The Guy Who Called the Housing Crisis Sold General Motors

Hayman Capital Management sold 1.5 million shares of General Motors, but it sold a lot more of a handful of other companies.

Aug 19, 2014 at 7:30PM

Www
Source: Steve Snodgrass via Flickr.

Every quarter, large money-managers have to disclose what they've bought and sold via "13F" filings. While Fools don't always follow what the big money does, we can often glean an idea or two by tracing their footsteps.

Kyle Bass, founder of Hayman Capital Management, is best known for shorting the subprime mortgage securities that nearly crippled the economy, effectively "calling" the economic recession and making a boatload of money at the same time. And while it doesn't have anything to do with real estate -- an area Bass clearly knows well -- Hayman Capital Management's largest stock holding since late 2013 has been General Motors Company (NYSE:GM)

This past quarter, Hayman Capital sold 1.5 million shares of General Motors. Let's dig into this move.

Buying and selling for several quarters 
Hayman Capital first opened a position in General Motors during the fourth quarter of 2013, and it added almost 2.5 million shares to that position in the first quarter of 2014. Here's a look at the price action of GM stock over the period since Hayman first opened a position:

Gm Hayman Trades

GM data by YCharts. Arrows added by author.

The green arrows mark the low points in the quarters when Hayman bought, and the red arrow marks the high price in the quarter when Hayman sold. At best, Hayman would have made about a 10% return on the GM stake it sold.

A big fat caveat
Even after Hayman Capital sold 1.5 million shares, GM was still its largest stock holding at the end of the recorded period. The percentage of Hayman's portfolio invested in General Motors actually increased from 23% at the end of the first quarter, to nearly 28% at the end of the second quarter.

What does this tell us? Not much.

First, digging just a little deeper into Hayman's 13F filings shows us something important: The value of Hayman's stock portfolio declined a whopping 29% from one quarter to the next from $1.04 billion to $732 million. This is why basing your investments on the moves of large money-managers is rarely a good idea. The reality is that we have almost no idea why this happened.

Because we can see the changes in holdings at the fund, we do know that Bass sold off a lot of positions, including Kinder Morgan (NYSE:KMI)Vodafone Group Plc (NASDAQ:VOD), and Verizon Communications (NYSE:VZ), which collectively accounted for more than 27% of the hedge fund's stock position.

Apples And Catfish

Comparing a hedge fund's holdings to our own can be like comparing apples and catfish.

But we don't know why Hayman Capital would have exited so many large positions and reduced its largest holding. Did a big investor cash out of the fund? Is Bass expecting a market correction? Has the fund invested in non-public securities that we don't see, given that 13Fs disclose stock holdings only? There could be any number of reasons, and hedge funds' motivations for buying and selling are often far different from those of the individual investor.

Picking good investments is hard enough without trying to read the minds of a hedge fund manager and his staff.

Focus on the business, not a total stranger's actions
Don't forget that Kyle Bass is managing Hayman Capital Management's portfolio and not yours. The objectives of the fund's investors may not be aligned with yours, so acting based on someone else's moves can lead to disaster. Further, 13F data is dated as soon as it's publicly available. It's mid-August, and we're talking about Hayman Capital's holdings at the end of the quarter ended June 30; we don't know how much the fund paid for its shares, how much it sold them for, or when the trades happened. 

Looking at what the big money does isn't a bad place to start, but it's not where your bucks should stop.

Warren Buffett's worst auto-nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact, but Warren Buffett isn't one of them, calling it a "real threat" to one of Berkshire Hathaway's biggest businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to ride this megatrend. Click here to access our exclusive report on this stock.

Jason Hall owns shares of Berkshire Hathaway and Tesla Motors. The Motley Fool recommends Berkshire Hathaway, Ford, General Motors, Kinder Morgan, Tesla Motors, and Vodafone and owns shares of Berkshire Hathaway, Ford, Kinder Morgan, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers