Caxton Associates, one of the best known macro hedge funds of all time, was co-established by Bruce Kovner in 1983. The billionaire co-founder retired back in 2011, leaving the hedge fund under the stewardship of Andrew Law, who was serving as chief investment officer at the time. Interestingly, Caxton was one of the first hedge funds which started hunting for investment opportunities based on macroeconomic trends. The New York-based investment management firm is trading a wide range of asset classes, including stock indexes, bonds, currencies, and commodities. The fund’s 13F filing for the June quarter reveals that Caxton’s top stock picks as of June 30 are represented by the following companies: Bank of America Corporation (NYSE:BAC), Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT), and Molson Coors Brewing Company (NYSE:TAP).
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 118% since then and outperformed the S&P 500 Index by around 60.4 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.
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Let’s start by looking into Caxton Associates’ most valuable equity holding, Bank of America Corporation (NYSE:BAC). During the second quarter, the global macro hedge fund boosted its stake in the bank by 5.41 million shares to a 7.35 million-share holding, which is valued at $125.09 million. The shares of BAC have dropped by 10% over the past year, mainly owing to the 9% decline suffered this week. It seems that China’s decision to devalue its currency stands behind the sharp drop in the bank’s share price. The devaluation itself might suggest that the Chinese economy is currently in a worse position than most analysts have previously assumed. Indeed, BAC has direct exposure to China, but its economic slowdown might spread all around the world, which might in turn affect BAC’s operations and activities even more. However, some analysts believe that the recent slump in BAC’s share price has created a great buying opportunity, as the bank is believed to be in great shape at the moment. Ken Fisher’s Fisher Asset Management also boosted its stake in Bank of America Corporation (NYSE:BAC) during the quarter, amassing a stake of 42.69 million shares.
Caxton Associates reported owning 863,000 shares of Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) in its most recent 13F, which yields an increase of 813,000 shares from the prior filing. The hotel and leisure company has seen its stock decline by nearly 10% year-to-date. Starwood has been outperformed by its competitors such as Marriott International Inc. (NASDAQ:MAR) and Hilton Worldwide Holdings Inc. (NYSE:HLT) in expanding their hotel chains and has lost visible market share over the last few years. Hence, Starwood has recently appointed the investment bank Lazard to evaluate strategic options, indicating that the company might be looking to be acquired. However, some analysts suggest that the probability of Starwood engaging in a strategic move is slimmer than most people expect. In the meantime, Daniel Och’s OZ Capital Management has been loading up on Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) shares, reporting a 5.97% stake in the company via a recent 13G filed with the SEC.
Caxton Associates acquired 572,000 shares of Molson Coors Brewing Company (NYSE:TAP) during the quarter, piling up a 717,000 share-stake valued at $145.00 million. The brewing company recently reported better-than-expected quarterly profit, which was boosted by higher pricing and higher demand for the company’s higher-margin beers. Molson Coors Brewing Company (NYSE:TAP)’s net sales dropped by 15.4% year-over-year to $1 billion, being affected by the strong U.S. dollar. At the same time, Molson reported net income of $229 million or $1.23 per share for the quarter, compared to $290.9 million or $1.56 per share reported a year ago. The stock has been quite volatile this year, having lost slightly over 6% since the beginning of the year. Meanwhile, Molson is among the top five mid-cap stocks hedge funds love, with James Dinan’s York Capital Management representing its largest shareholder within our database with 3.21 million shares.
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