Hedge funds are notoriously and legitimately secretive.
As we learned in the London Whale debacle involving a trading unit of JPMorgan Chase (NYSE:JPM), there's always the chance that when your positions are broadcast, others will exploit the knowledge. While JPMorgan isn't a hedge fund itself, of course, its trading actions in this instance mirrored one. Not to mention, in the current day and age of quasi-class warfare, why would hedge-fund managers publicize the millions -- or, in some cases, billions -- of dollars that they rake in every year?
Nevertheless, four times a year, hedge funds with at least $100 million in assets under management are obligated to file a Form 13-F with the SEC, detailing their long positions held at the time. And lo and behold, it's that time of year again! I, accordingly, combed through a number of 13-F filings to find some of the most interesting third-quarter purchases.
Greenlight Capital buys Yahoo!
David Einhorn, the founder and manager of Greenlight Capital, is arguably one of the most hated and successful hedge fund managers living.
While he's perhaps best known for his widely-publicized fight against Allied Capital, immortalized in his book "Fooling Some of the People All of the Time," he's made a number of prescient short calls over the years. In 2007, he shorted Lehman Brothers, guessing correctly that the investment bank had massive exposure to toxic and illiquid subprime real estate investments. In 2011, he shorted Green Mountain Coffee Roasters (NASDAQ:GMCR), highlighting a "litany of accounting questions" and the longevity of a business model founded on expiring patents. And earlier this year, Einhorn made news by shorting Chipotle Mexican Grill (NYSE:CMG), citing legal problems surrounding its employment practices and unsustainable same-store sales growth.
I bring these examples up, merely to demonstrate that when Einhorn makes a move, other traders and investors tend to follow.
It's for this reason, in turn, that his decision to purchase 5 million shares of Yahoo! (NASDAQ:YHOO) last quarter raised eyebrows. Einhorn had previously staked a position in Yahoo! last year, noting its valuable Asian assets, but he subsequently exited it in the first quarter of this year. His restaked claim is being interpreted as a vote of confidence in Marissa Mayer, the former Google (NASDAQ:GOOGL) executive who was recently hired to run Yahoo.
Tudor Investments picks up Facebook
Another surprise came courtesy of Paul Tudor Jones of the eponymously named Tudor Investment. While Jones is best known for predicting the stock market crash of 1987 -- using doctored stock charts, mind you -- he remains a relevant player today, with a purported $12 billion in assets under management.
Similar to Einhorn, Jones, too, went headlong into the technology sector, buying shares in Facebook (NASDAQ:FB), Zynga (NASDAQ:ZNGA), and Groupon (NASDAQ:GRPN). To say that these companies have been suffering of late would be an egregious understatement. Since going public this past summer, Facebook has seen its stock plummet by nearly 50% on concerns that it won't be able to sufficiently monetize its massive user base.
Meanwhile, shares in the game maker Zynga are down 85% since their peak in early March. Earlier today, moreover, the company announced that its CFO is leaving to take a "senior finance position" at Facebook. As my colleague Evan Niu put it: "In case you haven't heard, Zynga is having a bit of an employee retention problem." It should go without saying that this doesn't bode well for the company.
Finally, with respect to Groupon, it's hard to think of a company that went from having so much promise to being so hated in such a short amount of time. Since going public approximately one year ago, its shares are down a staggering 89%. And, in addition to having a number of, let's just say, accounting issues, it, too, is struggling to keep talent. Despite its relatively tender age, the daily deals business just promoted its third chief operating officer in two years.
With all of these factors in mind, it seems clear that Jones's hasn't shaken his high-risk/high-reward, trading-centric approach that he's famous for.
The Foolish bottom line
While we here at the Motley Fool would never promote trading in and out of stocks like hedge funds often do, it's still interesting and important to know what these omnipresent investment vehicles are up to. To learn more about one of the stocks that caught the attention of Tudor Investments, click here to download our in-depth report on Facebook.
John Maxfield has no positions in the stocks mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill, Facebook, Google, and JPMorgan Chase & Co. and has the following options: long JAN 2014 $20.00 calls on Facebook, long DEC 2012 $16.00 puts on Green Mountain Coffee Roasters, and short DEC 2012 $21.00 calls on Green Mountain Coffee Roasters. Motley Fool newsletter services recommend Chipotle Mexican Grill, Facebook, Green Mountain Coffee Roasters, Google, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.