The under-performance of the hedge fund industry over the past several years has resulted in many hedge funds closing shop. So, it wasn’t a surprise when it was revealed that Cascabel Management L.P., a fund started by former Tiger Management LLC analyst Scott Sinclair, along with Laurence Chang is in the process of shutting down after suffering significant losses in the past few quarters. Cascabel was started in the midst of the financial crisis and had the backing of hedge fund legend Julian Robertson, who through his hedge fund Tiger Management LLC seeded Cascabel. Although Cascabel started on solid footing by generating 29% returns in 2009, it failed to generate consistent returns for its investors. After losing almost 18% in 2011, the fund recovered and was up 4.8% and 27% in 2012 and 2013 respectively. However, it again lost 17% in 2014 and according to reports was down during 2015 as well. Overall, since it was founded, Cascabel Management L.P. provided its investors a meagre return of only 5%. In this article we are going to evaluate Cascabel’s final top stock picks, revealed by the fund’s 13F filing with the Securities and Exchange Commission for the March 31 reporting period. Cascabel’s latest 13F filing reveals that its public equity portfolio held value of only $42.37 million as of March 31, significantly below the $350 million it managed during its peak. The fund was heavily invested in the technology sector, which comprised more than 50% of its public equity portfolio. Cascabel heavily invested in blue chip stocks, as demonstrated by its latest top three stock picks: Time Warner Inc (NYSE:TWX), Google Inc (NASDAQ:GOOGL), and Apple Inc.(NASDAQ:AAPL).
Before we proceed to evaluate Cascabel’s top stock picks, investors need to sit back and ask themselves why a fund like Cascabel, which mostly invested in large-cap blue chip names had to shut down when most experts argue that blue chips are the best equity investments for individual investors. Research done by Insider Monkey for the period between 1999 and 2012 has shown that contrary to popular belief, the most popular large-cap picks of hedge funds in that period underperformed the broader market by seven basis points per month on average, whereas the 15 most popular small-cap picks outperformed the broader market by an average of nearly one percentage point per month. Insider Monkey’s flagship small-cap strategy has returned over 142% since its inception in August 2012, outperforming the S&P 500 ETF (SPY) by more than 83% (read the details here).
Cascabel doubled its stake in its top pick Time Warner Inc (NYSE:TWX) during the first quarter to 60,000 shares valued at $5.07 million as of March 31. Shares of Time Warner Inc (NYSE:TWX) have been on a consistent uptrend, up by over 175% in the last five years and by more than 27% over the last year. The company recently priced in a $2.1 billion debt offering and shares are up marginally this year. Most of the analyst community is bullish on the stock, with an average recommendation of ‘Buy’. Currently, Time Warner Inc (NYSE:TWX) shares are trading at $87.22, almost 10% below analysts’ average price target of $96.76. Daniel S. Och’s OZ Management is also heavily bullish on the stock, increasing its stake by 61% to 9.06 million shares in the first quarter.
Google Inc (NASDAQ: GOOGL) continued to be the second top pick of Cascabel at the end of the first quarter, even though the fund reduced its exposure by 40% to 6,000 Class A shares of the company which were valued at $3.3 million as of March 31. Google Inc (NASDAQ: GOOGL) has been underperforming the broader market for nearly two years and its shares have remained flat in the last few quarters. However, the real reason for a lot of investors to be frustrated with Google Inc (NASDAQ: GOOGL) is that the company currently sits on reserves of over $66 billion, but hasn’t shown any signs of declaring a dividend or going for a major acquisition. Andreas Halvorsen’s Viking Global is significantly bullish on the stock nonetheless, as it increased its stake in Google Inc (NASDAQ: GOOGL) by 121% in the first quarter to over 1.6 million shares.
Cascabel reduce its stake in its former top holding Apple Inc. (NASDAQ:AAPL) by 50% during the first quarter to 25,000 shares valued at $3.11 million, making the stock its third top pick. Shares of Apple Inc. (NASDAQ:AAPL) spiked by more than 15% in the first quarter, hence Cascabel’s move can potentially be seen as profit booking, though it may in hindsight have wished to hang on to the stock longer. Even though Apple Inc. (NASDAQ:AAPL)’s stock has more than tripled in the last five years, investors, including prominent ones like Carl Icahn continue to be bullish on the stock. Icahn recently published an open letter to Apple Inc. (NASDAQ:AAPL) CEO, Tim Cook, in which he argued that shares of the company are undervalued, stating that their fair value is $240. Among the hedge funds we track, Icahn’s Icahn Capital LP has the largest position, consisting of 52.76 million shares valued at over $6.5 billion as of March 31.