Reviewing 13F quarterly portfolio reports of high energy money managers surprised me by what was missing rather than what changed. Actually, plenty changed. The static ratio for many operators dropped close to zero. (A zero static ratio equates with total portfolio turnover.)
Even Berkshire Hathaway's (BRK.A)(BRK.B) static ratio came in relatively low for them, in the 60's. They juggled bank stocks, putting Bank of America (BAC) at 14%, the second largest asset holding after Apple (AAPL). Together, this duo comprises 54% of invested assets.
Let's hope they're a dynamic duo. Few operators run money so compressed, but Pershing Square comes close. The seven largest positions comprise over 90% of assets at risk. Lowe's (LOW) at 22% is a huge winner. Nearly 40% rests in restaurants. Domino's Pizza (DPZ) is new but Starbucks (SBUX) is gone. What's the conceptual basis for such a huge food service play? Doesn't it have to be post Covid-19 economic resurgence? Pershing has ants in its pants, at a zero-static ratio.
Actually, I see few portfolios positioned to capture economic resurgence. Hardly anyone but Carl Icahn (Trades, Portfolio) is heavy in oil. Berkshire Hathaway, historically heavy in bank stocks, stands alone here. Icahn, likewise, is a serious long-term player with a high static ratio comparable with Warren Buffett (Trades, Portfolio).
I can't find anyone near full sector weighting in financials, nor in materials like steel, copper and aluminum as well as basic industrials like automobiles and farm equipment. All were great performers these past four quarters. Freeport-McMoRan Copper (FCX) showed up in just one list, a 5% position in the Duquesne Family Office.
Go back say 14 months, to March of 2020, the market's nadir. Initial positions in dicey retailers like Macy's (M, Financial), raw materials producers like Freeport and Alcoa (AA) ran around the clock three to five times. Ditto for Halliburton (HAL), an oil service play better than Schlumberger (SLB). Freeport bottomed at $5 in March of 2020.
But this past Tuesday, Alcoa, Halliburton and Freeport dropped 5% to 10% intraday. Players need iron pants! In comparison, Amazon (AMZN, Financial) and Facebook (FB, Financial) did just a little better than the S&P 500 Index from March 2020.
In this double dozen of portfolios that I reviewed, I couldn't find General Motors (GM, Financial), which more than tripled off its March 2020 low. Exxon Mobil (XOM) even matched the market's gain along with JPMorgan Chase (JPM, Financial) and Citigroup (C).
Appaloosa is still churning its list with almost total turnover this March quarter. The bet now is in technology with a huge position in Micron (MU) at 9% of assets, closely followed by Amazon and Facebook. Occidental Petroleum (OXY) is at 3%, a spec on bubbly oil futures. Energy Transfer (ETP), a highly leveraged MLP, is at 2.5%, but I prefer Enterprise Products Partners (EPd) for its balance sheet strength.
Carl Icahn (Trades, Portfolio)'s portfolio which is sizable, near $24 billion, is the sole player deeply committed to speculative energy plays like Occidental, with nearly 10% of invested assets. Occidental, too, can fluctuate 5% to 10% intraday.
What caught my eye in the Trian Fund Management report was its Invesco position, an 11% holding. Very rarely do you find one money manager investing in another house. This could be viewed as a sign of weakness but it shouldn't be so. I could find only one other player in this mode with a sizeable position in Berkshire Hathaway.
Third Point's portfolio is a definitive statement that industrials, energy and materials sectors wax irrelevant. The biggest position is the payments processor, Upstart Holdings (UPST), at 11.5%, but this is an indifferent performer. They're light in technology which is hard to defend nowadays.
In Paulson & Co.'s portfolio, the sole position I share in common is Dish Network (DISH), for them a 3% holding. This is another house purely set against industrials, financials and technology. They like pharma and gold which leaves me cold. I'm covering healthcare with UnitedHealth Group (UNH), my long-term play.
I'm having trouble with the Glenview Capital Management portfolio, which shows total turnover this past quarter. Why such concentrated positions in healthcare and pharmaceuticals? Facebook and Alphabet (GOOG)(GOOGL) are exceptions, but just 5% of invested assets. Tenet (THC) is a huge winner followed by Bausch (BHC), together 20% of invested assets, but I'll stick with UnitedHealth Group.
Healthcare and pharmaceuticals rest easier on the nerves as overweights. Most retain healthy balance sheets and are recession resistant. But, stocks like Merck (MRK) and Pfizer (PFE), particularly Merck, showed lack-luster performance over the past years.
You need to believe in aggressive money management as do all these mentioned players. Why play a custodial role? You might as well be a paper pusher. But, most portfolios mentioned here don't inspire applause for me. I'm sticking overweighted in financials, energy MLP's and tech houses like Facebook, Amazon and Microsoft. Some of my $5 ragamuffins of a year ago now look pricey, but a strong economy could give them another leg up.
Martin Sosnoff and managed accounts own: Freeport-McMoRan, Halliburton, U.S. Steel, Alcoa, Macy's, Enterprise Products Partners, Bank of America, Microsoft, UnitedHealth Group, Amazon, J P Morgan Chase, Citigroup, Dish Network.
