(GuruFocus, January 26, 2010) Investment Guru Eric Mindich was a wonder kid in the investing work. He started working at Goldman Sachs after high school, and spent summers at the firm while earning a degree in economics at Harvard. In 1994, at the age of 27, he became the youngest partner in Goldman's history. He learned the trading business on Goldman's risk-arbitrage desk betting on corporate mergers.
In late 2004, he succeeded in launching a hedge fund, named Eton Park Capital Management, sized at more than $3 billion, making it one of the largest start-up funds on record. The successful start of the fund came despite heavy fees and other difficult terms for potential investors. For example, investors had to invest their money in the fund for as long as 4½ years to avoid a 6% redemption fee. Mindich's investors also had to invest at least $5 million and pay fees of "2 and 20," an annual management fee of 2% plus 20% of all profits.
It is claimed that he planned to invest as much as 70% of Eton Park's money in traditional equity strategies involving both purchases and "shorting" (the sale of borrowed stock in a bet the stock price will decline). But given just how much money is now in equity hedge funds, he assured his investors that he would invest globally to produce big returns, including Latin American, Eastern European and South African markets. Also, as much as 30% of Eton Park's funds may have gone into less liquid "private" transactions.
Mindich uses option to leverage his plays. Users of GuruFocus has access to information of his option holdings. As of September 30,2009, for which date he reported his holdings. He had 35 option positions, Puts and Calls of different stocks. These are his top option holdings:
Conclusion
Eric Mindich employed option strategies to leverage and hedge his bet.
To access information on Guru’s option holdings, click here.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Eric Mindich for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
In late 2004, he succeeded in launching a hedge fund, named Eton Park Capital Management, sized at more than $3 billion, making it one of the largest start-up funds on record. The successful start of the fund came despite heavy fees and other difficult terms for potential investors. For example, investors had to invest their money in the fund for as long as 4½ years to avoid a 6% redemption fee. Mindich's investors also had to invest at least $5 million and pay fees of "2 and 20," an annual management fee of 2% plus 20% of all profits.
It is claimed that he planned to invest as much as 70% of Eton Park's money in traditional equity strategies involving both purchases and "shorting" (the sale of borrowed stock in a bet the stock price will decline). But given just how much money is now in equity hedge funds, he assured his investors that he would invest globally to produce big returns, including Latin American, Eastern European and South African markets. Also, as much as 30% of Eton Park's funds may have gone into less liquid "private" transactions.
Mindich uses option to leverage his plays. Users of GuruFocus has access to information of his option holdings. As of September 30,2009, for which date he reported his holdings. He had 35 option positions, Puts and Calls of different stocks. These are his top option holdings:
1. Call Options for Pifzer Inc.
Pfizer Inc is a global pharmaceutical company. Pfizer Inc has a market cap of $152.11 billion; its shares were traded at around $18.85 with a P/E ratio of 8.6 and P/S ratio of 3.2. The dividend yield of Pfizer Inc stocks is 3.4%. Pfizer Inc had an annual average earning growth of 11% over the past 10 years.
Mindich owned call options that entitled him to 15 million shares. The options valued at $248 million. Besides, he also owned 1 million shares of Pifzer common stocks out right.
2. Put Options for IMCSI Emerging Markets Index Fund
iShares MSCI Emerging Markets Index Fund (EEM, Financial) seeks to provide investment results that correspond to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index.
Mindich owned put options that entitled him to sell 11 million shares of EEM. The options valued at $428 million, reflecting that Mindich was bearish towards the emerging markets.
3. Put and Call Options for Caterpillar Inc.
Caterpillar Inc (CAT, Financial) is the world's largest manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Caterpillar Inc. has a market cap of $34.34 billion; its shares were traded at around $55.14 with a P/E ratio of 19.5 and P/S ratio of 0.7. The dividend yield of Caterpillar Inc. stocks is 3%. Caterpillar Inc. had an annual average earning growth of 11.2% over the past 10 years.
Mindich owned put options that entitled him to sell 10.5 million shares of CAT. The options valued at $539 million.
Separately, Mindich also owned call options that entitled him to buy 3.5 million shares of CAT. The options valued at $180 million.
4. Call Options for Comcast Corp. Special Shares
Comcast Corporation (CMCSK, Financial) is principally involved in the development, management and operation of broadband cable networks, and in the provision of electronic commerce and programming content. Comcast Corp. Special has a market cap of $44.94 billion; its shares were traded at around $15.4 with and P/S ratio of 1.3. The dividend yield of Comcast Corp. Special stocks is 1.8%. Comcast Corp. Special had an annual average earning growth of 46.5% over the past 5 years.
Mindich owned call options that entitled him to buy 10.35 million shares of CMCSK. The options valued at $166 million.
Mindich also owned 1 million shares of Comcast Corp. Class A common shares and 6 million shares of Special common shares.
5. Call and Put Options for UnitedHealth Group Inc.
UnitedHealth Group Inc. (UNH, Financial) offers health care coverage and related services. Unitedhealth Group Inc. has a market cap of $38.35 billion; its shares were traded at around $33 with a P/E ratio of 10.2 and P/S ratio of 0.4. The dividend yield of Unitedhealth Group Inc. stocks is 0.1%. Unitedhealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated Unitedhealth Group Inc. the business predictability rank of 4-star.
Mindich owned call options that entitled him to buy 8.5 million shares of UNH. The options valued at $212 million. He also owned put options that entitled him to buy 1 million shares of UNH. The put options valued at $25 million. And he owned 1.2 million shares of UNH common shares outright.
Conclusion
Eric Mindich employed option strategies to leverage and hedge his bet.
To access information on Guru’s option holdings, click here.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Eric Mindich for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
