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David Atterbury’s Whetstone Capital Advisors’ Top Energy and Technology Bets

In a recent 13F filing with the Securities and Exchange Commission, David Atterbury‘s Whetstone Capital Advisors disclosed the holdings in its equity portfolio as of the end of March. Founded in 2010, Whetstone Capital aims to achieve superior investment returns by picking companies with a competitive advantage operating in industries experiencing secular growth. A firm believer in value investing, the firm’s portfolio typically has about 15-20 concentrated long positions and 5-10 short positions in struggling companies operating in out-of-favor industries. A high concentration meant that the firm’s top ten holdings constituted about 73.67% of its total equity portfolio, the market value of which stood at $287.12 million at the end of March. The energy sector constituted a whopping 49% of the above value and was represented by three key holdings: Energy Transfer Equity LP (NYSE:ETE), NiSource Inc. (NYSE:NI), and Williams Companies Inc (NYSE:WMB). The Technology sector represented 10% of the holdings with two of the notable contributors being Google Inc (NASDAQ:GOOGL) and Yahoo! Inc. (NASDAQ:YHOO).

David Atterbury - Whetstone Capital

At Insider Monkey 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 backtests to be on the safe side. Our research has shown 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. These stocks returned 135% over the last 2.5 years, outperforming the S&P 500 ETF by nearly 80 percentage points (see more details here).

Whetstone has a new top equity holding in the form of Energy Transfer Equity LP (NYSE:ETE) as the fund added an additional 522,800 shares bringing its total ownership to 644,000 shares with a value of $40.80 million. The stake represented 14.21% of the total portfolio value. The fund also has call options underlying 6,900 shares of Energy Transfer Equity LP (NYSE:ETE) valued at $1.57 million. The $36.57 billion energy company is a master limited partnership (MLP) and a general partner to the operating limited partnership, Energy Transfer Partners LP (NYSE: ETP). Through its affiliated companies, Energy Transfer Equity LP (NYSE:ETE) owns about 71,000 miles of natural gas and crude oil pipelines. In its first quarter financial results the company’s EPS of $0.52 missed estimates by $0.18, while revenue of $10.4 billion also came in a hefty $4.64 billion lower than anticipated. Energy Transfer Equity LP (NYSE:ETE)’s stock has appreciated by 16.84% year-to-date nonetheless. Two other funds that had significant holdings in the company are Daniel S. Och‘s OZ Management and James Dinan‘s York Capital Management.

A newly initiated position of call options underlying about 870,400 shares of  NiSource Inc. (NYSE:NI) ranked second in Whetstone’s portfolio. Valued at $39.27 million, the stake represented 13.68% of the equity portfolio. The fund also held a long position of nearly 252,800 shares of NiSource valued at $11.16 million. In September of last year the company announced its plan to split into two separate businesses, NiSource Inc. (NYSE:NI), which will be a natural gas and electrical utilities company, and Columbia Pipeline Group, which will be a natural gas pipeline and midstream-focused company. The split is expected to be completed by the middle of this year. The reason for the split given by the company was to enhance ‘strategic clarity and focus’. Phill Gross and Robert Atchinson‘s Adage Capital Management is the largest shareholder of NiSource Inc. (NYSE:NI) within our database.

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