Eric Mindich Increases His Most Valuable Stake in First Quarter

Jun 12, 2015

Eric Mindich (Trades, Portfolio), founder and CEO of hedge fund Eton Park Capital Management, has a history of early success. At the age of 27, he was the youngest partner in Goldman Sachs’ (GS, Financial) history. He left Goldman Sachs a decade later to start Eton Park – one of the largest fund launches in history at $3.5 billion.

For the first time since the financial crisis of 2007-2009, hedge funds are on the rise. Mindich has been logging a 10% return, and he was quite active in the first quarter.

Among his new buys, Mindich acquired enough shares of Zimmer Holdings Inc (ZMH, Financial), Pharmacyclics Inc (PCYC, Financial) and Office Depot Inc (ODP, Financial) to land all three stakes among the 10 most valuable in his portfolio, but he increased his most valuable existing stake, Lorillard Inc (LO, Financial), by more than 55%.

Mindich bought 2,263,016 shares of Lorillard, a Greensboro, North Carolina-based tobacco company, for an average price of $66.58 per share. The deal had a 4.27% impact on his portfolio.

Lorillard was the only existing stake Mindich increased in the first quarter.

Mindich bought 1,593,415 shares of Zimmer Holdings, an Indiana-based medical device company that was founded in 1927, for an average price of $117.52 per share. The transaction had a 5.41% impact on Mindich’s portfolio.

Mindich purchased 658,020 shares of Pharmacyclics, a California-based biopharmaceutical company, for an average price of $193.06 per share. The acquisition had a 4.87% impact on his portfolio.

Pharmacyclics has a market cap of $20.14 billion and an enterprise value of $19.25 billion. It has a P/E of 292, a Price/Book of 22.5 and a Price/Sales of 25.1. PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have shares of Pharmacyclics in their portfolios. Ken Fisher (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) sold their stakes in the first quarter.

Mindich acquired 16,150,900 shares of Office Depot, an office supply retail company headquartered in Boca Raton, Florida, for an average price of $8.91 per share. That purchase had a 4.29% impact on Mindich’s portfolio.

Six other new stakes ended up in Mindich’s top 20 holdings – TRW Automotive Holdings Corp (TRW, Financial), Talisman Energy Inc (TLM, Financial), Salix Pharmaceuticals Ltd (SLXP, Financial), Motorola Solutions Inc (MSI, Financial), Polaris Industries Inc (PII, Financial) and Microsoft Corp (MSFT, Financial).

Reductions and divestitures

Mindich reduced his holdings in half a dozen companies. The reduction with the greatest impact to his portfolio was Mindich’s sale of three-fifths of his stake in PowerShares QQQ Trust, Series 1 (ETF) [QQQ]. Mindich sold 3,000,000 shares for an average price of $105.01 per share.

PowerShares QQQ Trust’s market cap and enterprise value are both $49.88 billion. Ken Fisher (Trades, Portfolio), Leon Cooperman (Trades, Portfolio) and Murray Stahl (Trades, Portfolio) have shares in their portfolios.

Mindich also reduced his holdings in Spirit AeroSystems Holdings Inc (SPR), CDK Global Inc (CDK), B/E Aerospace Inc (BEAV), Armstrong World Industries Inc (AWI) and NorthStar Asset Management Group Inc (NSAM).

Mindich sold 23 stakes in his portfolio in the first quarter. The most significant impact to his portfolio was registered by the sale of 1,705,933 shares of Allergan Inc (AGN), a pharmaceuticals company based in Irvine, California, for an average price of $225.95 per share. The transaction had a -5.1% impact on his portfolio.

The sales were made after a jury’s decision to award $6.75 million in damages to a New York couple who alleged that doctor-recommended Botox treatments nearly killed their son, who has cerebral palsy – but before a judge in Vermont upheld the verdict. Allergan manufactures Botox. The doctor who recommended the treatments is from the Burlington, Vermont, area.

The lawsuit is one of two in Vermont federal court against Allergan. In the other lawsuit, relatives said the victim died from an overdose of Botox treatments over a seven-year period.

Mindich sold his 4,500,000-share stake in CBS Corp (CBS), a Manhattan-based mass media company, for an average price of $58.43 per share. The sale had a -2.9% impact on his portfolio.

Among the remaining stakes that Mindich sold in the first quarter were his stakes in Priceline Group Inc (PCLN), Time Warner Cable Inc (TWC) and Actavis PLC (ACT).

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