In its latest 13F filing filed for the reporting period of September 30, Hudson Bay Capital Management, managed by Sander Gerber, disclosed the holdings in its public equity portfolio worth almost $1.04 billion in aggregate. Given that the New York City-based fund that focuses on catalyst-driven absolute return strategies has done well since inception, let’s take a look at Hudson Bay Capital’s top stock picks, including XPO Logistics Inc (NYSE:XPO), Alibaba Group Holding Ltd (NYSE:BABA), Yahoo! Inc. (NASDAQ:YHOO), Zoetis Inc (NYSE:ZTS), and HC2 Holdings Inc (NYSEMKT:HCHC)
But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 36 month period beginning from September 2012 (see the details here).
#5 HC2 Holdings Inc (NYSEMKT:HCHC)
Shares held (as of September 30): 876,542
Total Value (as of September 30): $27.61 million
Percent of Portfolio (as of September 30): 1.20%
Hudson Bay Capital Management added 12,670 shares to its HC2 Holdings Inc (NYSEMKT:HCHC) position from June 30 to September 30 making HC2 Holdings Hudson Bay’s 5th largest non-index equity position. HC2 Holdings recently raised gross proceeds of over $51 million by selling 7.35 million shares at $7 each. The company plans to use the proceeds to finance potential accretive acquisitions, including pending insurance company buys. Of the around 730 elite funds we track, eight funds owned $46.57 million of HC2 Holdings Inc at the end of September, versus 10 funds and $32.34 million at the end of June.
#4 Zoetis Inc (NYSE:ZTS)
Shares held (as of September 30): 700,700
Total Value (as of September 30): $28.86 million
Percent of Portfolio (as of September 30): 1.25%
Along with Hudson Bay, Bill Ackman’s Pershing Square is a big believer in animal drug maker Zoetis Inc (NYSE:ZTS). Pershing Square reported a holding of 41.82 million shares at the end of September, making ZTS Ackman’s 5th largest equity position. Because of cost cutting, ZTS margins are creeping higher, and the company has beaten analyst earnings expectations every quarter this year. Zoetis is also expanding, having recently completed a $765 million acquisition of Pharmaq, a maker of farmed fish vaccines and drugs. ZTS shares are up by 8.7% year-to-date so far.