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Martin Zweig and Joseph DiMenna’s Recent Poor Performance

Martin Zweig and Joseph DiMenna had a terrific 5-year performance. Zweig-DiMenna Partners is up around 90% over the past 5 years. The problem is they lost nearly 20% since August 2008, right before Lehman’s collapse. In 2008, their loss was nearly 6%-  which is much better than an average hedge fund’s. In 2009, they lost 3.5% when everybody else was recouping their 2008 losses. Over the first 11 months of 2010, their loss was close to 3%.

Zweig-DiMenna usually have a gross long exposure of 95% and a gross short exposure of 40%. So they’re 55% net long on the average. They say their long bias usually range between 25% and 85%. Considering they had 180 stocks in their 13F portfolio and probably short sell a similar number of companies, clearly they aren’t placing their bets randomly. They systematically manage to buy the losers and sell the winners during the past couple of years. We can’t take a look at their short book, but they had more than $2 Billion in stocks in their 13F portfolio at the end of 2010. Insider Monkey, your source for free insider trading data, compiled Zweig-DiMenna’s 10 largest new stocks picks, in case you think their luck will reverse in 2011:

Company Ticker Return Value (Millions)
Barrick Gold ABX -9.7% 43
Apache Corp APA -2.5% 27
Citigroup C 2.3% 36
DuPont DD 7.9% 24
Market Vectors Coal ETF KOL -3.3% 21
Priceline PCLN 12.9% 25
Rio Tinto RIO 4.9% 29
Salix Pharmaceuticals SLXP -12.9% 22
Steel Dynamics Inc STLD 2.6% 23
Target Corp TGT -8.5% 21

 

Their largest new stock picks lost 0.8% since the end of 2010, vs. 5.2% gain for the SPY. These results imply that their poor performance might be the result of their long picks. Their best new pick is Priceline, which is also one of Chase Coleman’s favorite stocks. Barrick Gold is one of John Paulson’s large holdings. Finally, legendary oil investor T. Boone Pickens has Apache in his portfolio.

T Boone Pickens

We think it’s more appropriate to check out Zweig-DiMenna’s 15 largest positions to understand more about their performance. Here are the results:

Company Ticker Return Value (Millions)
APPLE INC AAPL 11.0% 52
PRUDENTIAL FINANCIAL PRU 7.5% 48
BARRICK GOLD CORP ABX -9.7% 43
GOLDCORP INC GG -6.2% 40
CF INDUSTRIES HOLDINGS CF 12.5% 38
GOOGLE INC GOOG 3.8% 37
CITIGROUP INC C 2.3% 36
NEWMONT MINING NEM -5.8% 35
WALTER ENERGY WLT -6.9% 32
HEWLETT-PACKARD HPQ 16.2% 30
RIO TINTO PLC RIO 4.9% 29
JPMORGAN CHASE & CO JPM 6.5% 29
APACHE CORP APA -2.5% 27
RED HAT INC RHT -2.8% 26
HESS CORP HES 4.6% 26

 

Their 15 largest positions returned 2.6% since the end of December, underperforming the SPY by 2.6 percentage points. It’s clear now that they have problems with their long picks as well as short positions. Their three best performing positions are HPQ, CF, and AAPL.  David Tepper and Lee Ainslie’s Maverick had HPQ in their portfolios. Billionaire investor Leon Cooperman also added HPQ to his portfolio during the fourth quarter. Apple and CF Industries are two stocks several hedge funds’ own the most. Another big drag on Zweig-DiMenna’s recent performance is the decline in gold and mining stocks.

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