Adage Capital filed on November 16th for its new position in Adolor Corp (ADLR). The SEC 13G filing shows the firm now takes 2.34 million shares in ADLR, corresponding to a 5.03% passive stake ownership. Adage Capital did not have any share in ADLR before, and the firm passed the 5% ownership threshold on November 7th. ADLR skyrocketed on October 24th when Cubist Pharmaceuticals (CBST) signed a definitive agreement to acquire ADLR for $4.25 per shares in cash. Now ADLR has returned nearly 290% since January, and is trading at $4.72 now. Other seven hedge funds in our list were bullish about ADLR in the second quarter. Julian Baker And Felix Baker’s Baker Bros. Advisors had the most among the hedge funds, with 6.95 million shares. Jim Simons’ Renaissance Technologies had 2.30 million shares, slightly down by 2% from Q1.
Daniel Barach is a former hedge fund manager now aiming his attack at tax loopholes beneficial to his colleagues. Barach led his one-man protest against the “carried interest” tax in Greenwich, Conn. on Wednesday and in New York City on Thursday, according to news reports. The tax on carried interest – the amount hedge fund and private equity managers make from a firm’s performance – is currently 15%. President Barack Obama has been seeking to raise that rate to 35%, the same tax rate on ordinary income, in order to produce additional revenues to deal with the country’s $14 trillion debt. The Greenwich Time and the International Business Times have reported that Barach, a New York resident who once ran the hedge fund firm MLT Capital, has stood on a Greenwich street and showed up near New York’s Zuccotti Park, the unofficial home of the Occupy Wall Street movement. On both occasions, he has worn a sign around his neck that reads, “STOP Tax Breaks for Hedge Fund Managers.”
Jeffrey Tannenbaum’s Fir Tree Capital Revealed 5.5% Passive Stake in MF Global (InsiderMonkey)
Jeffrey Tannenbaum’s Fir Tree Capital reported 5.5% passive stake in MF Global Holdings Ltd. (MF) on November 15th. Fir Tree Capital now takes 9 million MF shares. This is a brand-new position since the firm did not have any share in MF before. It seems that Fir Tree Capital was buying the tip value in MF after David Tepper’s Appaloosa Partners, which reported a 14.25 million shares distressed investment position on November 14th. MF Global reported $191.6 million quarterly loss after the company lost $6 billion in European sovereign debt. It filed bankruptcy on October 31st.
A Florida man has been accused of using a phony hedge fund to lure clients into investing $12.6 million by promising access to highly-sought-after initial public offerings. John Mattera was arrested yesterday at his home in Fort Lauderdale, Fla. According to prosecutors and the Securities and Exchange Commission, he promised investors that he’d put their money into escrow accounts pending the promised IPOs, for companies such as Facebook and Groupon Inc. But the complaint alleges Mattera’s Praetorian Global Fund had none of the promised access, and that he instead spent almost $6 million of investor cash on a luxurious lifestyle, his taxes and to settle a lawsuit.
Steven A. Markel recently bought 12,500 shares in Markel Corp (MKL). Steven A. Markel is the vice chairman and director in Markel Corp. According to the Form 4 filing, Mr. Markel made 2 insider purchases for total 12,500 shares in MKL on November 15 and 16, giving him approximately 2.30 million shares in the company. His purchase price was about $396.6. MKL has return 4% year to date and is trading at $395.15 now.
Chicago Hedge Fund Manager Sentenced to 20 Years (Reuters)
A federal judge on Thursday handed a 20-year prison sentence to Philip Baker, the former managing director of the collapsed Chicago hedge fund Lake Shore Asset Management Ltd. Baker, a 46-year-old Canadian citizen, was sentenced to the maximum for a single wire fraud count by U.S. District Judge John Darrah for his role in soliciting $294 million from 900 investors worldwide, according to the office of U.S. Attorney Patrick Fitzgerald in Chicago.
Joseph F. Skowron had everything going for him. A Yale-educated doctor, Mr. Skowron gave up a budding career as an orthopedic surgeon for the riches of Wall Street. He became a star hedge fund manager, using his medical knowledge to earn millions of dollars trading health care stocks. He lived with his wife and four young children in a $7 million mansion in the wealthy Connecticut suburb of New Canaan, where he could be seen driving through town in his Aston Martin. On Friday, a federal judge in Manhattan sentenced Mr. Skowron to five years in prison for insider trading, capping a remarkable reversal of fortune for the fair-haired 42-year-old.
H.P. Gives Relational’s Whitworth a Board Seat (NYT)
Hewlett-Packard said on Thursday that it had named Ralph V. Whitworth, the head of the hedge fund Relational Investors, to its board as the computer giant seeks to head off potential campaigns by activist shareholders. Mr. Whitworth will take a seat on H.P.’s newly expanded board, which now numbers 14 directors, according to a company statement. He will sit on the board’s investment and compensation committees. “We believe that Ralph will bring a constructive voice and a track record of value creation into the boardroom,” Ray Lane, H.P.’s executive chairman, said in a statement. “We look forward to benefitting from his perspective and experience.”
Grosvenor Capital Management has raised nearly $124 million for its main fund. The Chicago-based firm said it had raised $123.9 million for the multi-strategy vehicle, which it launched three years ago. The fund of hedge funds boasts a large number of institutional investors and other hedge funds among its clients. Grosvenor manages a total of about $24 million.
The writing was kind of on the wall at the end of March. S&P 500 Index was near the 4600 level whereas inflation rate was close to 8% and the 10-year Treasury yield jumped to 2.7%. The probability of further increases in interest rates and sharp declines in the stock market was much larger than the probability of further gains in stock prices. So, we started telling our premium subscribers to short the market at the end of March. Most hedge funds interpreted the macro developments the same way we did and reduced their exposure. The total value of stock holdings in hedge funds’ portfolios went down from $3.1 trillion at the end of December to $2.8 trillion at the end of March.
This isn’t a terribly large reduction in market exposure, but it is still a reduction. It still shows that hedge funds have a slight edge in market timing.
Insider Monkey has long been a believer of imitating the top stock picks of hedge funds, and this approach has helped us beat the market on average over the last several years.
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
So, how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter we analyzed Warren Buffett’s stock picks covering the 1999-2017 period and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe to generate better returns than Warren Buffett is achieving himself.
You can enter your email below to get our FREE report. In the same report you can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12-24 months. We initially share this idea in October 2018 and the stock already returned more than 150%. We still like this investment.
Free Report Reveals
Warren Buffet's Secret Recipe
Our Price: $199FREE