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Graham Griffin
Graham Griffin
Articles (195) 

Caxton Associates Exits Oil Holdings in the 4th Quarter

New buy lands in top holdings

Caxton Associates (Trades, Portfolio) has revealed its portfolio for the fourth quarter of 2020. Top trades include an addition to its BTC iShares MSCI Emerging Markets Exchange-Traded Fund (EEM) holding and a new buy into The AES Corp. (NYSE:AES). The firm also sold out of Hess Corp. (NYSE:HES), Cabot Oil & Gas Corp. (NYSE:COG) and Equinor ASA (NYSE:EQNR).

The firm primarily focuses on global macro investments. Managers make bets on macroeconomic trends through liquid assets while considering stocks, bonds, currencies and commodities.

Portfolio overview

At the end of the quarter, the firm's portfolio contained 138 stocks, with 73 new holdings. It was valued at $1.45 billion and has seen a turnover rate of 28%. Top holdings at the end of the quarter were SSGA SPDR Gold Shares (GLD), BTC iShares MSCI Emerging Markets ETF, Aptiv PLC (NYSE:APTV), AES and Micron Technology Inc. (NASDAQ:MU).

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By weight, the top three sectors represented are utilities (12.19%), technology (9.76%) and consumer cyclical (4.73%).

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BTC iShares MSCI Emerging Markets

The fourth quarter saw the fund make its usual major addition to the holding in the BTC iShares Emerging Markets ETF (EEM). The firm purchased 1.57 million shares to boost the holding by 62,820%. During the quarter, the shares traded at an average price of $47.75 per share. Overall, the purchase had a 5.6% impact on the portfolio and GuruFocus estimates the total gain of the holding at 1.57%.

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On March 4, the shares were trading at $53.04. Year to date, the shares are up 5.52% compared to the S&P 500 ETF (SPY) return of 2.02%.

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Hess

The firm sold out of its holding in Hess (NYSE:HES) for the sixth time in the last decade. The remaining 1.01 million shares traded during the quarter for an average price of $45.56 per share. GuruFocus estimates the total loss of the holding at 3.08% and the sale had a -4.37% impact on the equity portfolio.

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Hess is an independent oil and gas producer with key assets in the Bakken Shale, Guyana, the Gulf of Mexico and Southeast Asia. At the end of 2019, the company reported net proved reserves of 1.2 billion barrels of oil equivalent. Net production averaged 311,000 barrels of oil equivalent per day in 2019, at a ratio of 69% oil and natural gas liquids and 31% natural gas.

As of March 4, the stock was trading at $69.69 per share with a market cap of $21.26 billion. According to the GF Value Line, the shares are trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 4 out of 10 and a valuation rank of 1 out of 10. There are currently five severe warning signs issued, including declining revenue per share, an Altman Z-Score of 0.93 placing the company in the distress column and a low Piotroski F-Score of 3 indicating poor business operations. The company has continued to issue new long-term debt as cash levels have dropped off.

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Cabot Oil & Gas

Another holding to bite the dust during the quarter was Cabot Oil & Gas (NYSE:COG). The firm sold 2.08 million shares after making an addition of 1.06 million shares in the third quarter. The shares traded at an average price of $17.58 during the quarter. The sale had a -3.82% impact on the portfolio and GuruFocus estimates the total gain of the holding at 3.12%.

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Houston-based Cabot Oil & Gas is an independent exploration and production company with operations in Appalachia. At year-end 2019, Cabot's proved reserves were 12.9 trillion cubic feet of equivalent, with net production of approximately 2,500 million cubic feet of natural gas per day. All of Cabot's production is Marcellus dry natural gas.

The stock was trading at $18.78 per share with a market cap of $7.38 billion on March 4. The shares are fairly valued according to the GF Value Line.

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GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 7 out of 10. There is currently one severe warning sign issued for declining revenue per share. Revenue has been in decline since 2018 despite a small hike in net income in 2019.

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AES

The firm reestablished its holding in AES (NYSE:AES) after selling out in the third quarter. Around 2.1 million shares were purchased during the quarter at an average price of $20.82 per share. The firm has gained an estimated 21.46% on the holding and the purchase had a 3.42% impact on the portfolio.

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AES is a global power company with businesses in 14 countries. It has a portfolio of more than 100 power plants and wind and solar farms. Its current construction program will increase its net generating capacity to over 35 gigawatts. AES also has majority ownership and operates six electric utilities distributing power to 2.4 million customers in the U.S. and El Salvador. AES is one of the world leaders in utility-scale energy storage in its Fluence joint venture with Siemens.

On March 4, the stock was trading at $26.05 per share with a market cap of $17.16 billion. According to the GF Value Line, the shares are significantly overvalued.

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GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are currently four severe warning signs issued, including new long-term debt and poor financial strength. The company's current weighted average cost of capital exceeds the return on invested capital, meaning the company will destroy value as it grows.

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Equinor

Rounding out the five most impactful trades by the firm was the sale of the Equinor (NYSE:EQNR) holding. The firm sold the 2.19 million shares that were purchased in the third quarter at an average price of $15.14 per share during the fourth quarter. The sale had a -3.25% impact on the portfolio and GuruFocus estimates the firm lost 1.86% on the holding during its short lifetime.

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Equinor is a Norway-based integrated oil and gas company. It has been publicly listed since 2001, but the government retains a 67% stake. Operating primarily on the Norwegian Continental Shelf, the firm produced 2.1 million barrels of oil equivalent per day in 2019 (52% oil) and ended the year with 6.0 billion barrels of proven reserves (48% oil). Operations also include oil refineries and natural gas processing, marketing and trading.

As of March 4, the stock was trading at $19.43 per share with a market cap of $62.31 billion. The shares are trading at a modestly overvalued rating according to the GF Value Line.

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GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 4 out of 10. There are currently three severe warning signs issued for declining gross margins, declining revenue and an Altman Z-Score of 1.21 placing the company in the distress column. The company has seen cash flows decline since 2018 and net income dipped into losses for 2020.

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Disclosure: Author owns no stocks mentioned.

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