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The Morning Brief: Hedge Funds Dump Apple and Gun Makers; SAC Capital Braces for Redemptions

Who’s soured on Apple? Turns out, the list of hedge funds that bailed out of Apple in the fourth quarter is a very long one, judging from the latest 13Fs. Farallon Capital unloaded its entire stake of 137,000 shares. Barry Rosenstein’s Jana Partners liquidated its entire stake of more than 143,000 shares. Other firms that unloaded all their shares included John Thaler’s JAT Capital; Daniel Loeb’s Third Point; Stephen Mandel’s Lone Pine Capital; John Burbank’s Passport Capital; Andreas Halvorsen’s Viking Global; and Eric Mindich’s Eton Park Capital Management; Jana Partners; and Omega Advisors.

Meanwhile, Julian Robertson’s Tiger Management portfolio cut its Apple stake by 60 percent, from nearly 101,000 shares to roughly 42,000 shares. Tiger Global Management pared its holding from 1.3 million shares to 1.05 million shares, and it no longer has call options on Apple stock. Those options were valued roughly equal to its common stock position at the end of the third quarter. Even so, Apple remained Tiger Global’s largest position as of December 31. Also notable, Louis Bacon’s Moore Capital increased its stake in the stock to 25,800 shares from 9,700 shares.

Thursday was the deadline for investors in Steve Cohen’s SAC Capital to submit their requests to remove their money. Last month, SAC said it was bracing for about $1 billion in redemptions. The firm has $14 billion, of which $6 billion is outside money.

Hedge funds also unloaded shares in makers of firearms in the fourth quarter in the wake of the massacre at Sandy Hook Elementary School in Newtown, Connecticut on December 14. Renaissance Technologies sold 370,000 shares of Sturm Ruger, reducing its stake to 2.5 percent from 4.4 percent, while Cadence Capital Management, among the largest holders of Smith & Wesson Holding, liquidated its entire stake of 1.22 million shares.

Andrew Feldstein of Blue Mountain Capital Management, a of $12.5 billion hedge fund firm, believes the steel industry is experiencing volatility, presenting opportunities for investors. Speaking at the Harbor Investment Conference Wednesday Feldstein recommended going long U.S. Steel stock and shorting its debt, shorting the credit of JFE Steel using credit default swaps, and shorting Australia’s Fortescue Metals Group. Blue Mountain Capital is the same firm that bet against JP Morgan’s infamous “London whale” derivative hedge trade that resulted in a $6.2 billion loss for the bank. It recently hired Jes Staley, the former head of JP Morgan Chase’s investment bank.


According to JP Morgan’s Prime Brokerage monthly publication, Prime Brokerage Global Hedge Fund Trends, in January gross leverage among all accounts in its Prime Brokerage portfolio increased 4.6 percent, from 1.83 to 1.91, a new 52-week high. Net exposure for equity long-short and market neutral funds rose 8.3 percent, from 0.72 to 0.78 while net leverage rose from 0.63 to 0.69.

The total amount of assets in hedge funds climbed 2.31 percent, to $2.66 trillion, according to eVestment. Assets are around 10 percent below the historic peak set in the second quarter of 2008. eVestment also reported that the average fund’s January performance was up 2.42 percent.

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