A Look At Whitebox Advisors Top Equity Holdings As It Prepares To Close Down Its Mutual Fund Unit

Barely two months after it had announced that its equity head Jason Cross will be leaving the firm after 14 years of service, Minneapolis-based Whitebox Advisors is again in the news after announcing that it would be liquidating all the three mutual funds it manages on January 19. The asset management firm was founded by Andrew Redleaf in 2000 and currently boasts of assets under management of $3.85 billion. 2015 turned out to be a really bad year for Whitebox’s mutual fund arm with its flagship fund ‘Whitebox Tactical Opportunities’ losing 21% (as of December 24, 2015) and witnessing almost $1 billion in redemptions.

According to the fund’s latest 13F filing, its US equity portfolio at the end of September was worth almost $2.24 billion, slightly lower than the $2.31 billion that it was worth at the end of June, and  its top 10 equity holdings accounted for 35.14% of the value of its portfolio. The filing also revealed that Whitebox Advisors’ equity portfolio experienced a turnover of 62.24% during the third quarter and stocks from finance and energy sector constituted a major chunk (23% and 17%, respectively) of it. In this article we will be taking a closer look at the top five stocks Whitebox Advisors was betting on going into the final quarter of 2015.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

#5 Yahoo! Inc. (NASDAQ:YHOO)

– Shares Owned by Whitebox Advisors (as of September 30): 792,500

– Value of Holding (as of September 30): $114.9 Million

Amid a 26.4% drop of the Yahoo! Inc. (NASDAQ:YHOO)’s stock during the third quarter, Whitebox Advisors increased its stake in the company by 165%. Yahoo! Inc. (NASDAQ:YHOO)’s Board recently announced that it is abandoning its erstwhile plan of spinning-off Yahoo!’s holdings in Chinese e-commerce major Alibaba Group Holding Ltd (NYSE:BABA) and will start evaluating a spin-off of the company’s core business, the cash in its balance sheet and its stake in Yahoo! Japan.

The company’s intrinsic value and its plans regarding its equity holdings in Alibaba and Yahoo! Japan are probably the main reasons why investors are betting on the stock. Even though during the third quarter, it registered a decline in popularity among the funds we follow with 89 investors reporting long positions as of the end of September, versus 104 funds a quarter earlier.

The investors from our database amassed over 20% of Yahoo!’s outstanding stock heading into the fourth quarter and for good reasons, since several activists have been pushing Marissa Mayer to make a decision regarding Yahoo!’s future. Jeff Smith’s Starboard Value and Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors are two activist funds that have been involved in Yahoo!’s fate of late.