13F REPORTS HYPERACTIVE, WRONG FOOTED
Nobody managing money was moon bound during the September quarter. Plenty of screw-ups, overtrading and fallow sector emphasis. Good-acting groups like energy got little or no play in portfolios. Aside from Warren Buffet I couldn’t find anyone really interested in energy and financials, either. Several managers remain overweighted in high tech paper, pretty much a disaster in the making.
Case by case, what surprised me was the big correction in Renaissance Technology’s $70 billion fund. This is a house of mathematicians, not security analysts. They trade intraday for eights and quarters but come up short. Names are recognizable like Merck and Gilead along with Microsoft and Alphabet but timing is everything. Portfolio turns over 100%during the quarter. Typical positions range from 1% on down, but day trading Alphabet and Microsoft? Where’s the value added?
Turning to Tiger Global Management, I detected some evolution from super concentrated tech orientation. Static ratio of positions still low at 42% of assets. Meta Platform and Alphabet, conspicuous losers, still 10% of assets while J.D.Com and Microsoft comprise over 20% of assets. Hey, guys. What would make you bang out such properties?
T Rowe Price Associates, traditionally a growth stock fund, is bunched into 4 stocks: Microsoft, Amazon, Apple and Alphabet. Save Apple, 3 out of 4 losers. The market says now ain’t the right time for pricey growthies. Buying into the NASDAQ 100 Index covers you in tech paper. Why make brokers rich with individual stock selection?
Horse of a different color is Third Point, a $5 billion house devoted to value stocks. But, its turnover ratio at 58% leaves me wary… I don’t see any energy plays, even financials here. Big positions in Colgate Palmolive, PG&E, Danaher and UnitedHealth. This house seems disinterested in energy and financials. UNH is a pricey growth stock but a great operator in healthcare insurance programs.
Pershing Square, now at an $8 billion asset base, sticks to value investing with definable properties like Lowe’s, Canadian Pacific and a bunch of food service operators. I’m negative on railroads as a cyclical play, but I missed the snap-back in Lowe’s. Still allergic to any cyclical plays in a stuttering GDP setting. What to like about Pershing is its power of concentration in prosaic businesses that are all analyzable. No overtrading here. This is a house using security analysis, not mathematics as its driver. Static ratio is reasonable at 33%.
In Carl Icahn’s portfolio, I saw what I expected to see: A low static ratio. Carl’s no trader for eighths and quarter points. The list stays heavy in energy like nobody else. CVR Energy is a big winner. If you care to stick with a good operator, Carl’s your man. I own Occidental Petroleum where he was concentrated, but then peeled off most of his position.
For pretty full concentration in healthcare, there’s Glenview Capital Management. But, why so high in asset turnover while Cigna and Tenet comprise 24% of assets? A big winner like UnitedHealth is conspicuously missing here plus Eli Lilly.
I finally found a portfolio with no technology plays. Namely, Elliott Investment Management, a $7 billion house with low turnover. Major portfolio holding at 23% of assets is Triple Flag Precious Metals. I could never make such a play because conceptually I hate gold as an investment. For all other metals and mining plays—copper, steel, aluminum your entry point is critical at bottom of cycle levels. Then, you could double your money over 12 months. I can’t build a reliable earnings model for gold, not a gold bug and never will be such an animal.
Family office portfolios get my attention, because after all, they’re investing their own capital not OPM (Other People’s Money)). I turned to the Duquesne Family Office’s portfolio. Static ratio is low at 22%. Half their $1.7 billion portfolio rests in a mix of growthies and value stocks like Eli Lilly, Amazon, T-Mobile and Chevron. Coupang, an 18% position, but I never heard of this South Korean property with marginal results.
Coatue Management, an $8 billion house, has tied itself to the electric auto sector with Tesla and Rivian nearly 20% of assets. There follows then an array of tech and drug houses: Moderna, Amazon, NVidia, Netflix, Disney, even Meta Platforms. Low static ratio at 25%. Good to own the right stocks but, I’d use the NASDAQ 100 Index, instead.
What is Citadel Advisors doing with its $77 billion? Turnover is the name of the game here. Sole position over 1% of assets is Amazon. This is a growth stock portfolio, but I can’t find any theme here-in. Finally, financials show up…Goldman Sachs, JPMorgan Chase and Wells Fargo. Still nobody’s so keen on banks, insurance underwriters and brokerage houses excepting Warren Buffett whose interest in Geico dates back over 50 years. Berkshire Hathaway sits (contentedly) with its 40% position in Apple. They don’t teach this brand of activism in “B” school. I’m heavy in oils, too, but sufficiently cowardly not to overweight financials like JP Morgan Chase and Goldman Sachs.
When I interviewed for a job on the Street in 1959 as a research trainee, I was shoed in Mexican sandals. The research partner kindly advised me to buy a pair of black shoes with laces and so I did. Surprised by Warren’s $4 billion buy in Taiwan Semiconductors, I checked it out and then bought a 5% position.
My path and Warren’s crossed in 1963 when we both were checking out a besieged American Express. I held on for a couple of years, but Buffett still inventories it. How many of today’s high metabolic overachievers think of forever as their holding period? For operators getting bruised today, think of BRK as a viable property, still capable of renewing itself. Throw away your pie charts, guys.
I was non-plussed by the Jana Partners portfolio. Not my world. What is Freshpet and New Relic at 35% of assets? Portfolio turnover in the September quarter was total. Gimme a break!
My quarterly look-see didn’t show me much in high tech plays that have fouled up, like Amazon and Meta Platforms. Oils were buoyant but had few takers along with the financials. Yet, these sectors represent 40% of market valuation. Nobody’s playing a capital preservation game. Overspeculation and high turnover go on, but is it the right time for all that?