The founder of Ivory Capital, Curtis Macnguyen may have a bone to pick with his fellow hedge fund managers, whose investment skills might not be better than his own, though they enjoy the perks of greater assets under management partly as a result of being less private and more in the public eye. In an article on Bloomberg, he expressed some frustration over the notoriety of investors like David Einhorn of Greenlight Capital, who has four times the assets under management that Macnguyen does, despite his fund underperforming Macnguyen’s Ivory Optimal since the beginning of 2009.
“The only difference between me and Einhorn is that he’s higher profile and I’m purposely very low profile,” Macnguyen tells Bloomberg. “Plus, I’m supercompetitive and will only get better over time.”
According to the piece, Macnguyen avoids stocks termed as ‘hedge fund hotels’. These are companies that are very popular among hedge funds when the overall market looks good, but as soon as things look a bit shaky, the investors leave fast and in herds. According to his latest 13F filing, some of the top picks of his fund’s portfolio included popular choices of hedge fund managers such as eBay Inc (NASDAQ:EBAY), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Hertz Global Holdings, Inc. (NYSE:HTZ), Yahoo! Inc. (NASDAQ:YHOO) and American Airlines Group Inc (NASDAQ:AAL). According to our methodology, which is based on long holdings in companies exceeding market-caps of $1 billion, Ivory returned 4.3% during the first quarter based on its 61 qualifying holdings at the start of the quarter. This compares well with the S&P 500 ETF (SPY)’s returns of 0.9% during the same period. However, the issue remains whether Ivory will be found swimming naked when the tide goes out or not, in the sense of the popular analogy that Warren Buffett once drew.
Macnguyen initiated a stake in eBay Inc (NASDAQ:EBAY) during the fourth quarter with 2.06 million shares valued at $115.81 million. The e-commerce company, which is planning to spin off its payment arm PayPal sometime later this year represented 3.72% of the fund’s equity portfolio. Among the hedge funds that we track, 87 had invested $11.2 billion in the $69.87 billion market-cap company. It doesn’t really look like Ivory is ready for a flight of capital from this position, which was also one of the favorite stock picks among the billionaires that we track. Carl Icahn was one of them, as his fund Icahn Capital LP held some 46.27 million shares of eBay Inc (NASDAQ:EBAY) valued at $2.60 billion at the end of 2014.
Ivory’s stake in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) towards the end of the fourth quarter contained about 847,200 shares valued at $121.24 million. The $71.43 billion pharmaceutical company had 102 funds from our database invested in it, with an aggregate investment of $14.08 billion. Jeffrey Ubben’s Valueact Capital held the highest stake among those funds. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was recently backed by Bill Ackman of Pershing square to acquire the Botox maker Allergan. Even though the healthcare company failed in its attempt, Ackman made a healthy profit from the stake that it had acquired in Allergan.
Ivory’s Hertz Global Holdings, Inc. (NYSE:HTZ) holding consisted of nearly 4.80 million shares valued at $119.64 million. The $9.47 billion market-cap company has the favor of 72 funds, which had an aggregate investment of $6.39 billion in the company at the end of last year. Icahn Capital headed the list of these firms as well in terms of the most-valuable holding. The stock of the car rental company, which has been under an accounting review since March last year dipped about 13.07% during the first quarter. On the brighter side, Morgan Stanley recently upgraded Hertz Global Holdings, Inc. (NYSE:HTZ)’s rating from ‘Underweight’ to ‘Equal Weight’.
1.12 million shares of Yahoo! Inc. (NASDAQ:YHOO) were acquired by Ivory during the fourth quarter to put the total stake of its position in the internet giant at 1.59 million shares valued at $80.35 million. The $42.14 billion company had the confidence of 99 funds, which had $7.59 billion in capital invested at the end of last year. D E Shaw and James Dinan’s York Capital Management are two prominent shareholders of the tech company. Yahoo! Inc. (NASDAQ:YHOO) is an ailing business which has little to show off in terms of its core operations’ profitability. The stock dipped 12.02% in the first quarter.
In American Airlines Group Inc (NASDAQ:AAL), the fund held about 2.1 million shares valued at $112.98 million according to its latest 13F filing. The $33.6 billion market cap airlines company had 123 funds with a total of $6.11 billion invested in it. York Capital was also one of the significant stockholders of American Airlines Group Inc (NASDAQ:AAL).
Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of 6 basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of 7 basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.
Disclosure: None
