Fund (Perry Partners) second quarter 2009 performance was up 8.55%.
Perry listed several debt positions that were profitable during 2Q09:
1. The top performance of the fund has been auto finance bank debts – debt of Chrysler Financial, Ford Motor Credit (NYSE:F) and GMAC.
2. An investment in Rite Aid (RAD) bonds was also profitable during the quarter.
3. Because these bonds mentioned above climbed significantly, Perry had reduced their positions.
4. Perry built a position in E*Trade bonds.
5. Perry participated in the Debtor-In-Possession (DIP) financing for General Growth Properties (GGP) and made profitable investments in several parts of the capital structure.
6. The fund begins Q3 with a 10% exposure to Residential Mortgage Backed Securities (RMBS). This portfolio was also profitable for the quarter.
7. The fund's sovereign CDS position was the biggest detractor for the quarter on a mark to market basis.
8. Perry believes the credit cycle will take several years to resolve, but the fund had the cash to take advantage of the situation
Perry Partners increased our equities exposure slightly in Q2 by adding selectively to positions such as Dell and Humana.
1. Dell Inc.(NASDAQ:DELL)
Perry rationalized his positions:
At its lows in March, Dell was an $8 stock with roughly $4 in net cash per share. Based upon an aggressive cost-cutting program, we believed that the worst case EPS for 2009 would be higher than $1 which provided us with a large margin of safety on the investment. Our enthusiasm for the name was bolstered by the potential for a corporate hardware upgrade cycle with the launch of Microsoft’s new operating system this fall. Dell reported a strong first quarter and the stock traded up in June as the magnitude of the cost cutting activities became evident to the street.
2. Humana (NYSE:HUM)
We also believe that our positions in the managed care sector represent compelling opportunities given the fears surrounding the new administration's potential healthcare reform policies. In our opinion the healthcare insurers will be key participants in the reform, and while these companies will clearly be impacted, the situation will not be nearly as dire as their stock prices reflected in March.
3. Other positions
The reinsurance sector also remains a significant part of the equity book. The fund also runs a well hedged portfolio in Asia.
Read the complete letter: