Slashing General Motors Company (GM) Proves Unwise as Kyle Bass’ Stock Picks Did Terribly in Q1, Tanking by 18.9%

A new position in Occidental Petroleum Corporation (NYSE:OXY) was another miss for Bass, with shares of that company dipping by 8.59% during the first quarter. The new position consisted of an even 25,000 shares of Occidental Petroleum Corporation (NYSE:OXY) valued at $2.02 million. While losses in the energy sector have slowed from the second half of last year, they have yet to have the expected bounce back that many investors seemed to be counting on entering the quarter, including Bass apparently. Andrew Hall’s Astenbeck Capital Management was also counting on a bounce back, opening a large new position in Occidental Petroleum Corporation (NYSE:OXY) during the fourth quarter.

Bass also had a position of 2.27 million shares underlying put options in SYSCO Corporation (NYSE:SYY), a food services company. The position had a value of $89.98 million. With SYSCO Corporation (NYSE:SYY)’s returns being down by 4.19% during the first quarter, there’s potential some or all of those options have been, or will be able to be, exercised. Donald Yacktman of Yacktman Asset Management is hoping for a big turnaround in the second quarter, as he holds a long position in SYSCO Corporation (NYSE:SYY) of 31.63 million shares.

As we’ve seen, hedge funds and other big money managers like Bass prefer to have the largest amounts of their capital invested in large and mega-cap stocks because these companies allow a much larger capital allocation, which is important taking into account that the global hedge fund industry has swollen to nearly $3.0 trillion. That’s why, if we take a look at the most popular stocks among hedge funds (we track more than 700 in our database), we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by 7 basis points per month. However, we found that we can combine the pricing inefficiencies among small-cap picks with hedge fund expertise and obtain significant results. This was confirmed through backtesting and in forward tests of our small-cap strategy since 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds managed to provide gains of more than 132%, beating the broader market by over 79 percentage points (see the details).

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