONS CORP AMERICA NEW CXW SH N 65,040 13% 2.0% LIBERTY MEDIA CORP LMCA SH N 64,119 New 2.0% UNITED RENTALS INC URI SH N 62,698 -55% 1.9% ROCKWELL AUTOMATION INC ROK SH N 58,465 New 1.8% BEAM INC BEAM SH N 56,258 7% 1.7% KRAFT FOODS INC KFT SH N 55,158 New 1.7% AETNA INC NEW AET SH N 53,321 New 1.6% RADWARE LTD RDWR SH N 52,619 -28% 1.6% VISTEON CORP VC SH N 51,441 New 1.6% FORD MOTOR CO DEL F SH CALL 49,300 0% 1.5% CHEMTURA CORP CHMT SH N 48,105 -12% 1.5% FORTUNE BRANDS HOME & SECUR INC FBHS SH N 47,048 -26% 1.4% FIFTH & PAC COS INC FNP SH N 47,048 -7% 1.4% BROOKDALE SENIOR LIVING INC BKD SH N 45,396 New 1.4% CELANESE CORP DEL CE SH N 41,495 New 1.3% APPLE INC AAPL SH N 40,005 -37% 1.2% TURQUOISE HILL RES LTD TRQ SH N 39,702 New 1.2% SPRINT NEXTEL CORP S SH N 37,399 New 1.1% CITIGROUP INC C SH CALL 34,588 -13% 1.1% BANK OF AMERICA CORP BAC SH CALL 32,824 -84% 1.0% GILAT SATELLITE NETWORKS LTD GILT SH N 32,324 0% 1.0% DOLLAR THRIFTY AUTOMOTIVE GRP IN DTG SH N Sold out 0.0% GOODRICH CORP GR SH N Sold out 0.0% SPDR S & P 500 E T F TRUST SPY SH CALL Sold out 0.0% HUMAN GENOME SCIENCES INC HGSI SH N Sold out 0.0%
Hedge Fund Alpha 42
George Soros Soros Fund Man. New Positions -AIG (AIG) -Pioneer Natural Resources (PXD) Increased Positions -General Electric (GE) -Lucent (ALU) Reduced Positions -Wal-Mart (WMT) -Sandisk (SNDK) Sold Out -Comverse (CMVT) -Clorox (CLX)
Brief Discussion: George Soros is best known for the fortune he made shorting the British pound in 1992, but he currently invests a considerable amount of money in equities and so is required to report many of his long positions in 13F filings. Weve gone through the 13F for the third quarter of the year and compared Soross holdings at the end of September to three months earlier. Read on for our impression of his moves and compare them to what he's bought and sold before. AIG. American International Group (AIG) became Soross largest 13F equity holding during the third quarter with a position of over 15 million shares being reported in the filing. A number of value investors have been getting into the insurer over the course of the year, and at a P/B ratio of 0.5 it certainly looks cheap compared to the book value of its equity. We also like its earnings multiples- it trades at 9 times forward earnings estimates- and revenue was up strongly in the third quarter compared to the same period in 2011. Fellow billionaire Dan Loeb had initiated a position during the second quarter of 2012 and we think that it still looks like a good buy for investors. Selling Walmart. Wal-Mart Stores (WMT) had been Soross top stock last quarter, but between July and September he sold about half of his shares in the discount retailer. Wal- Mart reported only modest growth in its most recent quarter compared to the same period in the previous year, but given its massive size and its limited exposure to broader market conditions (the beta is 0.4) we think thats a fairly good result. Limited growth also indicates that Wal-Mart isnt seeing too much competitive pressure from dollar stores. The stock trades at only 14 times trailing earnings and we actually think that its one of the better buys in the retail industry. Warren Buffett is a major Wal-Mart shareholder. Selling Westport. The near-closing of the position in Westport Innovations (WPRT) could be name specific or part of a broader move away from auto parts. Westport provides low- emission engines that run on natural gas and other relatively clean fuels, so theres company specific factors as well as broader industry demand driving the stock. The market cap is currently $1.4 billion even though Westport is expected to be unprofitable both this year and next year. With the business struggling recently, and quite heavy short interest (27% of outstanding shares held short) we think the stock should be avoided. Megacap dividends. Soros may have sold some shares of Wal-Mart, but its still one of his six largest 13F equity positions along with an increased stake in General Electric Company (GE) and a large increase in his holdings of Johnson & Johnson (JNJ). These latter two stocks pay dividend yields above 3% at current prices, and have market caps of about $200 billion. They also both got mid-single digit growth rates in revenue last quarter versus a year earlier, though higher costs at Johnson & Johnson had driven that companys net income down somewhat. Their forward earnings multiples are in the 12-13 range,
which along with the dividend yield indicates value potential, though in Johnson & Johnsons case these forward estimates represent expectations of high earnings growth. Were less sure about that stock, though GE could merit a closer look. We think that Soross moves in AIG and Westport make perfect sense. Selling Wal-Mart is a bit harder to understand as we like the company and think that it offers a good opportunity in retail- many general retail stores trade at considerably higher earnings multiples, and many specialty big-box stores such as Best Buy are proving less able to compete with Amazon. We dont think owners of Wal-Mart should be selling.
Hedge 43
Fund Alpha George Soros Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio MICRON TECHNOLOGY INC MU PRN N 813,118 0% 8.8% LUCENT TECHNOLOGIES INC. 549463 PRN N 536,170 40% 5.8% AMERICAN INTERNATIONAL GROUP INC AIG SH N 499,092 New 5.4% ADECOAGRO S A AGRO SH N 260,671 2% 2.8% WEBMD HEALTH CORP WBMD PRN N 258,565 0% 2.8% DIGITAL RIVER INC DRIV PRN N 243,444 8% 2.6% GENERAL ELECTRIC CO GE SH N 237,272 22% 2.6% SPDR GOLD TRUST GLD SH N 227,135 49% 2.5% CIENA CORP CIEN PRN N 204,422 0% 2.2% NETAPP INC NTAP SH N 198,103 35% 2.1% WAL MART STORES INC WMT SH N 183,594 -49% 2.0% JOHNSON & JOHNSON JNJ SH N 177,017 1557% 1.9% C F INDUSTRIES HOLDINGS INC CF SH N 171,155 992% 1.8% ROVI CORP ROVI PRN N 161,187 86% 1.7% J D S UNIPHASE CORP JDSU PRN N 153,578 -37% 1.7% CHARTER COMMUNICATIONS INC CHTR SH N 150,969 7% 1.6% HOLOGIC INC HOLX PRN N 150,213 28% 1.6% PIONEER NATURAL RESOURCES CO PXD SH N 145,767 New 1.6% MOTOROLA SOLUTIONS INC MSI SH N 144,319 19% 1.6% GOOGLE INC GOOG SH N 142,884 New 1.5% LINKEDIN CORP LNKD SH N 141,470 New 1.5% EXPRESS SCRIPTS INC ESRX SH N 135,782 62% 1.5% WALGREEN CO WAG SH N 132,288 New 1.4% QUANTUM CORP QTM PRN N 127,051 0% 1.4% MARKET VECTORS E T F TRUST GDX SH N 124,876 133% 1.3% DISH NETWORK CORPORATION DISH SH N 122,099 -10% 1.3% SPDR S & P 500 E T F TRUST SPY SH PUT 121,909 1% 1.3% SUNTRUST BANKS INC STI SH N 114,239 71% 1.2% ACACIA RESEARCH CORP ACTG SH N 107,256 21% 1.2% ORBITAL SCIENCES CORP ORB PRN N 98,250 -19% 1.1% PEABODY ENERGY CORP BTU SH N 98,076 New 1.1% SHUTTERFLY INC SFLY SH N 94,813 21% 1.0% GENERAL MOTORS CO GM SH N 93,555 308% 1.0% WEBMD HEALTH CORP WBMD PRN N 88,676 New 1.0% SANDISK CORP SNDK PRN N 83,193 -69% 0.9% MOLYCORP INC MCP SH N 920 New 0.0% COMVERSE TECHNOLOGY INC CMVT SH N Sold out 0.0% CLOROX CO CLX SH N Sold out 0.0% R F MICRO DEVICES INC RFMD PRN N Sold out 0.0%
Hedge Fund Alpha 44
David TepperAppaloosa Man. New Positions -AIG (AIG) -JP Morgan Chase (JPM) Increased Positions -Citigroup (C) -Goodyear (GT) Reduced Positions -Powershares (QQQ) -Google (GOOG) Sold Out -Royal Bank Scotland (RBS) -Nuance (NUAN)
Brief Discussion: Appaloosa Management is a value hedge fund managed by billionaire David Tepper whose name might sound familiar to any recent attendees of Carnegie Mellons Tepper School of Business. The fund has an estimated $16 billion under management. We have gone through Appaloosas 13F for the third quarter of 2012 and picked out a few of the funds investment themes. Read on for our discussion and compare Appaloosa's picks to previous filings. AIG. American International Group (AIG) was Appaloosas largest new position in the third quarter, with the fund reporting a position of 8.3 million shares. AIG had been a frequent buy among hedge funds during the second quarter, including fellow billionaire Dan Loeb's Third Point, and even after rising 27% year to date AIG trades at about half the book value of its equity. The business is showing signs of improvement, with revenue rising rapidly last quarter compared to the third quarter of 2011, and it trades at 9 times forward earnings estimates. With much of the market still showing poor sentiment against the company, we think it could be a good value stock. Airlines. The fund had bought shares of United Continental, US Airways Group (LCC), and Delta Air Lines (DAL) during the second quarter and added shares of each of those stocks during the third quarter as well. Investors typically fear investing in airlines because of the relatively high bankruptcy risk- many major airlines have declared bankruptcy at some point in the last 20 years- but weve been interested in the airlines as value stocks for some time because of their cheap valuations. The forward P/E multiples of these three airlines are in the 4-5 range, with Delta and US Airways having trailing P/Es in that range. Since Wall Street analysts expect considerable growth over the next several years, these stocks have very low five-year PEG ratios. The industry should drive somewhat low multiples, but the possibility that US Airways will take over American Airlines should also reduce competition and allow for prices to be raised. Wed avoid United Continental, specifically, because its business has not been doing as well recently but we like the other two airlines as value plays. Autos. Appaloosa increased its positions in General Motors Company (GM) and The Goodyear Tire & Rubber Company (GT), which had also been among its largest positions at the end of June. GM has become a trendy value stock over the past few months, with billionaire David Einhorn of Greenlight Capital presenting it as a long pick at Octobers Value Investing Congress (our analysis of Greenlights own 13F showed that fund buying shares during the third quarter). The automakers multiples certainly look good- it trades at 9 times trailing earnings- but its peers have P/Es in that same range or only slightly higher, and to put it bluntly they have better brand names than Government Motors does. With GMs earnings actually slipping in the third quarter versus a year earlier, we think that hedge funds like Appaloosa should be looking elsewhere. To Tepper and his teams credit, theyve done that by also
owning Goodyear. This is a risky stock with high debt loads and pension obligations, and its business was down last quarter compared to Q3 2011, but it trades at only 5 times consensus earnings for 2013 and carries a five-year PEG ratio of 0.2. Itll probably underperform analyst expectations, but would have to see extremely poor performance in order to prove overvalued at current prices. We think it matches up well with auto parts companies and other alternative ways to play an auto thesis. For the most part Appaloosa looks like it has picked out some good value stocks- major airlines and AIG look like good buys for investors. Were less certain of how its playing a recovery in the auto industry, and while we can see an argument for Goodyear wed prefer to own automakers other than GM.
Hedge 45
Fund Alpha David Teppers Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio POWERSHARES QQQ TRUST QQQ SH N 442,285 -23% 11.0% APPLE INC AAPL SH N 347,768 1% 8.7% CITIGROUP INC C SH N 333,566 10% 8.3% AMERICAN INTERNATIONAL GROUP INC AIG SH N 270,518 New 6.7% UNITED CONTINENTAL HOLDINGS INC UAL SH N 191,470 4% 4.8% GOODYEAR TIRE & RUBBER CO GT SH N 174,484 27% 4.3% GOOGLE INC GOOG SH N 147,128 -12% 3.7% QUALCOMM INC QCOM SH N 144,026 0% 3.6% U S AIRWAYS GROUP INC NEW LCC SH N 142,293 5% 3.5% GENERAL MOTORS CO GM SH N 135,417 26% 3.4% BROADCOM CORP BRCM SH N 123,175 43% 3.1% HUNTSMAN CORP HUN SH N 118,231 25% 2.9% FORD MOTOR CO DEL F SH N 114,563 52% 2.8% JPMORGAN CHASE & CO JPM SH N 97,038 New 2.4% DELTA AIR LINES INC DAL SH N 95,042 9% 2.4% ORACLE CORP ORCL SH N 87,206 -11% 2.2% OWENS CORNING NEW OC SH N 81,070 7% 2.0% MASCO CORP MAS SH N 79,509 38% 2.0% E M C CORP MA EMC SH N 76,363 3% 1.9% M G M RESORTS INTERNATIONAL MGM SH N 74,085 244% 1.8% HARTFORD FINANCIAL SVCS GRP INC HIG SH N 70,230 237% 1.7% WHIRLPOOL CORP WHR SH N 53,741 -8% 1.3% FUSION I O INC FIO SH N 47,251 10% 1.2% MUELLER WATER PRODUCTS INC MWA SH N 44,011 0% 1.1% DEAN FOODS CO NEW DF SH N 36,251 -8% 0.9% MARVELL TECHNOLOGY GROUP LTD MRVL SH N 35,354 63% 0.9% MICROSOFT CORP MSFT SH N 33,622 0% 0.8% TWO HARBORS INVESTMENT CORP TWO SH N 31,843 0% 0.8% SEALED AIR CORP NEW SEE SH N 31,727 New 0.8% CALUMET SPECIALTY PRODS PTNRS LP CLMT SH N 30,326 -20% 0.8% NETAPP INC NTAP SH N 29,605 16% 0.7% SANDISK CORP SNDK SH N 29,047 0% 0.7% CHIMERA INVESTMENT CORP CIM SH N 28,142 160% 0.7% LAM RESH CORP LRCX SH N 27,204 97% 0.7% VALERO ENERGY CORP NEW VLO SH N 26,697 -63% 0.7% BEAZER HOMES USA INC BZH SH N 25,121 2679% 0.6% BANK OF AMERICA CORP BAC SH N 24,344 -29% 0.6% ROYAL BANK SCOTLAND GROUP PLC RBS SH N Sold out 0.0% SPDR S & P 500 ETF TRUST SPY SH N Sold out 0.0%
Hedge Fund Alpha 46
David EinhornGreenlight Capital New Positions -Yahoo (YHOO) -Babcock & Wilcox (BWC) Increased Positions -General Motors (GM) -Marvell (MRVL) Reduced Positions -Apple (AAPL) -Seagate (STX) Sold Out -Microsoft Calls (MSFT) -United Health(UNH)
Brief Discussion:
Taking profits. During the third quarter of the year, Apple Inc. (AAPL) was up nearly 15% while Seagate Technology PLC (STX) rose over 20% (the NASDAQ was up only about 6%). This brought both Apple and Seagate to gains of over 60% for 2012. Einhorn and his team apparently decided to start selling shares during the third quarter, and while these are still Greenlights largest positions the number of shares that the fund owns fell by over a third in both cases. We think that Apple is a buy at current prices, though the stock has fallen over 15% in the last month in a half as more Apple longs likely follow Greenlights lead ahead of the potential expiration of tax cuts on capital gains at the end of the year. At current prices, it trades at only 13 times trailing earnings (read more of our thinking on Apple). Seagate, along with many other data storage companies, continues to look very cheap: its trailing P/E is only 4, the forward P/E is 5, and earnings growth compared to a year ago has been very strong. We think it looks like a good buy as well. GM. One of Einhorns stock picks at the Value Investing Congress in early October was General Motors Company (GM) and hed put his money there during the third quarter with a substantial increase in Greenlights holdings of the automaker. See Einhorn's case for being long GM. Poor European numbers continue to drag GM down despite good performance in North America, and earnings were actually lower in the third quarter than in Q3 2011- not good for the supposedly recovering automaker. Its trailing P/E of 9 is attractive, but we think that investors should look at other auto companies, or possibly auto parts manufacturers, if they want exposure to the industry. Technology. Weve already mentioned Apple and Seagate as two of Einhorns favorite stocks. Three other tech companies joined those two in Greenlights eight largest long positions by market value: Microsoft, and two stocks that the fund had bought heavily over the course of the quarter. Its stake in Marvell Technology Group Ltd. (MRVL) grew from 26 million shares to 33 million; Marvell, a producer of integrated circuits, has been a big loser for Greenlight year to date with the stock price down 47% (including 20% since the beginning of October). So you can get it cheaper than Einhorn did, and at 9 times earnings on either a trailing or a forward basis. However, earnings dropped 52% in the quarter ending in July 2012 versus a year earlier and we think that wed avoid the stock. Greenlight also nearly doubled its stake in Computer Sciences Corporation (CSC), a $5.4 billion market cap IT services company, to a total of 6.9 million shares. Computer Sciences is expected to see $2.56 in earnings per share for the current fiscal year ending in March 2013 (an implied current-year P/E of 14) though it
actually saw a small decrease in sales in its most recent quarter compared to the same period in the previous year. We wouldnt recommend buying it either. Greenlights sales of Apple and Seagate might be good advice for current owners currently looking at big paper gains, but we think that the correction in both stocks has created a good value opportunity for investors to get in. The funds big buys dont look as appealing to us, with likely better opportunities in the auto theme than GM. The other technology plays face serious problems in their businesses- though, with decent multiples, it might be good to keep an eye on Marvell and Computer Sciences to see if they can stabilize.
Hedge 47
Fund Alpha David Einhorns Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio APPLE INC AAPL SH N 727,907 -25% 12.1% SEAGATE TECHNOLOGY STX SH N 514,232 -28% 8.6% GENERAL MOTORS CO GM SH N 490,992 24% 8.2% CIGNA CORP CI SH N 334,992 10% 5.6% MARKET VECTORS E T F TRUST GDX SH N 322,527 0% 5.4% MARVELL TECHNOLOGY GROUP LTD MRVL SH N 299,483 28% 5.0% DELPHI AUTOMOTIVE PLC DLPH SH N 252,497 1% 4.2% MICROSOFT CORP MSFT SH N 228,201 0% 3.8% COMPUTER SCIENCES CORP CSC SH N 221,162 90% 3.7% E N S C O PLC ESV SH N 207,092 0% 3.5% N C R CORP NEW NCR SH N 192,769 0% 3.2% XEROX CORP XRX SH N 190,820 0% 3.2% EINSTEIN NOAH RESTAURANT GRP INC BAGL SH N 189,875 0% 3.2% AETNA INC NEW AET SH N 174,092 39% 2.9% C B S CORP NEW CBS SH N 157,260 0% 2.6% VIRGIN MEDIA INC VMED SH N 144,844 0% 2.4% SPRINT NEXTEL CORP S SH N 144,506 -64% 2.4% ASPEN INSURANCE HOLDINGS LTD AHL SH N 123,168 0% 2.1% COVENTRY HEALTH CARE INC CVH SH N 119,149 -57% 2.0% D S T SYSTEMS INC DEL DST SH N 113,615 8% 1.9% LIBERTY MEDIA CORP LMCA SH N 101,221 0% 1.7% HUNTINGTON INGALLS INDS INC HII SH N 89,979 -16% 1.5% LEGG MASON INC LM SH N 83,145 0% 1.4% BARRICK GOLD CORP ABX SH N 82,163 0% 1.4% YAHOO INC YHOO SH N 80,699 New 1.3% OAKTREE CAP GROUP LLC OAK SH N 75,925 0% 1.3% WELLPOINT INC WLP SH N 55,584 -50% 0.9% HUMANA INC HUM SH N 54,563 -53% 0.9% N V R INC NVR SH N 54,090 0% 0.9% STATE BANK FINANCIAL CORP STBZ SH N 34,629 0% 0.6% FIFTH STREET FINANCE CORP FSC SH N 21,946 0% 0.4% BABCOCK & WILCOX CO NEW BWC SH N 21,915 New 0.4% A E C O M TECHNOLOGY CORP ACM SH N 16,561 New 0.3% CHIPOTLE MEXICAN GRILL INC CMG SH PUT 15,877 0% 0.3% MICROSOFT CORP MSFT SH CALL Sold out 0.0% UNITEDHEALTH GROUP INC UNH SH N Sold out 0.0% CAREFUSION CORP CFN SH N Sold out 0.0% HESS CORP HES SH N Sold out 0.0% EXPEDIA INC EXPE SH N Sold out 0.0%
Hedge Fund Alpha 48
Dan LoebThird Point New Positions -Murphy Oil (MUR) -Kraft Foods (KFT) Increased Positions -Apple (AAPL) -AIG (AIG) Reduced Positions -Delphi (DLPH) -Cabot Oil (COG) Sold Out -News Corp (NWSA) -Capital One (COF)
Brief Discussion:
Apple Inc (AAPL) is a hedge fund favorite, but many managers have showed less confidence in the tech giant as of late. Interestingly, one notable investor was quite bullish on the stock last quarter. Enter Dan Loeb. Loeb, founder and manager of New York-based hedge fund Third Point, is one of the wealthiest investors we track. Loeb is the infamous activist investor involved in the executive drama at Yahoo! Inc. (YHOO), where he successfully removed Scott Thompson from his post as CEO in May. Loeb was also instrumental in the hiring of Marissa Mayer, and has led similar campaigns at InterCept, Penn Virginia, Nabi Biopharmaceuticals, Horizon Natural Resources, and Western Gas Resources, to name a few. While individual investors may think it foolhardy to attempt to follow the likes of Loeb in today's markets, our studies have shown that those who mimic or "monkey," the world's best fund managers can beat the markets by up to seven percentage points a year. Loeb has a track record that includes year-end returns between 30%-40% as recently as 2009 and 2010. As you can see by looking at Loeb's entire 13F portfolio, the hedge fund manager has a penchant for tech stocks; Yahoo and Apple combine to make up more than 40% of his holdings, which totaled $3.27 billion at the midway point of 2012. Yahoo accounted for $1.1 billion of the Third Point's 13F portfolio in the second quarter. The position in the tech giant increased 3.5% last quarter. Third Point now holds a little over 73 million shares of Yahoo, worth $1.3 billion. Third Point now holds more than 6% of Yahoo's outstanding shares, which have performed quite well over the past month, unlike those of Apple. After trading between $15 and $16 a share for much of 2012, Yahoo's stock price has recently broken out above this range, and now flirts with $18 a share. The major catalyst for this bullish performance was the company's impressive third quarter financials, in which it beat the Street's revenue and earnings forecasts. The key number was an adjusted EPS of 35 cents, versus consensus of 26 cents a share. Sell-side analysts now expect Yahoo to generate earnings growth of 11.7% a year over the next half-decade, compared to the 9.6% clip it has experienced since 2006. Despite the potential for accelerated EPS growth, shares of Yahoo still trade at a bargain bin P/E of 5.4X and a PEG of 0.46. Loeb also holds quite a bit of Apple in his fund, and despite drawing the ire of many big time managers, the position was increased last quarter. After holding 425,000 shares in Q2, Loeb reported a 710,000 share position in Q3, an increase of more than 67%. Apple has lost more than 23% of its market value over the past two months, after fourth quarter earnings largely disappointed Wall Street's expectations. Despite his upped stakes in Apple and Yahoo, Loeb wasn't an outright bull in the third quarter. The hedge fund manager downsized his position in Delphi Automotive (DLPH), and sold off his entire holdings of J.C. Penney (JCP) and DISH Network (DISH). Delphi Automotive, the large cap auto parts manufacturer, has returned nearly 50% in 2012 alone, on the back of increased demand for its electronics products in the Far East.
JC Penney and DISH Network, two stocks that Loeb sold off, have had vastly different experiences in 2012. The former, which appointed former Apple executive Ron Johnson as CEO in the summer of last year, is attempting quite the transformation. DISH Network, meanwhile, was the fifteenth largest holding in Loeb's portfolio at the end of the second quarter, as the hedge fund manager held more than $57 million of stock in the pay-tv company. DISH has experienced solid appreciation in 2012, gaining more than 20% since the start of the year, but did post disappointing third quarter earnings earlier this month. To recap: if you're looking to monkey Dan Loeb's latest 13F, your best play might be to make similar 'confidence bets' in Apple and Yahoo, though it'd be smart to ignore any contrarian desires when considering JC Penney or DISH. Delphi, meanwhile, did cut next quarter's guidance, but the auto parts company is still expected to generate solid earnings growth at an attractive valuation. This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge 49
Fund Alpha Dan Loebs Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio YAHOO INC YHOO SH N 1,166,181 4% 23.0% AMERICAN INTERNATIONAL GROUP INC AIG SH N 770,565 944% 15.2% APPLE INC AAPL SH N 473,645 67% 9.3% DELPHI AUTOMOTIVE PLC DLPH SH N 310,000 -13% 6.1% MURPHY OIL CORP MUR SH N 260,450 New 5.1% KRAFT FOODS INC KFT SH N 206,750 New 4.1% LYONDELLBASELL INDUSTRIES N V LYB SH N 129,150 92% 2.5% NEXEN INC NXY SH N 126,700 New 2.5% UNITED TECHNOLOGIES CORP UTX SH N 125,264 3% 2.5% UNITEDHEALTH GROUP INC UNH SH N 110,820 11% 2.2% SYMANTEC CORP SYMC SH N 107,850 New 2.1% WESCO INTERNATIONAL INC WCC SH N 97,183 New 1.9% LIBERTY GLOBAL INC LBTYA SH N 94,162 19% 1.9% HILLSHIRE BRANDS CO HSH SH N 87,035 729% 1.7% AUTODESK INC ADSK SH N 83,375 New 1.6% CABOT OIL & GAS CORP COG SH N 78,575 -13% 1.6% COCA COLA ENTERPRISES INC NEW CCE SH N 78,175 -9% 1.5% CONSTELLATION BRANDS INC STZ SH N 74,405 360% 1.5% WELLPOINT INC WLP SH N 72,512 47% 1.4% LIBERTY GLOBAL INC LBTYK SH N 70,641 25% 1.4% SENSATA TECHNOLOGIES HOLDING N V ST SH N 52,098 15% 1.0% WESTLAKE CHEMICAL CORP WLK SH N 51,142 40% 1.0% WEATHERFORD INTL LTD NEW WFT SH N 50,720 8% 1.0% FOSTER WHEELER AG FWLT SH N 47,920 New 0.9% NEWELL RUBBERMAID INC NWL SH N 47,725 108% 0.9% N X P SEMICONDUCTORS N V NXPI SH N 46,269 New 0.9% BIOMARIN PHARMACEUTICAL INC BMRN SH N 40,260 New 0.8% VERTEX PHARMACEUTICALS INC VRTX SH N 39,123 40% 0.8% CIGNA CORP CI SH N 37,453 -53% 0.7% ARIAD PHARMACEUTICALS INC ARIA SH N 32,684 -36% 0.6% ENPHASE ENERGY INC ENPH SH N 30,823 0% 0.6% SPDR GOLD TRUST GLD SH N 22,346 -10% 0.4% ROYAL BANK SCOTLAND GROUP PLC RBS SH N 13,960 -39% 0.3% METLIFE INC MET SH CALL 10,450 New 0.2% ROYAL BANK SCOTLAND GROUP PLC RBS SH N 5,780 -31% 0.1% NEWS CORP NWSA SH N Sold out 0.0% CAPITAL ONE FINANCIAL CORP COF SH N Sold out 0.0% PLAINS EXPLORATION & PROD CO PXP SH N Sold out 0.0% LIBERTY INTERACTIVE CORP LINTA SH N Sold out 0.0%
Hedge Fund Alpha 50
Chase ColemanTiger Global New Positions -Yahoo (YHOO) -Burger King (BKW) Increased Positions -Apple (AAPL) -Baidu(BIDU) Reduced Positions -Yandex (YNDX) -Apple (AAPL) Sold Out -Qihoo 360 (QIHU) -HomeAway (AWAY)
Brief Discussion: Fresh from its third quarter 13F filing with the SEC, Tiger Global Management founded by billionaire Chase Coleman - has reported holding a significantly larger number of Facebook Inc (FB) shares than we originally had thought. Coleman, the infamous 'tiger cub,' is the original founder of Tiger Global Management, while Lee Fixel and Scott Shleifer are both managing directors and co-portfolio managers of the firms venture capital/private equity funds. At the end of Q2 Tiger Global reported holding a little over $60 million in Facebook's class A stock. One quarter later, this position has risen by nearly 500% and is now worth more than $250 million. Tiger Global Management converted their private shares into public ones, thereby forcing them to report the new total on their 13F. With the updated figures, we can see that Facebook is the tenth largest holding in Tiger Global's 13F portfolio and is approximately 4.2% of the portfolio value. Here's a complete look at Tiger Global's holdings. The stock lost over 30% of its value in the third quarter, and hit an all-time low of $17.55 in early September. Even though it has gained roughly 27% since this low, Facebook still sports a moderately attractive 31.0 times five-year expected earnings, which is far below the forward P/E of primary peer LinkedIn (79.4X). On the back of the company's impressive third quarter mobile ad performance, sell-side analysts predicting strong EPS growth of 26.0% a year over the next half-decade, meaning that now may not be a bad time to "monkey" Coleman and his team into Facebook if you haven't already. Another stock Tiger Global was buying last quarter is Amazon.com (AMZN), which now accounts for $122 million of the fund's 13F portfolio, an price-adjusted increase of 38.7% from Q2. Amazon has been in the doldrums over the past month, losing close to 8% of its value after missing the Street's earnings estimates. Excluding the effects of LivingSocial, Amazon posted a loss of 23 cents a share versus consensus of -$0.08. It was also reported that the company's daily deal acquisition has lost 95% of its original value since being purchased in 2010. It's likely that Coleman and his team were expecting better third quarter results and whiffed, or if not, it's also possible that the fund is attracted to the company's ever-omnipotent growth. Sell-siders expect EPS growth to actually speed up over the next five years by ten percentage points, to 35.7%. While an astronomical earnings valuation is obviously a concern, Amazon actually trades at a 7.4% discount in relation to its five-year average book value. Tiger Global downsized its holdings of Apple (AAPL) in the third quarter. At the end of Q2, Coleman and his team had elected to hold 1.4 million shares, but now report a long position that is over 7% smaller. While we cannot see Tiger Global's moves in the fourth quarter, Apple has lost nearly 20% in the past two months, so we don't know how the fund is behaving on the dip.
We still like Apple because it trades at a meager 9.3 times forward earnings, and sports a lowly PEG ratio of 0.59. Many Cupertino bulls have been making the valuation case over the past month to no avail, but the pessimists must be reminded that the company has a number of events on its horizon that can vault Apple to a fairer valuation, most notably a potential deal with China Mobile and first quarter financials.
Hedge 51 Fund Alpha Chase Coleman-
Tiger Global New Positions

Brief Discussion: Two other interesting plays we've noticed in Tiger Global's 13F are newly reported stakes in 3D Systems (DDD) and Groupon (GRPN). 3D Systems is the iconic three-dimensional printing company, with the power to give consumers the world's first easy-to-use 3D content creator. The company isn't the only player operating in the 3D printing space, but it does provide the most usable, streamlined version of the technology in comparison to primary competitors like Stratasys, MakerBot, and Solidoodle. The markets have responded favorably to the company's accessibility, as shares are up nearly 190% since the start of 2012 alone. Despite these gains, 3D Systems trades at an attractive forward P/E of 26.7X, far below Stratasys (39.8X). With the potential to be a perennial high-flier as its technology becomes more available to the masses, 3D Systems might turn out to be the most rewarding stock in Tiger Global's portfolio. Coleman and his team also initiated a new position in Groupon. Shares of the daily deal website now trade below $3 a share, just one year after they were above the $25. Much of
-Yahoo (YHOO) -Burger King (BKW)

Groupon's decline can be attributed to ever-present accounting concerns, as well as consistent earnings disappointments. In its most recent quarter, the daily deals site reported flat earnings as the Street was expecting a profit of 3 cents a share. The most troubling aspect of Groupon's Q3 financials was that coupon billings abroad, which make up close to half of its overall revenues, shrank. We speculate that Coleman and his team were attracted to Groupon's bargain bin Increased Positions valuation, in addition to the company's plan to increase automation, but it's still a risky endeavor for the individual investor. As competitors in the daily deal space continue to -Apple (AAPL) -Baidu(BIDU) spring up like weeds in Groupon's once pristine marketplace, it doesn't seem reasonable to expect a major bounce back anytime soon. If you're looking to add one of Tiger Global's positions, it would be best to consider Apple, 3D Systems, or Facebook. Each stock has game-changing potential over the intermediate term, and all trade at an attractive valuation.
Reduced Positions -Yandex (YNDX) -Apple (AAPL) Sold Out -Qihoo 360 (QIHU) -HomeAway (AWAY)
Hedge 52
Fund Alpha Chase Colemans Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio APPLE INC AAPL SH N 867,237 -7% 12.2% APPLE INC AAPL SH CALL 800,526 45% 11.2% YANDEX N V YNDX SH N 567,525 -27% 8.0% GOOGLE INC GOOG SH N 526,641 -23% 7.4% PRICELINE COM INC PCLN SH N 489,065 -9% 6.9% YAHOO INC YHOO SH N 399,375 New 5.6% LIBERTY GLOBAL INC LBTYA SH N 379,688 -21% 5.3% VISA INC V SH N 377,461 -8% 5.3% MASTERCARD INC MA SH N 370,214 -2% 5.2% FACEBOOK INC FB SH N 254,488 500% 3.6% BAIDU INC BIDU SH N 251,314 45% 3.5% LINKEDIN CORP LNKD SH N 243,006 -39% 3.4% LIBERTY GLOBAL INC LBTYK SH N 141,282 -36% 2.0% MAKEMYTRIP LIMITED MMYT SH N 122,358 0% 1.7% AMAZON COM INC AMZN SH N 122,074 39% 1.7% FRONTIER COMMUNICATIONS CORP FTR SH N 101,272 -3% 1.4% BURGER KING WORLDWIDE INC BKW SH N 100,368 New 1.4% MOODYS CORP MCO SH N 99,383 New 1.4% TAL EDUCATION GROUP XRS SH N 95,679 -1% 1.3% CHARTER COMMUNICATIONS INC CHTR SH N 88,807 New 1.2% GRACE W R & CO DEL NEW GRA SH N 82,712 -15% 1.2% MELLANOX TECHNOLOGIES LTD MLNX SH N 71,071 New 1.0% UNITED STATES NATURAL GAS FD L P UNG SH CALL 64,020 67% 0.9% ANCESTRY COM INC ACOM SH N 60,160 0% 0.8% ARCOS DORADOS HOLDINGS INC ARCO SH N 56,723 0% 0.8% QUESTCOR PHARMACEUTICALS INC QCOR SH N 44,815 New 0.6% LIVE NATION ENTERTAINMENT INC LYV SH N 44,772 -48% 0.6% STRATASYS INC SSYS SH N 43,520 New 0.6% STURM RUGER & CO INC RGR SH N 39,592 New 0.6% DONNELLEY R R & SONS CO RRD SH N 37,083 -3% 0.5% DECKERS OUTDOOR CORP DECK SH CALL 36,640 New 0.5% DECKERS OUTDOOR CORP DECK SH N 31,144 -55% 0.4% 3 D SYSTEMS CORP DEL DDD SH N 29,565 New 0.4% RENAISSANCERE HOLDINGS LTD RNR SH N 23,112 0% 0.3% QIHOO 360 TECHNOLOGY CO LTD QIHU SH N Sold out 0.0% HOMEAWAY INC AWAY SH N Sold out 0.0% SONY CORP SNE SH CALL Sold out 0.0% SUPERVALU INC SVU SH N Sold out 0.0% UBIQUITI NETWORKS INC UBNT SH N Sold out 0.0%
Hedge Fund Alpha 53
Carl IcahnIcahn Capital New Positions -Netflix (NFLX) Increased Positions -Forest Labs (FRX) -Icahn Enterprises (IEP) Reduced Positions -Commercial Metals (CMC) Sold Out -Dynergy (DYN)
Brief Discussion: Carl Icahn, the infamous corporate raider, made a splash toward the end of the third quarter by deciding to take on Netflix (NFLX). Icahn flew under the radar with a few modest increases in other stocks he owned at the end of 2Q. One big move was a 7.5% stake in the natural gas company Chesapeake Energy. Chesapeake is down almost 8% since the end of 2Q. Icahn's total position in Netflix represents a 10% ownership in the video streaming company. Netflix is up over 30% since the end of October, and now trades over 100x earnings. The next layer of growth for Netflix is expected to come via international subscribers, with total subscriptions in this space growing from 26.2 million in 2011 to 34.7 million in 2012 and 43.6 million in 2013. This impressive subscriber growth is only expected to translate into revenue growth of 14% in both 2012 and 2013. One other key headwind is that as Netflix embarks on international expansion, operating margins are sure to contract as greater investments are made in content and marketing. EPS growth is expected to be down almost 100% in 2012 from 2011, and 2013 is expected rebound in growth by only 13%. We see the best-case scenario for Netflix investors if Icahn puts enough pressure on management to seek a sale to a larger tech company. Icahn was also boosting his 2Q position in Forest Laboratories (FRX) during 3Q to 30 million shares, a 16% increase. Forest now makes up over 9.7% of Icahn's 13F portfolio. Icahn took a real interest in Forest at the same time he jumped into Federal-Mogul, during 2Q of 2011. Since the end of this period, Forest is down almost 20%, and the drug company has been pushed down of late on lowered 2013 guidance. Forest expects to only earn between $0.45 $0.60 per share next year, versus previous estimates of $0.66. Forest appears to be in a tough place right now, trading at 15x trailing earnings, but 25x forward earnings. Revenues are expected to be down 35% in 2013 due to the loss of patent protection of its antidepressant drug, which has seen a nearly 90% drop in sales this year. We would wait to see how well Forest executes on rebuilding its product portfolio before investing. Navistar International (NAV) was another stock that Icahn was increasing shares in during 3Q, boosting his 2Q stake by 25%. Navistar is the manufacturer of commercial trucks and engines, but trades well out of line with its peers. Navistar is trading at over 100x earnings, with the industry average being around 10x. Navistar is down almost 40% since the end of 3Q 2011, the quarter when Icahn first bought into the stock. Navistar's EPS is expected to grow at 5% per year over the next five years. CVR Energy (CVI) remained Icahn's top equity holding - not counting Icahn Enterprises LP. Icahn held his CVR position steady during 3Q after having upped its shares in 2Q by over 450%. CVR now makes up over 18% of Icahn's 13F portfolio. Icahn pulled his offer earlier this year to purchase the rest of CVR that he did not own, around 20% of the company. His offer was $30 per share, where the stock now trades around $39. At the time of Icahn's offer, management remained adamant that it could unlock more value for shareholders. CVR has managed to beat EPS estimates each of the last three quarters and the energy company should grow earnings over 35% per year during the next half-decade.
We see Icahn's investment in Netflix as a short term positive for the company, but question its long-run growth prospects. Icahn might be able to pressure Netflix into entertaining various purchase offers from the likes of Yahoo, Microsoft or Amazon, so this situation is worth monitoring. For Icahn's other picks, Federal-Mogul has some of the best growth prospects, but Forest Labs looks to have further headwinds, along with Navistar. CVR looks to be positioned nicely, steadily increasing free cash flow and only trading 9x earnings, compared to an industry average of 16x. This issue is licensed to the Insider Monkey account owner associated with reykes@gmail.com
Hedge 54
Fund Alpha Carl Icahns Portfolio:

Company Name Ticker SH/PRN Option Value (x1000) Activity % in Portfolio ICAHN ENTERPRISES L P IEP SH N 3,953,418 4% 35.3% C V R ENERGY CVI SH N 2,616,553 0% 23.4% FOREST LABS INC FRX SH N 1,091,874 16% 9.8% CHESAPEAKE ENERGY CORP CHK SH N 945,108 0% 8.4% FEDERAL MOGUL CORP FDML SH N 701,785 0% 6.3% HAIN CELESTIAL GROUP INC HAIN SH N 449,225 0% 4.0% AMERICAN RAILCAR INDUSTRIES INC ARII SH N 336,432 0% 3.0% MENTOR GRAPHICS CORP MENT SH N 249,542 0% 2.2% OSHKOSH CORP OSK SH N 237,688 0% 2.1% NAVISTAR INTERNATIONAL CORP NAV SH N 216,183 25% 1.9% COMMERCIAL METALS CO CMC SH N 104,721 -1% 0.9% WEBMD HEALTH CORP WBMD SH N 94,009 0% 0.8% TAKE TWO INTERACTIVE SOFTWR INC TTWO SH N 85,381 4% 0.8% NETFLIX INC NFLX SH N 68,050 New 0.6% ENZON PHARMACEUTICALS INC ENZN SH N 41,098 0% 0.4% MOTRICITY INC MOTR SH N 3,323 0% 0.0% AMYLIN PHARMACEUTICALS INC AMLN SH N Sold out 0.0% DYNEGY INC DEL DYN SH N Sold out 0.0%
Hedge 55 Fund Alpha 25 Most Popular Stocks
10 Most Popular Stocks Among Hedge Funds

11 Pfizer (PFE)
Our database of 13F filings allows us to track the long equity positions of hedge funds and other notable investors when these filings occur about seven weeks 12
Johnson & Johnson (JNJ)
after the end of each quarter. We can not only look at a specific manager and see what he or she is thinking, but also identify broader trends among hedge funds. 13
SPDR Gold ETF (GLD)
For example, we can process the filings and rank the ten most popular stocks among hedge funds (see our rankings for the second quarter). Here are the ten 14
Express Scripts (ESRX)
stocks which the largest number of investors in our database reported a long position in at the end of September: 15
Visa (V)
16
Mastercard (MA)
1. Apple Inc. [AAPL] No surprise here: once again, Apple was the most popular stock among hedge funds. 146 investors reported a position, down only slightly 17
eBay (EBAY)
from 147 last quarter. Highbridge Capital Management, managed by billionaire Glenn Dubin, had owned a fairly small position in Apple at the beginning of July 18
Priceline (PCLN )
but had increased it to about 120,000 shares by the end of September. Billionaire Dan Loebs Third Point also bought shares during the quarter. 19
News Corp (NWSA)
2. Google Inc [GOOG]. Google gained on Apple- 132 funds and other investors 20
Oracle (ORCL)
owned Google at the end of the quarter, up from 118 three months earlier- but it wasnt quite enough to reach the top slot. Platinum Asset Management, an 21
Cisco (CSCO)
Australian fund managed by billionaire Kerr Nielson, increased its holdings of
22
EMC Corp (EMC)
Google to 300,000 shares by the end of the quarter. Tiger Global Management, which is managed by billionaire Chase Coleman and his investment team, also
23
Kinder Morgan (KMI)
added shares.
24
Amazon (AMZN)
3. American International Group, Inc. [AIG]. Talk about a hot stock: about 50 different investors in our database initiated a position in AIG during the third
25
Anadarko (APC)
quarter of the year, with a total of 110 hedge funds holding it in their portfolio. This not only got AIG into the top ten list, but made it the third most popular stock. Billionaire Leon Coopermans Omega Advisors increased its stake in AIG by 75%, making it Omegas largest holding (see more of Cooperman's largest holdings); AIG is also George Soross largest long equity position after he bought shares as well (check out George Soros's portfolio). 4. Microsoft Corporation [MSFT]. AIGs rise contributed to Microsofts fall from the #3 spot. A small number of hedge funds also sold out of Microsoft, reducing its ownership below 100 filers in our database to 96. Bridgewater Associates position in Microsoft was its largest long position for a company at the end of September; the large and successful hedge fund is managed by billionaire Ray Dalio. Dont pay hedge funds hefty fees when you can buy the best stock picks of best hedge fund managers at a fraction 5. Citigroup Inc. [C]. Big banks in general saw hedge fund interest increase slightly, and the most popular pick in the industry was Citi with 93 hedge funds owning the stock. Billionaire David Teppers Appaloosa Management increased its holdings of Citi to 10.2 million shares between the beginning of July and the end of the third quarter. of what they charge
Q1 2011
Hedge 56 Fund Alpha 25 Most Popular Stocks
10 Most Popular Stocks Among Hedge Funds

11 Pfizer (PFE)
(Continued from previous page)
12
Johnson & Johnson (JNJ)
13
SPDR Gold ETF (GLD)
6. General Motors Company [GM]. Even before billionaire David Einhorn of told attendees at Octobers Value Investing Congress that GM was one of his long 14
Express Scripts (ESRX)
stock picks, the hedge fund community had been buying in with the 78 holders of the stock from the end of the second quarter increasing to 88. Einhorns fund had 15
Visa (V)
owned about 23 million shares of the stock at the end of September (see David Einhorn's top picks). 16
Mastercard (MA)
7. Bank of America Corp [BAC]. 85 hedge funds and other notable investors 17
eBay (EBAY)
reported owning Bank of America, up from 82 in the previous quarter. D.E. Shaw, a large hedge fund managed by David Shaw, reported owning over 8 million 18
Priceline (PCLN )
shares of the bank on its 13F.
19
News Corp (NWSA)
8. JPMorgan Chase & Co. [JPM]. Ownership ticked up slightly here as well, with our database showing 83 13F filers with positions in JPMorgan Chase. Fisher Asset 20
Oracle (ORCL)
Management, a money management firm run by billionaire Ken Fisher, more than doubled the size of its position in JPMorgan Chase during the third quarter of the 21
Cisco (CSCO)
year.
22
EMC Corp (EMC)
9. Wells Fargo & Company [WFC]. You can have your C and BAC and JPM, but
23
Kinder Morgan (KMI)
Warren Buffett will stick with Wells Fargo. Berkshire Hathaway actually increased its stake in what is generally considered to be one of the safest large banks and
24
Amazon (AMZN)
with a total of 81 filers in our database owning the stock it kept right behind the other big banks in our rankings (see Warren Buffett's new picks).
25
Anadarko (APC)
10. QUALCOMM, Inc. [QCOM]. Thanks to upstarts AIG, GM, and Wells Fargo, Qualcomm dropped three places in our rankings even though the number of hedge funds reporting a position decreased by only two (from 79 to 77). Billionaire Stephen Mandels Lone Pine Capital cut its stake but still owned 6.9 million shares at the end of the quarter, a position worth over $400 million at that time.
Dont pay hedge funds hefty fees when you can buy the best stock picks of best hedge fund managers at a fraction of what they charge
Q1 2011
Hedge 57
Fund Alpha Whats Next?

-An analysis of aggregate moves in hedge fund ownership. We list the most and least popular hedge fund stock picks by market cap. Hedge funds dont have a large advantage over retail investors when it comes to large cap stocks. However, our historical analysis uncovered strategies in the smallcap space that beat the market as much as 20 percentage points per year. Our premium subscribers will have access to the list of 15 stocks that satisfy our proprietary strategys criteria. The stock picks of our Hedge funds tend to generate more alpha when they invest in underfollowed stocks because they are more likely to uncover facts secret strategy in our previous issue beat the market by 2 percentage points between September 4th and November 16th. Our premium subscribers will also be able to read in-depth analyses of 6 of these stocks in the next section. that arent widely known by investors. Imitating these stock picks has the potential of delivering significantly higher -The stock picks of our small cap strategy in our previous issue also beat the market by 7 percentage points in 2.5 months. Our premium will have access to these stock picks too. returns. Subscribe Now!

Best Stock Picks of Best Hedge Funds

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Best Stock Picks of Best Hedge Funds

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Q3 2012 Issue:2

Inside This Issue 1

A Gift To You From Insider Monkey

Why Track Hedge Funds

Hedge Fund Alpha

Fund Alpha Why Track Hedge Funds

Hedge Fund Alpha 3

Warren Buffett Berkshire Hathaway New Positions

Hedge Fund Alpha 4

Warren Buffett Berkshire Hathaway New Positions

Fund Alpha Warren Buffetts Portfolio:

Hedge 6 Fund Alpha Steve Cohen-

-American Intl. Group (AIG) -Fossil (FOSL)

-Amazon (AMZN) -Nordstrom (JWN)

Hedge 7 Fund Alpha Steve Cohen-

-American Intl. Group (AIG) -Fossil (FOSL)

-Amazon (AMZN) -Nordstrom (JWN)

Fund Alpha Steve Cohens Portfolio:

Hedge Fund Alpha 9

Fund Alpha Stanley Druckenmillers Portfolio:

Hedge Fund Alpha 11

Fund Alpha T. Boone Pickens Portfolio:

Hedge Fund Alpha 13

Hedge Fund Alpha 14

Fund Alpha Stephen Mandels Portfolio:

Hedge Fund Alpha 16

Ray DalioBridgewater Associates

Fund Alpha Ray Dalios Portfolio:

Hedge Fund Alpha 18

Bill AckmanPershing Square

Fund Alpha Bill Ackmans Portfolio:

Hedge Fund Alpha 20

Fund Alpha Paul Singers Portfolio:

Hedge Fund Alpha 22

Fund Alpha Nelson Peltzs Portfolio:

Hedge Fund Alpha 24

Fund Alpha Seth Klarmans Portfolio:

Hedge Fund Alpha 26

Fund Alpha Leon Coopermans Portfolio:

Hedge Fund Alpha 28

Ken GriffinCitadel Investment Gr.

Fund Alpha Ken Griffins Portfolio:

Hedge Fund Alpha 30

Hedge 31 Fund Alpha Julian Robertson -

Tiger Management New Positions

-Charter (CHTR) -Priceline (PCLN)

Fund Alpha Julian Robertsons Portfolio:

Hedge Fund Alpha 33

Hedge 34 Fund Alpha John Paulson -

Paulson & Co. New Positions

-Life Technologies (LIFE) -Equinix (EQIX)

Fund Alpha John Paulsons Portfolio:

Hedge Fund Alpha 36

Hedge 37 Fund Alpha Jim Simons-

Renaissance Tech. New Positions

-Cisco (CSCO) -Duke Energy (DUK)

Fund Alpha Jim Simons Portfolio:

Hedge Fund Alpha 39

Hedge 40 Fund Alpha James Dinan-

York Capital Man. New Positions

-Yahoo (YHOO) -General Grown

-Bank of America (BAC) -Tyco (TYC)

Fund Alpha James Dinans Portfolio: