Hound Partners & Marble Arch Investments Are Betting On 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 later 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.

Marble Arch Investments was founded in 2007 by Scott McLellan, who had previously worked at Hound Partners. Hound’s manager, Jonathan Auerbach, is a Tiger Cub and so McLellan can trace his investment lineage to Julian Robertson as well. McLellan himself worked at Highbridge Capital Management and has an MBA from Northwestern. Marble Arch is a long/short equity fund.

In their most recent 13F filings reflecting activity during the fourth quarter of 2013, two hedge funds, Hound Partners and Marble Arch Investments, showed a remarkable amount of similarity in their holdings and investment activity, including Valeant Pharmaceuticals International Inc. (NYSE:VRX), Carters Inc. (NYSE:CRI), FleetCor Technologies Inc. (NYSE:FLT), and W R Grace & Co. (NYSE:GRA). Other equities owned by both funds include Charter Communications Inc. (NASDAQ:CHTR) and American International Group Inc. (NYSE:AIG). Given the concentrated number of stocks in their portfolios (23 for Hound and 22 for Marble Arch), we thought it would be interesting in delve into their common investments a little deeper.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

Given the backgrounds of the founders of the two firms, it is not surprising that their investments should overlap. Both Jonathan Auerbach and Scott McLellan, who founded Hound Partners, worked at Tiger Management previously. Three years later, McLellan left Hound to set-up another hedge fund, Marble Arch, along with Timothy Jenkins, another Tiger Management alumni. Both funds, based in New York, NY, employ a long/short equity strategy based on fundamental analysis.

Valeant Pharmaceuticals International Inc. (NYSE:VRX) was the top holding of both funds as of year-end 2013, accounting for 13.0% of Hound’s equity portfolio and 12.4% of Marble Arch’s. Neither fund changed its holdings of the multinational specialty pharmaceutical company during the fourth quarter. 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.

FleetCor Technologies, Inc. (NYSE:FLT) was another top holding of both funds, which was the third largest holding of Hound and second largest of Marble Arch. Both funds did reduce their positions by 14-21% in the payment processor of commercial fuel cards during the quarter, but their large remaining stakes still imply a bullish view on the stock.

Chemical and materials manufacturer W R Grace & Co. (NYSE:GRA) occupied the fourth largest position in Hound’s portfolio and third largest in Marble Arch’s. Again, we see a similarity in investing behavior among the two funds, as both reduced their stakes in the company by 11-20% during the fourth quarter but still maintained relatively large stakes. This could reflect a directional bet on GRA exiting bankruptcy soon.

Charter Communications Inc. (NASDAQ:CHTR) was the fifth largest equity investment of Hound and eighth largest  of Marble Arch. Both funds increased their positions in the telecommunications company by 7-8% during the quarter. The stock could have been a bet that CHTR would outbid Comcast Corp. (NASDAQ:CMCSA) and successfully acquire Time Warner Cable (NYSE:TWC). Although CMCSA and TWC reached an agreement recently, CHTR’s largest shareholder, Liberty Media Corp. (NASDAQ:LMCA) seems to remain interested on the ultimate outcome of the deal.

Disclosure: none

Recommended Reading:

Serengeti Asset Management Is Fond of These Stocks

Becker Drapkin Management Increases Its Holding of Cascade Microtech, Inc. (CSCD)

Kevin Kotler’s Broadfin Capital Reports New Stake In MELA Sciences Inc (MELA)

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!