Volatility in Oil Draws Hedge Fund Money
Some hedge funds dove into the oil patch in the final three months of 2014, seeking to profit on the turmoil in the energy sector, regulatory filings showed on Tuesday. Others reduced their holdings of technology stocks, including Apple and Alibaba, that recently attracted hedge funds in droves.
These moves by some of Wall Street’s most prominent investors were disclosed in filings with the Securities and Exchange Commission that provide a partial snapshot of hedge funds’ holdings as of the end of the year. The filings, submitted by a Tuesday deadline, shed some light on which companies and sectors are attracting the affection — or the skepticism — of the so-called smart money.
With oil prices falling in the last part of the year, several hedge funds apparently saw opportunities to go bottom-fishing in the energy sector. Third Point, the firm run by Daniel S. Loeb, acquired five million shares of the oil refinery company Phillips 66, a stake worth $383.1 million as of Friday. Leon G. Cooperman’s Omega Advisors amassed a 2.1 million-share position in Laredo Petroleum and a 652,500-share position in Sanchez Energy. But at the same time, Omega sold about 29 percent of its big stake in Sandridge Energy, ending the quarter with 32.2 million shares.
ValueAct Capital Management, an activist hedge fund, acquired big new positions in Halliburton and Baker Hughes, two oil field services companies that agreed to a $34.6 billion merger in November. The two stakes, each worth more than $900 million, could make ValueAct a forceful advocate for the tie-up, which will be subject to shareholder votes in March.
Hedge funds showed caution in the technology sector. One longtime fan of Apple, David Einhorn, who once took the company to court over a plan to eliminate preferred shares, reduced the Apple stake held by his Greenlight Capital hedge fund by about 6 percent, to 8.6 million shares, a stake worth more than $1 billion as of Friday. Another hedge fund, Coatue Management, which focuses on technology, reduced its Apple stake by about 15 percent, to 8.9 million shares, as of the end of the year.
Appaloosa Management, David Tepper’s hedge fund, sold its entire 1.2 million-share stake in Apple, as well as its stakes in Facebook and the Chinese Internet giant Alibaba, which became a hedge fund darling after going public in September. Mr. Tepper’s move on Alibaba appears well-timed, with the stock having fallen this year after peaking in the fall. With Apple, however, Mr. Tepper and his rivals have been confounded by the stock’s rally so far this year.
These disclosures are limited in important ways. Backward-looking and static, they show only the holdings of United States-listed stocks at the end of the fourth quarter. And they do not include any short positions, or bets against particular stocks.
What’s more, any apparent trends among the hedge funds fail to capture the diversity of the moves. Mr. Loeb, for example, increased his fund’s existing stake in Alibaba during the quarter, while Mr. Einhorn acquired a new stake in an older technology giant, Yahoo.
In addition to showing what stocks are getting attention, the filings help reveal how upstart hedge funds are mapping their strategies. Among the most closely watched of these funds are those run by disciples of Steven A. Cohen, the head of the former SAC Capital Advisors. That firm pleaded guilty to securities fraud in 2013 and has since rebranded itself as Point72 Asset Management, a $10 billion family office that manages mainly Mr. Cohen’s personal fortune.
Gabriel Plotkin, who was one of the top portfolio managers at SAC, set out on his own last year, raising about $1 billion, including a $200 million commitment from Mr. Cohen, for his own hedge fund, Melvin Capital Management.
And Mr. Plotkin did not waste much time putting that money to work, taking positions in more than 40 stocks with an estimated value of $900 million, according to the fund’s regulatory filing. Mr. Plotkin specialized in investing in consumer stocks at SAC, and Melvin Capital appears to be no different, with the fund buying stakes in Amazon.com, the Del Frisco’s Restaurant Group, Deere & Company, Dick’s Sporting Goods, Foot Locker and Yum Brands.
Other relatively new hedge funds led by former disciples of Mr. Cohen are Aaron Cowen’s Suvretta Capital Management and Jason Karp’s Tourbillon Capital Partners. In the fourth quarter, Suvretta reported selling a 467,000-share position in Anadarko Petroleum and a 223,890-share position in Ashland, a speciality chemical company. The fund acquired a new 629,600-share position in Facebook in the period.
Tourbillon, in the fourth quarter, purchased a new 1.45 million share stake in Applied Materials and increased its stake in Cheniere Energy by about 630,000 shares. The fund exited a 280,000-share position in Zebra Technologies.