‘s Eton Park Capital
is preparing to dip its fingers in the energy industry after last year’s relatively successful evasion, when the fund managed to stay clear of the companies whose top and bottom lines crumbled in light of the tumbling oil prices. In an investor letter dated January 16 and seen by Reuters, the 47 year old investment manager expressed his future plans.
“We have completely avoided exposure to the high yield debt of energy companies and to energy-impacted emerging markets, but as the price of these bonds trade down, we are spending increasing amounts of time researching opportunities in this space,” Mindich was quoted as saying.
Mindich founded Eton Park in late 2004 by raising an impressive $3.5 billion. This was despite a rather unusual redemption clause, which subjected investors to fees as high as 6% if they were to withdraw their money before four years. That feat could only have been achieved given Mindich’s exceptional credentials. After just four years at Goldman Sach’s Equities Arbitrage desk, he was promoted to head the department, which he made into one of the most profitable divisions of the bank within two years. Consequently, at the age of 27 he became the youngest partner at the firm. As of the end of 2014, the market value of Eton Park’s equity portfolio stood at $7.08 billion, as compared to $8.5 billion a quarter earlier. Financial sector constituted 35% of the fund’s holdings, while energy stocks amassed only 6% of the portfolio value at nearly $407.57 million. The top three energy companies included Williams Companies Inc (NYSE:WMB)
, Marathon Petroleum Corp (NYSE:MPC)
and Cheniere Energy, Inc. (NYSEMKT:LNG)
Eton Park has returned nearly 45.4% in the last three years. Compare this with the 55% return of S&P 500 ETFs since August 2012, and more importantly with our small cap strategy, which is based on popular small cap companies among over 700 hedge funds that we track and have been sharing these stock picks in our newsletters since 2012, returning a staggering 135%
during this period. Analysing several years of 13F filings, our research has uncovered that the best investing ideas of hedge funds are not the large cap companies, but their small cap picks. However, these investment firms are bound by their large sums of capital which they need to generate more fees, but they also serve as an impediment to investing entire portfolios in the small cap companies. Although none of the companies in this article is a small cap, it is still interesting to see the direction in which the wind is blowing on the Wall Street.
On the top of our list is Williams Companies Inc (NYSE:WMB), which was Eton Park’s largest energy holding even after Mindich sold nearly 1.30 million shares of the company during the fourth quarter to bring his stake in the company to 1.58 million shares valued at $71.21 million. The fund also held ‘Call’ options underlying 5.0 million Williams Companies’ shares valued at $224.7 million. Williams Companies Inc (NYSE:WMB) is an energy infrastructure company focused on connecting North America’s significant hydrocarbon resource plays to growing markets for natural gas, NGLs, and olefins. Among the billionaires that we track at Insider Monkey, eight investors held in total around $978.17 million in the company. One of them is billionaire Daniel S. Och’s OZ Management, which held some 9.82 million shares valued at $441.39 million towards the end of 2014