Benjamin A. Smith‘s $5.85 billion fund, Laurion Capital Management has pushed Apple Inc. (NASDAQ:AAPL) off its top spot as the fund’s largest equity holding and replaced it with a newly initiated position in CBS Corporation (NYSE:CBS). We decided to take a closer look at the firm’s portfolio to analyze if it has lost hope in the world’s most valuable company, which runs one of the most profitable businesses ever.
The New York-based fund Laurion Capital was launched in 2005 by Benjamin A. Smith and Sheehan Maduraperuma, both of whom were previously employed by JP Morgan. The fund relies heavily on computer algorithms and quantitative models to derive superior returns. The turnover ratio for the first quarter stood at a staggering 145.68%, as the fund took huge stakes in options derivatives of a number of companies, unlike last quarter. However, huge investments in option contracts is a norm for Laurion Capital. At the end of March, the market value of Laurion’s public equity portfolio stood at $5.14 billion, up from $4.37 billion at the end of the previous quarter. Its top public equity holdings included CBS Corporation (NYSE:CBS), United Technologies Corporation (NYSE:UTX), and Yum! Brands, Inc. (NYSE:YUM).
Laurion Capital is a fund that we have been following for the last couple of years along with over 700 other investment firms. We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45 days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 142%, outperforming the S&P 500 ETF by nearly 84 percentage points (see more details here).
During the first quarter, Laurion slashed its stake in Apple Inc. (NASDAQ:AAPL) by 90% to 157,911 shares valued at $19.65 million. As far as the question of Smith losing hope in the $735 billion tech giant is concerned, it is hard to answer. Laurion also added call options underlying about 342,100 Apple Inc. (NASDAQ:AAPL) shares, taking the total number of call options on underlying shares to 500,000. Moreover, the fund also initiated a position of 500,000 put options underlying shares. However, without knowing the strike prices and maturity times, it is hard to decipher on which side of the movement in Apple’s stock the fund betting on. So far this year, Apple Inc. (NASDAQ:AAPL)’s stock has appreciated by more than 15%. Activist investor Carl Icahn‘s Icahn Capital LP is the largest stockholder of Apple Inc. (NASDAQ:AAPL) among the investors that we track, owning some 52.76 million shares valued at $6.56 billion.
During the first three months of the year, Laurion acquired some 1.25 million shares of CBS Corporation (NYSE:CBS) valued at $75.87 million. The stake represented 1.48% of the fund’s portfolio value. The $28.62 billion mass media company operates through four main segments, which are entertainment, cable networks, publishing, and local broadcasting. Although up by nearly 5% year-to-date, CBS Corporation (NYSE:CBS)’s stock has slid by a little more than 4% over the last year. The company recently announced that it will launch its premium cable network Showtime as a stand-alone streaming service. The subscription price of $10.99 per month is $4 lower than HBO Now’s fee. Eric W. Mandelblatt‘s Soroban Capital Partners is the largest stockholder of CBS Corporation (NYSE:CBS) within our database, holding about 12.36 million shares valued at $749.61 million.
Another newly initiated stake of the fund was in United Technologies Corporation (NYSE:UTX), and consisted of 417,700 shares valued at $48.95 million. The second-largest equity holding constituted 0.95% of the fund’s portfolio value. The stock of the $102.44 billion industrials company is trading nearly sideways on a year-to-date basis. A push in the right direction could come at the end of the third quarter, as that is the time United Technologies Corporation (NYSE:UTX)’s CEO Gregory Hayes has given for the company’s final verdict on whether to spinoff or sell its Sikorsky Aircraft business. Among investors that we track, Ken Fisher‘s Fisher Asset Management is the largest stockholder of United Technologies Corporation (NYSE:UTX)’s, owning 8.07 million shares valued at $945.53 million.
Laurion’s third-largest equity holding, Yum! Brands, Inc. (NYSE:YUM) was initiated during the March quarter with 587,945 shares valued at $46.28 million. The stock of the $39 billion restaurant holding company engaged in the operation of multiple restaurant chains, including Kentucky Fried Chicken, Taco Bell, and Pizza Hut, is up by a staggering 25% year-to-date. Among the funds that we track, pioneer activist Dan Loeb’s Third Point is the largest shareholder of Yum! Brands, Inc. (NYSE:YUM) with 3.3 million shares valued at $259.78 million.