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Farallon Capital’s New Stock Picks and Holdings

Tom Steyer’s Farallon Capital Management is the world’s 14th largest hedge fund, managing around $21 Billion. They had a rough 2008 and had to deal with a lot of redemptions.  Farallon Capital invests in various asset classes. US equities are a small percentage of their investments. At the end of December, their equity investments were $3.3 Billion, less than 15% of their AUM.

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Farallon Capital returned about 14.5% per year since 1986. Farallon returned 20% in 2006, 14.8% in 2007, -36% in 2008, 33% in 2009 and mid-teens in 2010. The fund tries to achieve superior risk-adjusted returns through fundamental, bottom-up analysis. Insider Monkey, your source for free insider trading data, follows long/short equity hedge funds that employ fundamental research and have proven track records. At the end of December, Thomas Steyer’s Farallon added 11 new companies to its 13F portfolio:

Company Ticker Return Value (Millions)
QWEST COMMUNICATIONS INTL IN Q -2.5% 134
AIRGAS INC ARG 2.2% 128
MICROSOFT CORP MSFT -2.4% 64
LPL INVT HLDGS INC LPLA -9.4% 40
FIDELITY NATL INFORMATION SV FIS 16.4% 39
DOLLAR GEN CORP NEW DG -11.2% 33
LYONDELLBASELL INDUSTRIES N LYB 7.8% 20
ENCANA CORP ECA 8.0% 20
DENTSPLY INTL INC NEW XRAY 7.2% 16
ROPER INDS INC NEW ROP 9.7% 6
LIGAND PHARMACEUTICALS INC LGND 1.1% 2

The weighted average return of these 11 companies was 3.7%, underperforming the SPY by 2.2 percentage points.

Dan Loeb has LyondellBasell (LYB), Airgas (ARG) and Ligand in his portfolio as well.

Richard Perry’s Perry Capital, Leon Cooperman’s Omega Advisors, Barry Rosenstein’s Jana Partners, Curtis Schenker’s Scoggin Capital, David Einhorn’s Greenlight CapitalBrevan Howard, and Whitney Tilson’s T2 Partners are hedge funds with Microsoft investments.

Larry Robbins’ Glenview has a large Fidelity National Information (FIS) position.

Leon Cooperman and T. Boone Pickens have Encana (ECA) investments.

Tom Steyer increased the following positions by at least 25%: Verisk Analytics (VRSK), McAfee (MFE), Transdigm (TDG), Genzyme (GENZ), Allegheny Energy (AYE), Target Corp (TGT), Baxter Intl Inc (BAX), and Crown Castle Intl (CCI).

At the end of December, Tom Steyer’s 20 largest holdings accounted for nearly 70% of his 13F portfolio.

Company Ticker Return Value (Millions)
NOVARTIS A G NVS -5.1% 308
ALCON INC ACL 0.4% 204
GENZYME CORP GENZ 1.9% 190
ALLEGHENY ENERGY INC AYE 8.1% 169
MCAFEE INC MFE 3.4% 147
QWEST COMMUNICATIONS INTL IN Q -2.5% 134
AIRGAS INC ARG 2.2% 128
HUDSON PAC PPTYS INC HPP -1.3% 107
SCHWAB CHARLES CORP NEW SCHW 12.8% 106
VIACOM INC NEW VIA 12.4% 95
STATE STR CORP STT 1.4% 92
TARGET CORP TGT -9.5% 91
ORACLE CORP ORCL 7.1% 81
WELLS FARGO & CO NEW WFC 9.1% 69
MI DEVS INC MIM 3.7% 66
MICROSOFT CORP MSFT -2.4% 64
HOME DEPOT INC HD 6.9% 63
CROWN CASTLE INTL CORP CCI 4.9% 62
IESI BFC LTD BIN -4.4% 60
MSCI INC MSCI -7.3% 59

Farallon’s top 20 stocks returned 1.6% since the end of December, underperforming the SPY by more than 4 percentage points. However, some of these top holdings (i.e. ACL, AYE, MFE, Q) are held as part of a merger arbitrage strategy and comparing their return to SPY isn’t very appropriate. Jim Simons’ Renaissance, Dan Loeb’s Third Point, Richard Perry’s Perry Capital, Warren Lichtenstein’s Steel Partners, and Barry Rosenstein’s Jana Partners are among the other hedge funds that bought Alcon as part of their merger arbitrage strategy. Actually merger arbitrage is one of the most popular strategies used by hedge funds. As a result, Alcon is one of the 10 most popular companies among hedge funds.

Tom Steyer also started to reduce some of his holdings significantly. He sold at least 40% of his holdings in the following companies: Check Point Software (CHKP), Home Depot (HD), BMC Software (BMC), Amag Pharmaceuticals (AMAG), Potash (POT), and RAM Energy (RAME).

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