Hound Partners & Arrow Capital Management Are Buying the Same Stocks

Jonathan Auerbach co-founded long/short equity fund Hound Partners with Scott McLellan in 2004, seeded by Tiger Management. Jonathan Auerbach had been a senior analyst at Ziff Brothers Investments before joining Tiger Management in 2004, when he was put in charge of a new umbrella fund, which became Hound Partners. Auerbach lured Scott McLellan to Tiger to help him run the fund. Prior to that, McLellan worked at Highbridge Capital. In 2007, Scott McLellan left to form Marble Arch Partners with Timothy Jenkins, who had spent three years working at Tiger Management. Jonathan Auerbach’s Hound Partners gained around 16 percent in 2013.

Arrow Capital Management, managed by Mal Serure, is “an alternative asset management firm focused on event-driven value investing, primarily in global public equities,” according to the firm. Mal Serure is a Bear Stearns alum, and Alex von Furstenberg–a former co-portfolio manager with the firm–has since moved on to found Ranger Global Advisors, a family office that manages over $1 billion in assets.

In their most recent 13F filings reflecting activity during the fourth quarter of 2013, the two hedge funds, Hound Partners and Arrow Capital Management, demonstrated some similarity in their holdings, including Valeant Pharmaceuticals International Inc. (NYSE:VRX), Carters Inc. (NYSE:CRI),  Charter Communications Inc. (NASDAQ:CHTR), and Endo Pharmaceuticals Holdings (NASDAQ:ENDP). Other investments owned by both funds include W R Grace & Co. (NYSE:GRA), Transdigm Group Inc. (NYSE:TDG) and Tesoro Corp. (NYSE:TSO). Given the concentrated number of stocks in their portfolios (23 for Hound and 17 for Arrow), we thought the overlap was interesting and wanted to explore some of their common investments a little bit more closely. Hound’s portfolio had a striking similarity with Marble Arch’s investments, which was not surprising given the shared backgrounds of the two funds’ founders. However, there is no similar relationship between Jonathan Auerbach and Mal Serure, which makes their overlapping holdings even more intriguing.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

Valeant Pharmaceuticals International Inc. (NYSE:VRX) was the top holding of Hound and second largest of Arrow. Hound maintained its position in the multinational specialty pharmaceutical company during the fourth quarter, while Arrow increased it by 5%. VRX has had a strong run over the past year, as its earnings have been boosted by its recent acquisition of eye care products maker Bausch & Lomb Holdings Inc.

Children apparel maker Carter Inc. (NYSE:CRI) was the second largest equity position of Hound and third largest of Arrow. Hound maintained its stake in the position, while Arrow reduced its stake by 30% during the fourth quarter. The stock has been volatile, with a disappointing earnings report in 3Q13 causing the price to drop precipitously in late October 2013, while a consensus-beating earnings release and forward guidance caused a similar rise in February 2014.

Endo Pharmaceuticals Holdings (NASDAQ:ENDP) was the 14th largest position of Hound and the fifth largest of Arrow. Hound increased its stake by 53% during the fourth quarter, while Arrow’s purchase was a new position. The stock had a great run over the past 12 months, appreciating by 145%, aided by a deal to acquire Canada’s Paladin Labs for $1.6 billion and a plan to re-domicile to Ireland, which will lower its tax rate.

Transdigm Group Inc. (NYSE:TDG) was 11th on the ranking for Hound and 10th for Arrow. Again, the former increased its stake in the aircraft component maker by 13% during the fourth quarter, while the latter’s position was a new purchase. The stock has recovered strongly since bottoming out in August, when it released disappointing earnings and forward guidance.

Disclosures: none.

Recommended reading:

Sandell Asset Management Increases Holding of Bob Evans Farms Inc (BOBE) Shares

Steven Cohen’s SAC Capital Ups Passive Stake in Gogo Inc (GOGO)

Carl Icahn’s Interview on eBay Inc (EBAY)

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!