Matthew Iorio’s White Elm Capital is returning money to its investors at the end of the year. Based in Greenwich Connecticut, Matt Iorio’s White Elm Capital is a top-tier hedge fund that flied under many investors’ radar screens. A former managing director at Stephen Mandel’s Lone Pine Capital, Matt Iorio is a Tuck School of Business graduate, and he mainly employs a long/short strategy with a fundamentalist focus.
According to a letter seen by Reuters, White Elm isn’t shutting down because it can’t beat the market anymore, Iorio is converting it into a family office. This year White Elm returned 28.7% through the end of November. That’s nearly 1.5 percentage points ahead of the S&P 500 Index, though not as good as the top 20 stock picks of hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. We noticed that five of Elm Ridge’s top 10 stock picks are among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
White Elm has been in existence for 12 years and managed to deliver annual gains of 15% which is very impressive. The long-short hedge fund managed more than $1 billion at its peak but its AUM fell below $400 in 2018. At the end of September the fund had $387 million in its 13F portfolio. Now that White Elm is returning outside capital, it will be selling a vast majority of these positions in a few weeks and this may put some pressure on some of these stocks.
White Elm’s top 3 positions were Transdigm (TDG), Visa (V), and Mastercard Incorporated (NYSE:MA). These are all liquid stocks. For example Mastercard Incorporated’s daily average volume is around $1 billion, so selling a $21 million position over a few days won’t put any noticeable pressure on the stock’s price. On the other hand, White Elm’s fifth largest position is Texas Pacific Land Trust (NYSE:TPL) which trades an average of 15,000 shares a day. We may definitely see some price pressure on TPL shares towards the end of this year as White Elm winds down its 27,100 share position which was worth $17.6 million at the end of September.
White Elm will also be selling its $19 million position in Autodesk, Inc. (NASDAQ:ADSK) which corresponds to about 10% of Autodesk Inc’s daily trading volume. The two other stocks White Elm won’t have any trouble winding down are PayPal Holdings, Inc. (NASDAQ:PYPL) and ServiceNow, Inc. (NOW) which have an average daily trade volume of $700 million. PayPal Holdings Inc is White Elm’s 7th biggest position and ServiceNow is 8th. White Elm’s 9th biggest position was also an extremely liquid stock: Amazon.com, Inc. (NASDAQ:AMZN). All three stocks are also among hedge funds’ top 20 picks. White Elm allocated about $17 million to these positions.
The only other top stock pick that may experience some price pressure that we noticed is Advanced Drainage Systems, Inc. (NYSE:WMS). Its daily trading volume was about $12 million on Friday and White Elm had $13.5 million invested in the stock at the end of September. So, WMS investors should keep an eye on this for the next few weeks.
You can check out White Elm’s entire 13F portfolio here and see whether any of its 31 positions might see some price pressure.
Disclosure: None. This article is originally published at Insider Monkey