This year has been very hard on some big hedge funds, which saw no other way out except to close down. The last one to join Jabre Capital Partners, Highfield Capital Management, Brenham Capital Management, Brenner West Capital Partners, Tourbillion Capital Partners, Criterion Capital Management in this trend is San Francisco-based Ascend Capital. The WSJ reported a month ago that Ascend Capital, which managed more than $2 billion at the end of January 2018, is planning to return client money and turn its firm into a modest family office. Malcolm Fairbairn, the fund’s founder and Chief Investment Officer disclosed the following in his investor letter:
“A combination of industry headwinds, a difficult market environment and some family health concerns have led to the conclusion that this is the right time to make a change.”
Mr. Fairbairn has an impressive experience in investing, running Ascend Capital for almost 20 years during which the company had many fantastic years in terms of performance. Prior to founding Ascend Capital, Mr. Fairbairn honed his investment acumen at Citadel Investment Group and Strome Suskind. He holds a B.S. and M.S. degrees in Chemical Engineering from Massachusetts Insititute of Technology. When it comes to the fund’s returns in recent years, its Ascend Partners Fund, L.P. brought back an impressive 12.22% in 2013, 5.00% in 2014, 2.63% in 2015. Then, in 2016 it has lost 3.51% only to come back in 2017 with a return of 5.91%. In 2018, through September, Ascend Partners Fund, L.P. had a negative performance, posting a loss of 1.73%, foreshowing in a way the disappointing future for the fund.
Nevertheless, Mr. Fairbairn also reported in the letter that he was very satisfied with the fund’s efficiency in times of crises, as the fund lost only 1.6% from the end of 2007 through the beginning of 2009, in the same period in which S&P 500 lost 50.9%. That can only mean that the recent performance was quite discouraging (in lack of a better word) that Mr. Fairbairn couldn’t conceive a strong comeback in 2019.
As a consequence of Ascend Capital’s closure, some companies in its portfolio may end up being oversold due to the short-term selling pressure. That’s why we thought it would be smart to take a look at its top 5 holdings from the end of Q3 2018.
The fund had the largest position in a waste services company Waste Connections Inc (NYSE:WCN) at the end of September 2018, counting 1.07 million shares with a value of $85.44 million, after it has boosted it by 618%. In the fourth quarter the company’s stock lost 6.41%, and at the time of the writing, it is trading at $73.30. The number of smart money investors from our database long Waste Connections dropped in the third quarter to 30 hedge funds, from 34 in Q2 2018.
The second biggest position at the end of third quarter worth $83.18 million, the fund disclosed in Graphic Packaging Holding Company (NYSE:GPK), on the account of 5.94 million shares. This is a big company that designs packagings for a variety of commercial products, and during Q4 its stock also dropped by 24.27% and it is now trading at $10.64.
In Mylan NV (NASDAQ:MYL) the fund had a position that included 2 million shares outstanding, with a value of $73.32 million. From the beginning of October until the end of December 2018, Mylan’s stock price lost 24.89% and it is currently trading at $27.23. Ascend Capital’s fourth biggest position at the end of the third quarter was in Crown Holdings, Inc. (NYSE:CCK), and it counted 1.35 million shares that were worth $69.39 million. The company’s stock dropped by 12.50% during the fourth quarter, and presently it is trading at $41.83. The fifth largest holding in Ascend Capital’s equity portfolio at the end of September 2018 was in Hyatt Hotels Corporation (NYSE:H), and it included 687,687 shares that were valued $54.73 million. This is yet another company among its top five third quarter holdings, whose stock prices dropped during Q4. Hyatt’s stock lost 14.35% to be precise, and at the moment of writing, is trading at $64.57.
If you are interested you can get familiar with our proprietary methodologies that aim to identify the best and worst hedge fund managers and their best and worst stock picks. For example, our latest list of best hedge fund stocks lost only 1.5% since November 15th vs. a loss of 3.3% for the S&P 500 ETF (SPY). Our latest list of the worst hedge fund stocks (which we recommended our subscribers to short) lost an average of 8.5% during the same period. So, our subscribers were able to beat the S&P 500 Index both on the long and short sides of their portfolios (read the details here).
This article was originally published at Insider Monkey.