At The Motley Fool, we understand that it often pays to zig when Wall Street zags, but that doesn't mean that we don't pay attention to what leading fund managers are buying and selling. And hedge funds, which are rarely in lockstep with the broader market, can be a particularly valuable source of insight.
Every quarter, fund managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing Securities and Exchange Commission Form 13-F. The form lists all U.S.-traded securities the manager held at the end of the quarter. Although the form doesn't disclose the manager's short positions or the manager's intraquarter trades, it can shine a bright light on his or her long stock bets. To help us make use of 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that tracks hedge fund public disclosures and develops investment strategies based on them.
Q4 2010 update
Carl Icahn is CEO of Icahn Capital, which is a privately owned hedge fund sponsor. The firm primarily manages private investment funds for its clients. It invests in small- and medium-sized companies having undervalued share prices. The total market value of Icahn Capital's disclosed equity holdings as of Dec. 31, 2010 -- the latest quarter for which data are available -- was $5.6 billion across 23 holdings. Here's a snapshot of the sector breakdown:
The fund's 10 largest positions (shares held) and associated changes as of Dec. 31 were:
(NYSE: MSI)-- increased 7%
(Nasdaq: BIIB)-- no change
(Nasdaq: GENZ)-- no change
(NYSE: CHK)-- increased 25.5%
Lions Gate Entertainment
(NYSE: LGF)-- no change
(Nasdaq: AMLN)-- increased 10.9%
(Nasdaq: MENT)-- no change
Hain Celestial Group
(Nasdaq: HAIN)-- increased 6.2%
(Nasdaq: LWSN)-- increased 3.2%
(Nasdaq: TTWO)-- no change
During the quarter, the fund also increased its position in Enzon Pharmaceuticals and Commercial Metals while reducing its exposure to Cadence Design Systems and Masco.
Following Icahn Capital
Should you care about Icahn's movements? According to AlphaClone's back-test simulation, anyone who invested in Icahn Capital's 10 largest holdings at the time they were disclosed publicly each quarter would have returned (4.7%) since 2005, versus 27.8% for the S&P 500 (including dividends) as of March 31. That's obviously subpar, although Icahn has a long track record of success as a corporate raider. Here's a chart showing AlphaClone's back-test model:
The strategy above buys/sells its holdings each quarter, five trading days after the SEC's filing window for Form 13-F closes.
Selected Q4 2010 commentary
Icahn Capital has a concentrated portfolio, with 41.8% in the tech sector and another 37% in health care. The portfolio has 9.6% of assets in energy and 4.1% in the services sector. Here are a few quick highlights from the 13-F filing:
- Current winner: Take-Two Interactive gained 21% in the fourth quarter, making it the largest gainer among the fund's top 10 holdings. The stock comprises 2.1% of the total portfolio. Take-Two has a four-star (out of 5) rating at Motley Fool CAPS.
- Current loser: Amylin Pharmaceuticals declined more than 29% in the fourth quarter of 2010. The company has a three-star rating in Motley Fool CAPS.
- New bets: The portfolio added a very small stake in Navistar during the quarter. Navistar makes commercial trucks and diesel engines and has a market capitalization of $5 billion.
So there you have it, the blow by blow of Icahn Capital's latest moves. Tell us what you think in the comments below.
Company data provide by AlphaClone LLC, a San Francisco-based research and investment management firm that tracks hedge fund public disclosures. For more information on the firm's investment approach, click here to visit AlphaClone.
Important disclosures for back-test performance results
Back-testing is the process of evaluating a core strategy by applying it to historical data. Back-tested performance results are provided for purposes of illustrating historical performance had a core strategy been available during the relevant period. Back-tested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any back-tested performance results. Actual results could differ materially from back-tested performance and future results could differ materially from back-tested performance. Past performance is no indication or guarantee of future results.
Take-Two Interactive is a Motley Fool Rule Breakers recommendation. Masco is a Motley Fool Income Investor recommendation. The Fool owns shares of Take-Two Interactive. Motley Fool Alpha LLC owns shares of Chesapeake Energy. The Motley Fool has a disclosure policy.