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As we’ve done in prior quarters, this post will highlight five of the most important trades made by HFs over the prior quarter. Clients receive this trend distillation the day filings hit (this is entirely based on public regulatory filings). For the purpose of this post, we’ll do an autopsy on which of these trades registered and which missed:

CHTR is King: +20.45% QTD

Our #1 conviction holding amongst all hedge funds, and one of the bright-spots in terms of heavy hedge fund participation names during 2016. We simulate nearly $5bn in cumulative profits in the name YTD, and an additional $770mm from the TWX stub. On the surface, hedge funds collectively increased their stake in the name by 60% (from ~50mm shares to 80mm shares, or roughly $8bn). However, most of that is explained by the conversion of existing TWX holdings as the graphic below will show [please visit the source link to view all charts and graphics]:

Holding the stock post event was definitely the fortuitous trade. Since June 30, the stock has run up dramatically, and the majority of that movement is explained by security selection alpha. The largest hedge funds that added to the name were TCI (effectively a net add of $650mm after their shares conversion of existing TWX stock totaling a $2.6bn position), Tiger Global (added $520mm to an existing $450mm position), Third Point ($330mm initiation), and Senator (doubled its position to $600mm). Many other TWX holders held onto their conversion ratios or added at the transfer. Notable exits included Coatue ($400mm), Eminence, and BlueMountain ($115mm each). Several funds within the HFU own nearly 1/5th of their reported market value in the stock ( TCI , Ratan , Altarock , Tybourne , Brahman , Deccan , Hengistbury , Tiger Global , and SPO ).

YHOO Draws MA Interest (and Pair Traders?): +15.47% Standalone; (20.65%) Delta Hedged with BABA QTD

A challenging quarter for this long-term stub trade. Frankly, many have migrated to long JD, but still. In addition to heavy movement into Charter, Yahoo saw huge position ramp-ups by many managers (who may or may not be hedged via BABA). As an outright trade (trying to capture some of the tailwind of a BABA turnaround), the stock is up double digits (a few hundred bps ahead of the Qs). We simulate a $1.34bn profit on the long leg for the 3rd quarter. Short sellers in BABA have felt some pain .

In terms of owners, TCI increased its position by 5x (from 14mm to 71mm shares) which currently stands at approx. $3bn. Canyon increased its stake by nearly 7.5mm shares, while Starboard held pat. Hudson Bay nearly tripled its position to a 15% of reported market value stake. Notable reductions include DE Shaw (shed 12mm shares but still holds 7mm), Mason (shed 10mm shares but still holds 3.2mm), and Citadel (4.7mm share reduction, while still holding 4.2mm). Luxor, Jericho, and Lion Point completely exited. As we can see in the chart below, crowding has inched up in YHOO while remaining depressed in BABA:

The Return of Midstream (WMB): +42.64% QTD

Given the attenuated legal dissolution of the ETE/WMB merger, several funds have been inching back into WMB even as Soroban and Corvex left the company’s board. Aggregate shares held in our HFU inched up from 177mm to 205mm. This was led by Steadfast ($270mm initiation), Millennium ($160mm initiation), Glenview ($155mm initiation), and Senator ($100mm initiation). Senator in particular is a long-standing share-holder , having first filed the security in 2010. Other initiations include Palestra, Scopia, Nokota, PAR, and PointState. Williams has been a meaningful driver of alpha since WTI crude hits its bottom in the 1st quarter.

COMM Sees a Change in Guard: (1.68%) QTD

With Carlyle reducing its stake in CommScope by 20mm shares (1/3 of aggregate holding), several funds were active purchasers of the name. The aggregate HFU added nearly 13mm shares of the stock. These included Lone Pine ($80mm add), Maverick ($55mm add to $470mm position), PFM ($50mm initiation), Makaira (7% initiation), Columbus Circle ($31mm add), and Shellback (4% initiation). The stock has been relatively range=bound in the third quarter, underperforming its tech peers. Will the measured exit of Carlyle precipitate a rebound in fundamentals?

Please visit the source link to access the full article with all charts and graphics: |

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