This Hedge Fund Made 14% Last Quarter

We track over 400 funds and investors, and have calculated the value-weighted returns for all funds in the 1500 largest stocks, while compiling a list of the top performing funds for the first three quarters of 2012. The returns are based on the fund’s 13F long positions only, as we do not have access to their short positions. Balyasny Asset Management was a top performing hedge fund during the third quarter, making our list of top forty funds by 3Q returns, coming in at 35th. This is big improvement from its ranking of 219th one quarter earlier. Balyasny made some key moves that helped boost the firm’s 3Q weighted average return to 14%. Dmitry Balyasny founded Balyasny Asset Management in 2001. The firm is a $2 Billion multi-strategy hedge fund, with a focus on macro investing.

Dmitry Balyasny

Balyasny’s top investment according to its 2Q 13F was The Shaw Group Inc. (NYSE:SHAW). Shaw is the engineering and construction company that is up over 60% year to date on news that Chicago Bridge is going through the acquisitive motions. More importantly for Balyasny, the firm increased its stake 75% to over 5 million shares before the start of 3Q, and during 3Q, Shaw was up 67%.

Balyasny appeared to be betting on infrastructure and energy during the quarter, but which other hedge funds are betting on the Shaw-Chicago infrastructure giant? Check out our coverage by clicking on the link. Shaw had been hemorrhaging cash as it misestimated various project costs. However, the company boosts a backlog of $9.5 billion, and promising growth in liquefied natural gas and U.S. petro projects.

Rounding out Balyasny’s top five picks according to its 2Q 13F are Schlumberger Limited (NYSE:SLB), SM Energy Co. (NYSE:SM), Western Refining, Inc. (NYSE:WNR), and Tesoro Corporation (NYSE:TSO). Balyasny has a relatively diverse portfolio with only around 15% of the firm’s 13F invested in these five holdings.

Schlumberger, 3.9% of Balyasny’s 2Q 13F, was up 11% in 3Q. The company makes products that aid in the exploration and production of oil and gas. Even though Schlumberger has seen a weakening in U.S. sales and margins, the company is being held up by its international focus. As well, higher than expected oil prices continue to give a boost to the company’s earnings. Besides Balyasny, Schlumberger has Ken Fisher and Steven Cohen as big name investors. Check out our recent Schlumberger insider summary.

Although Balyasny only had 3.3% of its 13F invested in SM Energy, the company was able to boost the firm’s overall performance, as it was up 13% in 3Q. This was one of the key moves in 2Q that helped carry the firm, with Balyasny having increased its stake over 200%. The energy company has missed earnings each of the last two quarters, but its stock price remains elevated as estimates predict it will grow EPS by 100% next year. SM is expected to have production up 25% for 2012, but we have our concerns over valuation, where the company  trades at 22x earnings, compared to key peers Energen and Newfield Exploration, both trading around 12x.

Balyasny continued its energy investing theme with the crude oil refiner Western Refining, which is the fund’s fourth largest equity holding, worth 2.5% of the firm’s 13F. The company was up 15% during 3Q and saw an upgrade from Goldman Sachs recently. As well, Credit Suisse raised its EPS estimates. The consensus EPS estimates for this year and next have seen steady revisions upwards, yet growth is still expected to be down 17% from last year.

Tesoro was a new position for Balyasny, and also saw Steven Cohen boost his 1Q stake over 1700% in 2Q. The investment paid off, as Tesoro was up over 70% during the third quarter. Balyasny made some serious money betting on the energy field, as Tesoro was a petroleum refiner. The company has seen positive price performance since announcing the purchase of BP’s Southern California refining business for $1.2 billion.

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