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

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

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!