By Michael Tarsala
Cheat off the smart kid. It’s really Covestor’s MO: Watch what successful investors and traders are doing. Then do that, move for move.
The world’s largest hedge funds are not yet on the Covestor platform. But we do have 180 investable models. At this point, Buffett and Paulson are not telling you every market move they are making as they are making it, like for example Michael Arold does, along with the other Covestor managers.
Even with the delayed disclosure (these guys are for Q4, so that part in particular is not in the Covestor spirit), it’s worth noting the three tickers that the world’s top hedge funds added in common: Delphi Automotive (DLPH), Liberty Media (LMCA) and the SPDR Gold ETF (GLD). For each, I included some commentary as to why the world’s top managers may have found it attractive.
Delphi: The Latest Phoenix of Auto Components
The main reason Delphi was a new holding was its return to Nasdaq trading in November. I have been analyzing the common new hedge fund positions in 13F filings for several years now, and a refloat of a $5 billion-plus company often results in additions from multiple top funds.
In Delphi’s case, George Soros, John Paulson and David Tepper’s Appaloosa Management all bought in.
Also of note with Delphi is the positive tone on recent conference calls. A few highlights from the most recent include its lessened dependence on GM, a lower cost structure, and profit margins that have risen three-fold year-on-year.
Delphi is a heck of a lot more expensive than it was in November. But at 5 times EV to EBITDA, it is still far below BorgWarner (9 times) and Johnson Controls (10 times).
Liberty Media and M&A
Warren Buffet, George Soros and four other top managers all registered as adding Liberty Media. One catalyst could be the elimination of two tracking stocks that helped to free up cash for buybacks and deals, and helped to boost trading liquidity. The company said on its earnings call last week that it still has $1.2 billion left for buybacks.
The stock performance this year could have a lot to do with how the company deploys capital, and whether it will be a buyer or seller of media assets this year. Or if can do so smartly, perhaps both.
The SPDR Gold ETF — Again
Hedge funds including Lone Pine, Hawkshaw Capital Management and Passport Capital all added the GLD to their holdings in Q4. I don’t see it as outside-the-box thinking in any way. Other big hedgies hold it. Paulson’s move to sell some of his GLD stake stood out to me far more, given that he is one of its biggest holders. But then again, gold is now nearing a 3-month high. So adding GLD for the first time worked for those who hadn’t already backed up the Brinks.
Check out this chart on Abnormal Returns: You’ll notice that the GLD is the only major asset class ETF to post double-digit gains last year, and is also up 10% or more in 2012.
