Hedge funds had a pretty solid run for much of this year, generating positive returns for seven or eight consecutive months (depending on the source) before that streak came to an end in October. The third-quarter was a particularly strong one for the industry, as evidenced by our own data. 659 funds in our system which filed for the June 30 13F reporting period held long positions in at least 5 non-micro-cap stocks, and those funds’ long bets posted 8.3% gains in the third-quarter based on the size of their positions on June 30. That easily bested the performance of S&P 500 ETFs, which returned only 3.3% for the period. Where hedge funds tend to falter is on the other positions in their portfolios (options plays, bonds, etc.), which are there to limit downside risk, but also limit upside potential. That’s why we recommend investors consider hedge funds’ top long bets and share them with readers throughout the year. In this article, we’ll analyze the top picks and performance of Perry Capital.
Perry Capital, run by Goldman Sachs alumnus Richard Perry, is a New York-based hedge fund founded 28 years ago. The fund recently announced that it will end its operations amid huge losses. However, the hedge fund appears to be going out with a bang, as its stock picks returned 12.79% in the third quarter, when looking at its 7 long positions in $1 billion+ companies. In this article we’ll take a look at its holdings in Ally Financial Inc (NYSE:ALLY), AerCap Holdings N.V. (NYSE:AER), American International Group Inc (NYSE:AIG), and Ball Corporation (NYSE:BLL) on June 30 and see how they performed.
Perry Capital trimmed its stake in Ally Financial Inc (NYSE:ALLY) by 30% in the second quarter, ending the period with about 15.76 million shares of the company. Ally Financial’s stock returned 14.6% in the third quarter. Cerberus Capital Management was the largest shareholder of Ally Financial Inc (NYSE:ALLY) in our system on June 30, with a stake worth $411.7 million reported as of the end of June. First Pacific Advisors LLC, Oaktree Capital Management, and Canyon Capital Advisors also held valuable positions in the company.
Perry Capital reported ownership of 5.92 million shares of AerCap Holdings N.V. (NYSE:AER) as of June 30. The aggregate value of this holding was about $199.02 million. The stock delivered a 14.6% return in the September quarter. Greenlight Capital held the most valuable stake in AerCap Holdings N.V. (NYSE:AER) among the funds in our database, which was worth $382.8 million at the end of the second quarter. Moreover, Omega Advisors, Highfields Capital Management, and Discovery Capital Management were also bullish on AerCap Holdings N.V. (NYSE:AER).
We’ll check out two more of the fund’s stock picks on the next page.