#$spr

[alphaattribution]

The Top Three Hedge Fund Stocks on the Rise

Yesterday's market rout left most investors feeling helpless -- hedge funds, included. Three names, however, appear to have come to the rescue, today. Symmetric.io looked at its index of high-hedge-fund-ownership names to assess which company-moves had the greatest impact on hedge fund managers. The Symmetric Hedge Fund Concentration index tracks a basket of companies in which hedge funds hold the highest percentage of the publicly traded equity. Market movement among these companies will disproportionately impact hedge fund investors, over and above other institutions. Spirit AeroSystems Holdings, Inc. (SPR)

Up 4.9% as of this morning

Key hedge fund owner: Scopia Management

Vipshop Holdings Limited (VIPS)

Up 4.5% as of this morning

Key hedge fund owner: Kylin Management

Valeant Pharmaceuticals International, Inc. (VRX)

Up 3.6% as of this morning

Key hedge fund owner: Brave Warrior Advisors

     For in-depth hedge fund reports on these and other managers, go to Symmetric.io    

[jstephencastellano]

25 Stocks for November 2015

We just published our latest model portfolio update on Seeking Alpha, “25 Stocks for November 2015.” 

Last month’s theoretical Core long model appreciated by +10.23% versus the S&P 500 up +8.05%. Stocks in the Core short model appreciated +12.84% for a loss of -12.84%. The resulting long/short model portfolio returned -2.60%.

Last month’s theoretical Opportunistic long model appreciated by +8.41% and stocks in the associated short model rose +7.85% for a loss of -7.85%. The resulting long/short model portfolio returned +0.56%.

Of the 25 long stock ideas in the November 2015 report, we have two favorites: United Therapeutics Corporation (UTHR) and Spirit AeroSystems Holdings, Inc. (SPR). 

The most notable new stock idea in the short model portfolio is Netflix, Inc. (NFLX). This is a high-risk short sale idea given that the stock has a record of momentum seemingly untied to underlying near-term fundamentals.

Notes In the Seeking Alpha report, with the help of financial data tools such as XBRLAnalyst, we added some summary data and abbreviated financial models illustrating the underlying fundamentals of these three stocks. 

See how we manage real-time derivations of these signals on InvestFeed, StockViews, and on Marketocracy for non-tax and tax-efficient portfolio derivations.

Subscribe to our posts by email via Google’s FeedBurner service or via Seeking Alpha.

Please see our disclaimers and disclosures.

[alphaattribution]

The Top Ten Most Sensitive Positions to Valeant Contagion

It seemed like such a nice small town in Long Island, until the New York Times fills us in on its Nazi past and perhaps questionable present. Something similar happened with Valeant Pharmaceuticals International, Inc. (VRX) yesterday. Andrew Left at Citron Research released a Smoking Gun yesterday and alleged that Valeant might be “the Pharmaceutical Enron.” While he stopped short of suggesting a hidden Nazi past, it did tank the stock price. Whether one believes Left’s contention or not, the knock-on effects of Valeant’s reaction reach beyond Valeant’s stock price. The collateral impact spreads contagion to other positions. When Valeant struggles, major holders of Valeant struggle. When they feel stress, their risk-profile changes, so other positions in their portfolio may no longer be as attractive. Put simply, it’s not just the innocent buyer in the neighborhood with the Nazi past that suffers. It’s the neighbors on the border, next door, who begin to feel the pain. Valeant had already been identified by Symmetric.io as one of the stocks most likely to be squeezed if hedge funds continued to show stress. Since the August report, Valeant had returned -46%, far underperforming the broader market and even other popular hedge fund names. Many managers are under additional pressure through higher industry-leverage ratios and the desire to dial down risk as they approach year-end. Valeant was down dramatically yesterday, but the collateral impact of Valeant had already begun. Dialing down risk had led to more selling, across additional positions in managers’ portfolios. The positions most sensitive to collateral impact moved even more dramatically. These include: Restaurant Brands International Inc. (QSR); Spirit AeroSystems Holdings, Inc. (SPR); among others. Many of these positions are already down dramatically as compared to their corresponding sectors. Is the market already pricing in stress in these positions? For a list of the top ten names most sensitive to contagion from Valeant, log into symmetric.io

[alphaattribution]

The Hedge Fund Risk of Risk-On, Risk-Off

The Dow opened down 1000 points on Monday. The S&P was down 5%. All this, on the heels of a one-week decline of the S&P500 of more than 5%. Risk assets seem to have lost their favor, and the risk-on, risk-off trade is back. Who’s most sensitive to the trade? Hedge funds. Daniel Loeb, Leon Cooperman, and Bill Ackman have crossed far into the red in August. Writes Alexandra Stevenson and Matthew Goldstein at the New York Times

Mr. Cooperman’s Omega Advisors posted a 12% decline this month through Wednesday and 10% this year. Mr. Loeb’s Third Point LLC and William Ackman’s Pershing Square Capital Management are also down big, erasing their gains for the year.

What is risk-on, risk-off?

Risk-on, Risk-off brings us back to mid-2010. The European crisis was in full swing. On good days, the equity markets would rip while gold and treasuries would decline. On bad days, equity markets would swoon, while investors would rush back into treasuries and gold. Investors were either chasing risky assets or doing everything they could to stay away from them. It didn’t matter how good your stock-pick was. Correlations were high, and investors were either risk-on or risk-off. RORO.

Why are hedge funds sensitive to risk-on, risk off?

When the market loses its taste for risky assets, correlations between risky assets increase, and they decline in tandem. A hedge fund manager’s ability to pick winners and short losers becomes less important. The only skill that gets rewarded is the ability to pick the market-direction, not the underlying stocks. Hedge fund manager decisions may have additional sensitivity to the risk-on, risk-off trade. When a manager takes a position in a stock, they have exposure to risks such as liquidity, concentration, and crowdedness. A market-shock like today’s, unsurprisingly, will often impact less liquid stocks dramatically. Without a plentiful group of buyers and sellers, a market shock will leave many sellers without corresponding buyers. Highly concentrated positions are also at risk. Take, for example, Spirit AeroSystems Holdings, Inc. (SPR). Scopia Capital Management is by far the largest hedge fund holder and the largest holder of SPR, having taken on considerable concentration risk, holding more than 12% of the company. On the Friday close, SPR was trading at $51.60. It hit a low of $47 Monday morning, down almost ten percent, far exceeding the movement of the market. Symmetric.io has aggregated the inputs and corresponding connections to isolate hedge funds that may be more sensitive to the dynamics engendered by the risk-on, risk-off trade. We’ve boiled it down to the top ten. For more information, register here.

[alphaattribution]

Top 10 Funds & Stocks at Risk of Being Squeezed in Market Turmoil

An 8.5 percent drop in the Shanghai Composite index in Monday’s trading session spread to financial markets across the world. In the US, the S&P 500 was down 4.9% on Monday trading, after steeper declines in Asian and European stock markets. We’ve seen this before, and it usually precedes hedge fund stress, underperformance and, at times, liquidation. So far, they’re doing OK. There’s little evidence of Hedge Funds liquidating positions, but certain hedge funds are at risk of being squeezed. In the full Symmetric liquidation report we follow three lines of analysis to conclude that: 

Crowded HF positions slightly underperformed in the recent turmoil

HFs as a group do not appear to be liquidating their positions

Specific hedge funds are at risk of being squeezed by liquidations

You can login to read the full report here or can register to see the report here, if you don't have an account Specific Hedge Funds at Risk of Being Squeezed We look at two factors to determine if a fund is at risk of being squeezed:

Stock Specific Stress: We calculate the overall stock specific stress for a fund’s publicly available positions. The stock specific stress measured across each manager’s portfolio registers the return of the fund’s publicly disclosed portfolio run in a market, beta and sector neutral fashion

Liquidity: We calculate how long it would take the manager to liquidate each position in their portfolio assuming they traded 30% of daily volume in each stock they own. We then calculate what percentage of manager’s positions would take more than 1 month to liquidate.

We think that managers who have seen significant stock specific stress coupled with a highly illiquid book, that would take a significant time to liquidate, are at risk of being squeezed. If the fund continues to see stress in its positions and must liquidate positions in order to reduce risk, those positions are likely to suffer even further as the market takes advantage of the knowledge that there are more sell orders to come. The table below shows a list of funds, with their MTD change in stock specific stress, AUM and the percentage of positions that would take more than 30 days to liquidate at 30% of volume.

Name MTD Stock Specific Stress Regulatory AUM % of Portfolio that is Illiquid Largest Illiquid Holding PERSHING SQUARE CAPITAL MGMT -4.17% 22 BN 100 VRX VALUEACT HOLDINGS LP -1.44% 19 BN 58 VRX BAKER BROS ADVISORS LLC -2.96% 11 BN 54 INCY SCOPIA MANAGEMENT INC -2.42% 9.8 BN 50 SPR SACHEM HEAD CAPITAL MANAGEMENT -1.50% 2.6 BN 46 CDK RA CAPITAL MANAGEMENT LLC -4.30% 1.8 BN 34 AXON BROADFIN CAPITAL LLC -3.82% 1.6 BN 32 FLML DEERFIELD MANAGEMENT -3.20% 7.5 BN 27 FLML PERCEPTIVE ADVISORS LLC -5.36% 2.4 BN 15 RTRX JERICHO CAPITAL ASSET MANAGEMEN -5.59% 3 BN 13 BID

You can login to read the full report here or can register to see the report here, if you don't have an account  

[alphaattribution]

Scopia Management returns an estimated 4.43% for May

Scopia Management Inc returns an estimated 4.43% for May 2015 - the fully hedged version returns 2.42%

Scopia Management Inc generated a 4.43% return on their publicly disclosed long portfolio for the month ending May 2015, outperforming the S&P500 by 442 basis points (bp). On a hedged basis, the portfolio would have returned 2.42% StockAlpha over the same period. Scopia's StockAlpha reflects the net return if each security in their portfolio was hedged with a sector ETF, such that the resulting portfolio was market, beta and sector neutral. StockAlpha in the Industrials sector contributed the most to StockAlpha during the month.

Positive Contributors to Scopia's Returns

Scopia’s position in Spirit Aerosystems Holdings Inc. Class A (SPR) contributed the most to the performance of the manager’s long-portfolio during the month. Over the month of May 2015, Scopia's 26.9% position in Spirit Aerosystems Holdings Inc. Class A (SPR) increased in value by 7.1%, contributing 1.91% (26.9%*7.1%=1.91%)to the long portfolios overall return. Looking at Scopia's portfolio through a fully hedged StockAlpha lens, the holding of Spirit Aerosystems Holdings Inc. Class A (SPR) also provided the largest contribution to fully hedged returns. Spirit Aerosystems Holdings Inc. Class A (SPR) returned 7.1% during the month compared to the Industrials sector, which returned 0.3%. As a result, after taking into account Spirit Aerosystems Holdings Inc. Class A (SPR)'s beta relative to its sector, the position contributed 1.8% of StockAlpha to the Scopia’s monthly performance.

Negative Contributors to Scopia's Returns

Much of the drag on Scopia’s long-portfolio during the month can be attributed to the holding of Aegerion Pharmaceuticals Inc (AEGR). Over the month of May 2015, the manager's 3.3% position in Aegerion Pharmaceuticals Inc (AEGR) returned -14.4%, contributing -0.47% (3.3%*-14.4%=-0.47%)to the long portfolios overall return. Looking at Scopia's portfolio through a fully hedged StockAlpha lens, the holding of Aegerion Pharmaceuticals Inc (AEGR) also provided the most negative contribution to fully hedged returns. Aegerion Pharmaceuticals Inc (AEGR) returned -14.4% during the month compared to the Health sector, which returned 4.5%. As a result, the position contributed -0.6% of StockAlpha to the manager’s monthly performance.

Overlap with other hedge funds

Of Scopia’s top 10 largest positions, Fresh Market Inc. (The) (TFM) is the name that is owned by most other hedge funds. 3.7% of hedge funds within Symmetric's universe had a position in Fresh Market Inc. (The) (TFM) as of March 31, 2015, making it a contrarian name relative to other stocks, even though it is the most consensus within the manager's top positions. Scopia initiated its position in Fresh Market Inc. (The) (TFM) 0.75 years ago. Other hedge funds that have significant ownership stakes in Fresh Market Inc. (The) (TFM) include Flowering Tree Inv Mgmt Pte Ltd (32.3% position initiated 2.3 years ago), Joho Capital Llc (16.2% position initiated 2 years ago) and Ashmore Group Plc (15.1% position initiated 0 years ago). Overall, Scopia's book is contrarian, with the average position held in the portfolio held by 8.1% of hedge funds. Screen, monitor and bechmark hedge fund managers at Symmetric.io