2016 was rough for the hedge fund industry in terms of redemptions, as it suffered a money exodus due to rising investor frustration amid low returns, unjustifiably high fees, and insider trading scandals. Hedge funds have had a positive year, gaining 4% in 2016, thought his lagged the S&P 500 Index, which is up by about 9% for the year. Yet a few hedge funds managed to beat the market with their sterling performance and smart moves. One such hedge fund was Owl Creek Asset Management, which is run by Jeffrey Altman. The fund returned an impressive 14.5% in 2016 through December 20, pushing the New York-based hedge fund’s 13F portfolio assets to a value of $2.31 billion. Owl Creek’s excellent performance this year calls for a detailed look at its top stock picks heading into this quarter, which we’ll do below.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Yahoo Inc. (NASDAQ:YHOO)
Owl Creek upped its stake in Yahoo by 4% in the third quarter, ending the period with over 15.77 million shares of the company, which had a net worth of $679.74 million. On Monday, financial services company Evercore ISI reaffirmed its ‘Hold’ rating on Yahoo Inc. (NASDAQ:YHOO) and has a price target of $39 on it. The stock is up by over 16% year-to-date. Verizon Communications Inc. (NYSE:VZ) entered into an agreement to acquire Yahoo’s internet assets for $4.8 billion earlier this year, but the deal could now be jeopardy amid Yahoo’s admission that around 1 billion of its user accounts were hacked in 2013 and 2014. Verizon is reportedly looking into the matter so as to ultimately ask for a concession in the deal or termination the contract entirely. Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors owns 20.80 million shares of Yahoo Inc. (NASDAQ:YHOO) as of the end of the third quarter.
HCA Holdings Inc (NYSE:HCA)
Owl Creek reported ownership of 1.15 million HCA Holdings Inc (NYSE:HCA) as of the end of the third quarter, with the total value of the shares coming in at $87.36 million. The shares of the Tennessee-based healthcare facilities operator have gained over 10% in value since the start of the year. Last month, HCA Holdings’ Board of Directors authorized a $2 billion stock repurchase program. For the full-year, HCA Holdings expects its EPS to come in at between $6.50 and $6.80, versus the consensus of $6.58, while revenue for the period is estimated to come in at between $41 billion and $42 billion, versus analysts’ estimate of $41.8 billion. A total of 62 hedge funds tracked by Insider Monkey were long HCA Holdings Inc (NYSE:HCA) at the end of the third quarter.
On the next page we’ll discuss the rest of the top stock picks of Owl Creek at the end of the third quarter.