Tuesday, February 17, 2015

So what does the smart money think of Alibaba?.......

To contextually paraphrase Steve Martin..... "The New 13Fs are here!...The New 13Fs are here!"

When I was a little boy, I longed for the day when Topps would create bubble gum "Hedgie Cards" for all of the kids on the block to trade and collect....sort of like billionaire Pokemon...."Hey, I've got a Charlie Munger rookie card!"....but I digress.   That said, I've just finished reviewing a sampling of the holdings of some of my favorite Hedge Funds (13Fs filed over the weekend) and as you  might suspect, the exercise was, to say the least, enlightening.

As an investor, it's always nice to know what the smartest guys in the room are doing. Even if you don't have enough money to warrant an invitation to sit in the room and it's 45 days after the fact, the 13Fs still provide invaluable information. We get a snapshot of what the Big Dogs are thinking.  That, of course, is the quintessential benefit of the 13F to individual investors.  Obviously, we have no way of knowing what level of high-frequency-genius-folly-brilliance-silliness transpired during the quarter, but at the very least, we get a feel for where things stood when the music stopped. The table below summarizes the Alibaba investment by some of the most savvy money managers in the business. (Selected data from SEC.gov and NASDAQ.com - URLs below)

Here are my key takeaways from the numbers:

Re: the 9/30/14 13Fs.
  1. As of 9/30/14 only ten (10) of the  twenty (21) funds below owned shares in the "Hottest IPO in history".
  2. The total amount invested was US$ 3.1 Billion, roughly 0.7% of the aggregate US$ 419 Billion in total assets under management.
  3. The clear outlier was one of Julian Robertson's funds, Tiger Management LLC, with roughly 27% of it's asset value invested in in BABA. Although, another, much larger, Robertson Fund I follow (Tiger Global Management LLC) had no position in the stock at the time.

Re: the 12/31/14 13Fs.
  1. Only 8 of the 21 funds maintained Alibaba positions.
  2. Total share count reduced from 34,566,602 to 31,409,418 during the quarter.
  3. Viking sold off 70% of it's shares during the quarter.
  4. The only two funds increasing their positions substantially were Third Point (Loeb) and Tiger (Robertson).   
  5. Third Point share ownership increased from 7.2 million to 10 million shares, up to 10% of the fund's 9/30/14 asset value.  Dan Loeb's slot on Yahoo!'s board and his sponsorship of Melissa Meyer probably has something to do with the increase, but I'm a little foggy as to what Loeb might see that Jackie Reses didn't before she abruptly resigned, absolving herself of any responsibility for the IPO. 
  6. Robertson's Tiger Fund(s) ownership increased from 1,216,283 shares to 6,386,783, up to 8% of the funds' 9/30/14 asset value.
  7. If we remove Third Point and the Tiger Funds, in the three months from 9/30/14 thru 12/31/14, total assets invested in Alibaba by all other funds decreased from $2.3 Billion to $1.3 Billion (Marked-to-Market at the 2/17/15 closing value of $86.85/share), or the equivalent of 0.3% of 9/30/14 assets.  Perhaps the other Big Dogs have finally taken some time to read the IPO filing and supporting documents?
    Notes on the above:

  1. With the exception of Third Point and Tiger,  the smartest guys in the room apparently don't think all that much of Alibaba's prospects.  The Hedge Funds listed below have the ability to invest in any security anywhere in the world (at presumably favorable terms) and most chose to avoid Alibaba initially.  The others that bought-in did so at relatively insignificant levels and either reduced or eliminated their positions after three months.  This speaks volumes.
  2. Third Point and Tiger, with their outlier positions (10% and 8% of NAV respectively) are probably rethinking their strategies now that BABA is trading in the $80 range, if they've not sold out already.
  3. Highbridge Capital Mgmt., owned by JP Morgan (a lead underwriter in the Alibaba IPO) chose not to invest in the company at all ....far from a ringing endorsement.
  4. BABA has gone from $120 down to the high $80's. Short interest is about 42 million shares, or about 8% of the unlocked float.  i.e.) There seems to be significant downside sentiment.  
  5. Re: the biggest of the Big Dogs, Drilling down on the Blackrock 13F as an exercise, we note that the BABA share count has been reduced by about 60% from the prior quarter. We also see that the company has taken only six (6) other positions in Chinese ADRs:  Baidu- $290 million;  VIP Shop - $15 million; WUXI Pharma - $2 million; Qihoo 360 - $4 million; YY.com - $4 million and Trina Solar - $600,000.  Of Blackrock's $95 Billion in available, invest-able assets, they chose to deploy only $412 million (0.4% of assets) on these ADRs. Baidu & BABA comprise nearly all of this investment.  As a point of reference, as of 12/31/14 there were 107 of these Chinese Shell Company ADRs listed on the NASDAQ and the NYSE with an aggregate Market CAP of more than US$1.3 Trillion. For reasons that I'm sure will become obvious over time, Blackrock, like most of the smart money, has chosen to stay clear of these assets, at least at quarter's end.    
  6. Last Thursday night Bill Ackman (Pershing Square) and Ray Dalio (Bridgewater) engaged in a spirited "activist" v "quant" debate at Ackman's charity event, illustrating the philosophical rift between fundamentalists (Investors who read filings) and rules based program traders (Investors who don't).  Dalio described his Quant philosophy as being essentially "long or short everything.  I don't have any bias."  This describes, at least to me, how program/rules based management could inadvertently accumulate significant positions in Alibaba, or for that matter, any misrepresented ADR or stock.  Simply put, the trades can be driven by bad data. (Note: Per the 13F's Bridgewater & Pershing Square had no positions in Alibaba.) Quant decisions/rules are generally based on spreads, price movements, velocity, etc. and lots of other slick metrics that individual investors can neither access nor understand. (Only 1% of Bridgewater's program trades are reviewed/stopped by a "human" trader.)   Unfortunately, failing to adjust for conditions or correct errors where the data is inaccurate or untrue (Ray's "Truth/Reality" thesis),  tends to yield unintended consequences (Knight Capital).  Ackman and fundamentalists would argue that this is the odd, yet expected, result when investors make decisions based on data rather than the intrinsic value of the underlying business. As Ackman commented....."This is fascinating."
  7. The March 20th, 2015  "Lock-Up" expiration is right around the corner.  Another  429 million BABA shares will be available for sale. Based on the 13F activity, I don't see that the smart money is going to be clamoring for additional shares.
  8. At this very moment there are probably legions of "dumb money"....chart-mongering, double-shoulder-candlestick-worshiping, moon-phase-analyzing technical day traders looking at the Alibaba recent weakness as a huge buying opportunity....gotta buy on the dips!
Well, now we have a pretty good idea of what the smart money thinks of Alibaba   As always, the question is, what is the dumb money going to do?.....and when will they do it?

 9/30/14
 9/30/14
 9/30/14
 12/31/14
(b) 12/31/14
"The Smartest Guys in the Room" 
Holdings 
Shares of
Value Mlns US$
Shares of
Value Mlns US$
Billions  US$
BABA
$88.85
%
(a)
BABA
$86.85
%
Viking Global Investors $26.811,387,526$1,011,782 3.8%3,708,686$322,099 1.2%
Third Point $8.77,200,000$639,720 7.4%10,000,000$868,500 10.0%
Soros Fund Mgmt LLC$8.84,400,000$390,940 4.4%4,400,000$382,140 4.3%
DE Shaw & Co Inc$51.44,252,705$377,853 0.7%4,052,705$351,977 0.7%
Blackrock  Advisors LLC$95.52,378,588$211,338 0.2%935,877$81,281 0.1%
John Paulson  & Co Inc.$22.91,902,500$169,037 0.7%1,925,277$167,210 0.7%
Tiger Mgmt LLC (J Robertson)$0.41,216,283$108,067 27.0%571,183$49,607 12.4%
Tiger Global Mgmt LLC (J Robertson)$7.00$0 0.0%1.5%5,815,690$505,093 7.2%
Appaloosa  (Tepper)$7.3725,000$64,416 0.9%0$0 0.0%
Davidson Kempner Capital Mgmt.$1.7564,000$50,111 2.9%0$0 0.0%
Adage Capital Partners$41.9540,000$47,979 0.1%0$0 0.0%
Reniassance Technologies $39.00$0 0.0%0$0 0.0%
Bridgewater Associates LP$12.80$0 0.0%0$0 0.0%
Highbridge Capital Management - (JPM)$5.30$0 0.0%0$0 0.0%
Howard Capital Management $0.50$0 0.0%0$0 0.0%
Och-Ziff Capital Mgmt Group $2.10$0 0.0%0$0 0.0%
AQR Capital Management $35.40$0 0.0%0$0 0.0%
Lone Pine Capital $26.90$0 0.0%0$0 0.0%
Pershing Square  Cap. Mgmt (Ackman)$13.40$0 0.0%0$0 0.0%
Baupost (Seth Klarman)$5.40$0 0.0%0$0 0.0%
Elliott Management Corp$5.90$0 0.0%0$0 0.0%
Total$419.134,566,602$3,071,2430.7%31,409,418$2,727,9080.7%
(a) Tiger Funds Combined %
(b) Marked to Market at the 2/17/15 closing price.



Reference Codes/Links:

9/30/14 13F'as as of November 14th filing date.
12/31/14 13F'as as of February 14th filing date.
2014 low $82.81 on 10/15/14

Alibaba Securities subject to 13F disclosure:
01609W 10 2 * ALIBABA GROUP HLDG LTD SPONSORED ADS
01609W 90 2 ALIBABA GROUP HLDG LTD CALL
01609W 95 2 ALIBABA GROUP HLDG LTD PUT

*********************************
12/31 Third Point - 10,000,000
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001040273&owner=include&count=40&hidefilings=0

9/30 - Third Point - Dan Loeb -  7,200,000  shares
https://www.sec.gov/Archives/edgar/data/1040273/000108514614002342/xslForm13F_X01/form13fInfoTable.xml
************************************
12/31 Soros - 4,400,000 shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001029160&owner=include&count=40&hidefilings=0

9/30 Soros 4,400,000 shares
https://www.sec.gov/Archives/edgar/data/1029160/000114036114042212/xslForm13F_X01/form13fInfoTable.xml
*************************************

12/31 - DE Shaw 4,052,705
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001009207&owner=include&count=40&hidefilings=0

9/30 - DE Shaw 4,252,705 shares
http://www.nasdaq.com/quotes/institutional-portfolio/d-e-shaw--co-inc-63744?sortname=companyname&sorttype=0&page=5
**************************************

12/31 - Renaissance Technologies - 0
https://www.sec.gov/cgi-bin/browse-edgar?company=Renaissance+Technologies&match=&filenum=&State=&Country=&SIC=&myowner=exclude&action=getcompany&Find=Search

9/30 -Renaissance Technologies - Jim Simons - 0
https://www.sec.gov/Archives/edgar/data/1037389/000103738914000073/xslForm13F_X01/renaissance13Fq32014_holding.xml
****************************************

12/31 - Appaloosa -  0
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001006438&owner=include&count=40&hidefilings=0

9/30 - Appaloosa - David Tepper - 725,000
https://www.sec.gov/Archives/edgar/data/1006438/000100643814000008/xslForm13F_X01/Form13FInfoTable.xml
*************************************

12/31 - John Paulson
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001035674&owner=include&count=40&hidefilings=0

9/30 - John Paulson - 1,902,500
https://www.sec.gov/Archives/edgar/data/1035674/000114036114042274/xslForm13F_X01/form13fInfoTable.xml
****************************************
Ackman v Dalio
http://www.cnbc.com/id/102425102#.

12/31 - Bridgewater - Ray Dalio - 0 Shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001350694&owner=include&count=40&hidefilings=0

9/30 Bridgewater - Ray Dalio - 0 shares
https://www.sec.gov/Archives/edgar/data/1350694/000114036114041083/xslForm13F_X01/form13fInfoTable.xml
*****************************************

12/31 - Highbridge Capital Management - 0 Shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000919185&owner=include&count=40&hidefilings=0

9/30 - Highbridge Capital Management - JPM, - 0 shares - (JPM)
https://www.sec.gov/Archives/edgar/data/919185/000091918514000010/xslForm13F_X01/table13f-20140930-live.xml
******************************************

12/31 - Howard Capital Management - 0 Shares
https://www.sec.gov/cgi-bin/browse-edgar?company=howard+capital+management&match=&filenum=&State=&Country=&SIC=&myowner=exclude&action=getcompany&Find=Search

9/30 - Howard Capital Management - 0 Shares
https://www.sec.gov/Archives/edgar/data/1078658/000114036115002134/xslForm13F_X01/form13fInfoTable.xml
*********************************************

12/31 - Och-Ziff Capital Management Group  - 0
http://www.nasdaq.com/symbol/ozm/institutional-holdings

9/30 - Och-Ziff Capital Management Group - 0 shares -   (Daniel Ochs)
https://www.sec.gov/Archives/edgar/data/1403256/000140325615000016/ozm-20141231xex99xepr.htm
***************************

12/31 - AQR Capital Management - 0 Shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001167557&owner=include&count=40&hidefilings=0

9/30 - AQR Capital Management - 0 Shares
https://www.sec.gov/Archives/edgar/data/1167557/000108514614002279/xslForm13F_X01/form13fInfoTable.xml
*****************************

12/31 - Lone Pine Capital - 0 shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001061165&owner=include&count=40&hidefilings=0

9/30 - Lone Pine Capital - Stephen Mandel - TF - 0 Shares
https://www.sec.gov/Archives/edgar/data/1061165/000090266414004391/xslForm13F_X01/infotable.xml
*******************************

12/31 - Viking Global Investors - 3,708,686 Shares
http://www.nasdaq.com/quotes/institutional-portfolio/viking-global-investors-lp-72854?sortname=companyname&sorttype=0
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001103804&owner=include&count=40&hidefilings=0

9/30 - Viking Global Investors - Andreas Halvorsen - TF - 11,387,526 Shares
https://www.sec.gov/Archives/edgar/data/1103804/000110380414000044/xslForm13F_X01/Form13fInfoTable.xml
*******************************************

12/31 - Tiger Management LLC - 571,183 shares

9/30 - Tiger Management LLC Julian Robertson Jr. - 1,216,283 shares
https://www.sec.gov/Archives/edgar/data/1027451/000091957414006555/xslForm13F_X01/infotable.xml
********************************************
12/31 - Tiger Global Management LLC - 5,815,690 Shares
https://www.sec.gov/cgi-bin/browse-edgar?company=tiger+global+management+llc&match=&filenum=&State=&Country=&SIC=&myowner=exclude&action=getcompany&Find=Search
9/30 - Tiger Global Management LLC Julian Robertson Jr. - 0 shares
https://www.sec.gov/cgi-bin/browse-edgar?company=tiger+global+management+llc&match=&filenum=&State=&Country=&SIC=&myowner=exclude&action=getcompany&Find=Search
********************************************
Ackman v Dalio
http://www.cnbc.com/id/102425102#.

12/31 - Pershing Square - 0 Shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001336528&owner=include&count=40&hidefilings=0

9/30 - Pershing Square Capital Management - Bill Ackman - 0 Shares
https://www.sec.gov/Archives/edgar/data/1336528/000117266114001862/xslForm13F_X01/infotable.xml
********************************************

12/31 - Baupost - 0
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001061768&owner=exclude&count=40&hidefilings=0

9/30 - Baupost -  Seth Klarman - 0 shares
https://www.sec.gov/Archives/edgar/data/1061768/000114036114042304/xslForm13F_X01/form13fInfoTable.xml
***********************************************


12/31 - Adage Capital Management - 0 shares
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001165408&owner=exclude&count=40&hidefilings=0

9/30 - Adage Capital Management - Phillip Gross & Robert Atchinson - Harvard - 540,000
https://www.sec.gov/Archives/edgar/data/1165408/000117266114001743/xslForm13F_X01/infotable.xml
************************************************

12/31 - Elliott Management - 0 Shares
https://www.sec.gov/cgi-bin/browse-edgar?company=elliott+management&owner=exclude&action=getcompany

9/30 - Elliott Management - Paul Singer -  0 Shares
https://www.sec.gov/Archives/edgar/data/1048445/000114036114042257/xslForm13F_X01/form13fInfoTable.xml
************************************************

12/31 - Davidson Kempner Capital Management - 0
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001595082&owner=exclude&count=40&hidefilings=0


9/30 - Davidson Kempner Capital Management - 564,000 Shares
https://www.sec.gov/Archives/edgar/data/1595082/000159508214000032/xslForm13F_X01/Form13FHRInformation.xml
************************************************

12/31 - Blackrock Advisors LLC - 935,877
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001086364&owner=exclude&count=40&hidefilings=0

9/30 - Blackrock Advisors LLC - 2,378,588 shares
https://www.sec.gov/Archives/edgar/data/1086364/000108636414002620/xslForm13F_X01/form13fInfoTable.xml

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Saturday, February 7, 2015