Alpha The Best Stock Picks of The Best Hedge Funds

Q1 2013 Issue:4 Performance Update: Small-Cap Strategy Inside This Issue We published the first issue of our newsletter at the end of August and started sharing the 15 quarterly stock picks of our small-cap strategy. Our 1 Performance Update strategy is pretty straight forward to implement. We hold these stocks in 3 New Stock Picks our portfolio for about 3 months and update our portfolio with the new names as soon as we publish a new issue of the newsletter. Our Small 5 In-depth Analysis of New Stock Cap Strategy gained an average of 47.5% between September 4th and Picks May 15th. During the same time period S&P 500 index ETF (SPY) gained only 19.1%. The Small Cap Strategy also returned 12.6% between 22 Billionaire Fund 35 February 15th and May 16th, beating SPY’s 9.2% return by 3.4 percentage Managers points. 79 Most Popular Stocks Among Hedge Funds Here is how each of our small-cap picks from the last newsletter performed: 86 Least Popular Stocks Among Hedge Funds 1. United Rentals (URI): 4.8% 89 Most Popular Stocks Among 2. Gardner Denver (GDI): 9.1% Best Performing Hedge Funds 3. MetroPCS (PCS): 14.4%, This stock was acquired by TMUS on May 1st 90 Most Concentrated Positions Among Hedge Funds 4. Visteon (VC): 13.6% 5. W.R. Grace (GRA): 7.5% 92 30 Picks by Our New Bonus 6. Lear (LEA): 7.9% Mid Cap Strategy 7. Owens Corning (OC): 3.1% 92 15 Stocks That are Dumped 8. Genworth Financial (GNW): 17.1% by Hedge Funds 9. Abercrombie & Fitch (ANF): 5.1% 10. Allscripts Healthcare Solutions (MDRX): 25.1% 11. Brookdale Senior Living (BKD): 4.0% 12. Ocwen Financial (OCN): 8.4% 13. US Airways (LCC): 31.9% 14. Hillshire Brands (HSH): 14.9% Don’t pay hedge funds 15. Sally Beauty Holdings (SBH): 13.8% hefty fees when you can buy the best stock picks Historically this strategy beat the S&P 500 index by about 4.25 of best hedge fund percentage points per quarter and its performance over the last 8.5 managers at a fraction months was twice as good. of what they charge 2 Hedge Fund Alpha

Performance Update: Secret Strategy

Historically our secret strategy performed much better than the market. In our 10-year back test this strategy beat the S&P 500 index by 2 percentage points per month. It is a riskier strategy than our small-cap strategy though.

Our secret strategy gained 25.2% between September 4th and May 16th. Overall this strategy outperformed the S&P 500 index by 6.1 percentage points in 8.5 months. This is a very good result in comparison to what most hedge funds and mutual funds deliver. However, it is also clear that this strategy has been performing below its historical track record.

Secret Strategy beat the Here is how our stock picks from the previous quarter performed S&P 500 index by 2 during the last 3 months: percentage points per month in our 10-year 1. ADT Corp (ADT): -9.6% back test. This strategy 2. Realogy Holdings (RLGY): 20.6% returned 25.2% between 3. Gardner Denver (GDI): 9.1% September 4th and 4. NYSE Euronext (LAMR): 9.1% February 15th 5. Workday Inc (WDAY): 33.2% 6. Verisign (VRSN): 5.9% 7. PBF Energy (PBF): -18.0% 8. Spirit Realty Capital (SRC): 14.6% 9. National Bank Holdings Corp (NBHC): 0.1% 10. Dynegy (DYN): 18.8% 11. MetroPCS (PCS): 14.4%, This stock was acquired by TMUS on May 1st 12. LinnCo (LNCO): 4.1% 13. WhiteWave Foods (WWAV): 26.0% 14. Warnaco Group (WRC): NA, It was acquired by PVH Corp on Feb. 13th 15. Grupo Financero Sntdr (BSMX): 14.3%

In the next page you will find the stock picks of our small-cap and secret strategies. You will notice that secret strategy has a much higher turnover than the small-cap strategy. All 15 stock picks of the secret strategy are new stocks. On the other hand there are only 9 new stocks in the small-cap strategy. This means our small-cap strategy has lower transaction costs than our secret strategy. 3 Hedge Fund Alpha

New Stock Picks: Small-Cap Strategy

1. United Rentals (URI) 2. Visteon Corp. (VC ) 3. Lamar Advertising Co. (LAMR) 4. US Airways Group (LCC) 5. W.R. Grace & Co. (GRA) 6. MetroPCS Communications, Inc. (PCS) 7. Owens Corning (OC) 8. CommonWealth REIT (CWH) 9. Newcastle Investment Corp. (NCT) 10. Fortinet Inc. (FTNT) 11. Carter's, Inc. (CRI) United Rentals (URI) 12. Genworth Financial (GNW) 13. Lear Corp. (LEA) has been the most 14. Dean Foods Company (DF) popular small-cap stock 15. Community Health Systems (CYH) among hedge funds in our first three issues of our newsletter. It returned 78% during New Stock Picks: Secret Strategy the last 8.5 months.

1. Axiall Corporation (AXLL) 2. CommonWealth REIT (CWH) 3. Starz (STRZA) 4. Radian Group Inc. (RDN) 5. Constellation Brands Inc. (STZ) 6. Community Health Systems (CYH) 7. American Realty Capital Properties (ARCP) 8. NXP Semiconductors NV (NXPI) 9. Newcastle Investment Corp. (NCT) 10. Norwegian Cruise Line Holdings (NCLH) 11. Bright Horizons Family Solutions (BFAM) 12. Ulta Salon, Cosmetics & Fragrance (ULTA) 13. Copart, Inc. (CPRT ) 14. BMC Software (BMC) 15. Emeritus Corp. (ESC)

4 Hedge Fund Alpha

How To Use This Hedge Fund Newsletter

1. I don’t have time to trade in and out of stocks every quarter and I want to invest in only the best ideas. What should I do?

Don’t read the rest of this newsletter. Our 10-year historical analysis showed that the top 3 small-cap stocks among hedge funds beat the market by 284 basis points per month. The top 5 small-cap stocks among hedge funds beat the market by 220 basis points per month. The good thing about investing in these top 3-5 stocks is that they stay in our portfolio for relatively long periods of time. This means lower transaction costs and you will have more time to spend on other things. United Rentals (URI) has been the most popular small-cap stock since the inception of our strategy and this stock gained 78% during the past 8.5 months. Visteon (VC) is another stock that was consistently among the top 5 stocks and it returned 39% We will start publishing over the same time period. a monthly BONUS newsletter in June. This The downside of this approach is that it isn’t diversified enough. Usually it isn’t a will cost $149 for non- good idea to allocate a large chuck of your portfolio to a very small number of members but for the stocks. current premium members it is FREE. 2. You present a lot of strategies and lists in this newsletter. What is your “official” recommendation? Which strategy should we follow?

Our flagship strategy is the Small Cap Hedge Fund Strategy. Our premium members are free to do whatever they like but we suggest they buy the 15 stocks picked by our flagship strategy every quarter and sell the stocks that drop out of the list. We have a graph on almost every page on our website showing the performance of this strategy since its inception. We will also take a much closer look at these stocks in the next section.

3. Investing is a hobby for me. I have a lot of time on my hands and would like to come up with great investment ideas by looking at what hedge funds are doing. What do you recommend?

We provide tons of information for subscribers who want to dig deeper and come up with additional promising stock picks. We present a lot of lists (and the historical returns of each list) at the end of this newsletter. You can also analyze the portfolios of billionaire hedge fund managers. However, we should warn you that usually it’s not a great idea to imitate hedge funds’ all stock picks. For example David Einhorn’s large-cap stock picks significantly underperform his small-cap stock picks. We will start distributing a monthly bonus newsletter where we will focus on a single hedge fund manager and share his promising stock picks with you. This newsletter will be free for our premium members.

5 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

1. United Rentals (URI)

United Rentals has been our #1 pick for the past year. A very peculiar case of a construction/industrial equipment rental company that's booming to a greater degree than its industry: the prime rental equipment market (non- residential construction) is considered moderate (at best) by most economists, and the majority don't expect a complete recovery until 2014- 2015. One major trend, though, that was an effect of the last recession was a push away from buying construction equipment to renting instead. The latest sequester fears have pushed URI--the largest equipment rental company in the world--to even greater heights, as businesses have placed an even greater premium on short-term rental agreements.

Current Price: $58.68 1) Special Situations: No Price when first recommended: $32.31 2) Short Interest: 17.6% of float is short. This percentage itself has increased by nearly 50% since the end of March; URI's first-quarter revenues missed (Aug 31, 2012) targets ever so slightly, which may explain the rising short interest. No major Dividends Paid: 0 investors have proclaimed they're short. No. of HFs: 50 3) Developments/Catalysts: Still, URI's guidance is intact, along with the analyst optimism on Wall Street (avg. price target of $64.67 vs. current price of $58.70). Shares are up 15% since the mid-April Q1 report. Oppenheimer just boosted its PT to $68, and Citigroup boost its to $70 earlier this month. In short, URI is a great hedge against political uncertainty in Washington. Most business confidence indices are strong, but they're remained stagnant since February. Continued uncertainty will continue to push businesses to short-term rentals, and thus, URI.

4) Options: Jan 2015 $60 calls are $12; 2015 $65 calls are $9.76. Jan 2014 $60 calls are $7.10. Jan 2014 $65 calls are $5. Best play here Jan 2014 at $60 strike.

5) Insider Sentiment: No insider purchases since 2009. Two strict sales (non- option) have occurred in the past 90 days. Both aren't significant in size, and both are Directors at URI.

6) 13D/13G Owners: No +5% owners to track. 6 Hedge Fund Alpha

1. United Rentals (URI): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund UNITED RENTALS INC URI PRN N 115107 0% 0.2% Citadel Investment Group UNITED RENTALS INC URI SH N 103090 -14% 1.5% Point State Capital UNITED RENTALS INC URI PRN N 93624 0% 3.6% Alpine Associates UNITED RENTALS INC URI SH N 85314 -37% 1.0% Highbridge Capital Management UNITED RENTALS INC URI SH N 77113 0% 2.4% PAR Capital Management UNITED RENTALS INC URI SH N 76407 25% 0.1% Citadel Investment Group UNITED RENTALS INC URI SH N 62251 975% 0.3% SAC Capital Advisors UNITED RENTALS INC URI SH N 55330 58% 1.4% Egerton Capital Limited UNITED RENTALS INC URI SH N 55100 -25% 1.9% Odey Asset Management Group UNITED RENTALS INC URI SH N 52530 22% 0.2% Millennium Management

See the entire list and the history of hedge fund positions in this stock! 7 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

2. Visteon Corp (VC)

An automotive supplier to major auto OEMs globally, Visteon's favoritism in the smart money's world appears to be valuation driven. The company sold its automotive lighting business to Varroc for less than $100 million in early Aug. 2012; a $100M share repurchase program was also announced. Later that month late, CEO/President/Chairman Don Stebbins resigned, with Timothy Leuliette, previously a board member, named as the interim to all three posts. Visteon's stock responded to this move very well, popping more than 10% in a day's time. In early October 2012, Visteon confirmed Leuliette was made the official CEO/President. The Chairman position was re- assigned, and the CFO was replaced later that month. Another double-digit gain followed these moves, and $200M more in share repurchases were Current Price: $65.77 announced in Jan. 2013. Price when first recommended: $46.02 1) Special Situations: No

(Aug 31, 2012) 2) Short Interest: 2.5% of float is short. Dividends Paid: 0 No of HFs: 48 3) Developments/Catalysts: Visteon crushed first quarter rev/earnings estimates, registering 8.1% and 110% yoy growth, respectively. VC stock itself has risen more than 9% since reporting earlier this month, and 14% overall since the end of Q1. Wall Street's average price target, though, lies nearly 13% higher than Visteon's current stock price of $65.77.

In addition to the company-specific factors that warrant investors' optimism, S&P holds a "positive" outlook for the auto parts and equipment sub- industry as a whole. "Rising demand" domestically and in China are expected to contribute to long-term growth, though Eurozone troubles and "elevated" oil prices are worth keeping an eye out for. In the U.S., the average age of each car on the road is 11 years, the highest on record--another bullish factor in the shorter term.

4) Options: Jan 2015 $70 calls are $6. Jan 2015 $75 calls are $2.85. Jan 2014 $75 calls are $1.60. Preference would be Jan 2014 at a strike of $75.

5) Insider Sentiment: There were three separate insider purchases in Dec. 2012, and one bearish insider since the start of 2013, a direct sale.

6) 13D/13G Owners: No +5% owners to track. 8 Hedge Fund Alpha

2. Visteon (VC): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund VISTEON CORP VC SH N 150134 3% 0.7% SAC Capital Advisors VISTEON CORP VC SH N 133124 22% 2.8% JANA Partners VISTEON CORP VC SH N 121589 0% 14.1% Centerbridge Partners VISTEON CORP VC SH N 117716 -3% 42.2% Solus Alternative Asset Management VISTEON CORP VC SH N 104830 13% 1.0% Highfields Capital Management VISTEON CORP VC SH N 80696 1% 7.5% Silver Point Capital VISTEON CORP VC SH N 79659 -23% 1.7% York Capital Management VISTEON CORP VC SH N 63095 10% 1.3% Eton Park Capital VISTEON CORP VC SH N 60844 -18% 10.5% Alden Global Capital VISTEON CORP VC SH N 60036 -60% 1.8% Owl Creek Asset Management

See the entire list and the history of hedge fund positions in this stock! 9 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

3. Lamar Advertising (LAMR)

Lamar has some of the most impressive growth prospects in the outdoor advertising industry, with a transition to digital billboards driving the sell- side’s solid current-year (15%) and extreme year-ahead (76%) bottom line growth forecasts. More importantly, Lamar is looking at a REIT conversion by January 2014, with MKM Partners analyst Eric Handler saying quite succinctly, "billboards will make good real estate assets.”

1) Special Situations: REIT Conversion

2) Short Interest: 4.3% of float is short.

Current Price: $48.67 3) Developments/Catalysts: Since announcing in August 2012 that it was Price when first considering a move to REIT status for tax advantages, LAMR has risen over recommended: $48.12 50%, and Wall Street's high estimate still sees a 25% upside from current prices near $48 a share. (May 16, 2013)

Dividends Paid: 0 S&P calls 2013 a “transition year” for the advertising industry, with a secular No of HFs: 47 shift toward digital billboards offset by a fewer top-dollar opportunities like the Olympics, for example. Still, over the longer term, Lamar is looking like it'll be a prominent player in the dig-Ad space, which should serve its investors very well.

4) Options: Jan 2014 $50 calls are $3.45. Jan 2014 $55 calls are $1.57. Jan 2015 $50 calls are $5.30. an 2015 $55 calls are $3.70. Preference is Jan 2015 calls at a strike of $50.

5) Insider Sentiment: No insider purchases since 2011. Four insider sales in 2013.

6) 13D/13G Owners: SPO Advisory Corp owns 11.3%, Perry Corp owns 7.9%, and Southeastern Asset Management owns 6%. 10 Hedge Fund Alpha

3. Lamar Advertising (LAMR): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund LAMAR ADVERTISING CO LAMR SH N 404143 -18% 5.5% SPO Advisory Corp LAMAR ADVERTISING CO LAMR SH N 283221 0% 9.0% Perry Capital LAMAR ADVERTISING CO LAMR SH N 214372 -19% 1.0% Southeastern Asset Management LAMAR ADVERTISING CO LAMR SH N 156915 -53% 3.0% Luxor Capital Group LAMAR ADVERTISING CO LAMR SH N 89295 602% 0.4% SAC Capital Advisors LAMAR ADVERTISING CO LAMR SH N 71287 -31% 0.8% Glenview Capital LAMAR ADVERTISING CO LAMR SH N 70801 New 2.8% Tiger Consumer Management LAMAR ADVERTISING CO LAMR SH N 70478 1% 4.5% Southpoint Capital Advisors LAMAR ADVERTISING CO LAMR SH N 61768 -77% 6.0% Abrams Capital Management LAMAR ADVERTISING CO LAMR SH N 57938 -16% 1.3% Brookside Capital

See the entire list and the history of hedge fund positions in this stock! 11 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

4. US Airways (LCC)

US Airways' merger with AMR Corporation was announced in February 2013, and was approved by a bankruptcy judge earlier this May. Since news of the formal approval, shares of LCC have gained more than 9% and currently trade at $19.01 a share, but the agreement is still awaiting U.S. and European regulatory approval, providing another catalyst for more upside in the short term. Most analysts expect the deal to be completed by Q3 2013.

1) Special Situations: Merger arbitrage; possible investment post-merger.

2) Short Interest: 32.9% of float short.

Current Price: $19.01 3) Developments/Catalysts: Wall Street is betting that there's still an 11.3% Price when first upside in this merger arbitrage opportunity. If a deal does go through, LCC recommended: $14.50 shareholders will receive an undetermined amount of shares of the newly merged airline. All in all, LCC shareholders will own about 28% of the new (Feb 15, 2013) company, which most estimate to be worth more than $10 billion, and Dividends Paid: 0 annual revenues in excess of $40B, making it the largest airline in the U.S. No of HFs: 47 With that being said, LCC investors do have the opportunity to ride their original investment past the merger, as President Scott Kirby has cited a massive potential to ""hit the ground running," adding that the two are "going to get the code share up within weeks compared to what's taken much longer at some other mergers." Kirby has also pointed out that they expect "operational integration done effectively and with very minimal customer disruption.”

4) Options: Jan 2014 $20 calls are $1.74. Jan 2014 $21 calls are $1.47. Jan 2015 $20 calls are $3.10. Preference is Jan 2014 calls at a strike of $20.

5) Insider Sentiment: No insider purchases on record. Six different insiders were selling in late April 2013.

6) 13D/13G Owners: FMR owns 9.2%, Vanguard Group owns 5.8%, Appaloosa owns 5.8%.

12 Hedge Fund Alpha

4. US Airways (LCC): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund U S AIRWAYS LCC SH CALL 424250 0% 37.9% BlueCrest Capital Mgmt. U S AIRWAYS LCC SH N 181525 -11% 3.8% Appaloosa Management LP U S AIRWAYS LCC PRN N 171520 -13% 8.3% Whitebox Advisors U S AIRWAYS LCC SH N 133128 99% 1.6% U S AIRWAYS LCC SH N 101961 200% 17.5% Alden Global Capital U S AIRWAYS LCC SH PUT 60564 New 1.3% Empyrean Capital Partners U S AIRWAYS LCC SH CALL 42564 New 2.8% Lakewood Capital Management U S AIRWAYS LCC PRN N 36925 0% 0.4% Highbridge Capital Management U S AIRWAYS LCC SH N 27016 -56% 5.6% Standard Pacific Capital U S AIRWAYS LCC SH N 26464 New 0.2% Columbus Circle Investors

See the entire list and the history of hedge fund positions in this stock! 13 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

5. WR Grace & Co (GRA)

WR Grace & Co is a specialty chemicals company best known for its catalysts used to convert oil into transportation fuels. Shares were up more than 40% last year on rising hopes that its decade of asbestos-related court drama-- and bankruptcy protection--was turning the right corner. In 2013, GRA is up nearly 20% and recently cracked the $80 mark for the first time in their history.

1) Special Situations: Bankruptcy

2) Short Interest: 1.90% of float short.

Current Price: $80.67 3) Developments/Catalysts: While a sizable chunk of GRA's value has Price when first already been taken, shares are still cheap on a cash basis (10th lowest in the recommended: $57.76 50-stock specialty chemicals industry), and the sell-side expects bottom line growth in the mid-to-high teens next year. Topeka Capital Markets, who has (Aug 31, 2012) a Hold rating on GRA, says the company is "finally set to emerge" from Dividends Paid: 0 bankruptcy protection by the end of this year or "early 2014." Average PTs No of HFs: 46 on GRA lie in the $87 range--an 8% upside from current levels.

One intriguing aspect of GRA's business is its innovations in the fluid catalytic cracking (FCC) arena, specifically in manufacturing the catalysts that drive this process. the company recently reached a joint venture with Al Dahra Agriculture to build the first FCC catalyst plant in the United Arab Emirates. The facility "will serve refineries throughout the Middle East and potentially into South Asia" by Q4 2015, according to an official statement. On a longer-term, macro-level scale, global demand for FCC catalysts are expected to rise significantly in the coming half-decade, with GRA expected to be a major player, and likely, the leader in this space.

4) Options: Jan 2014 $82.50 calls are $3.20. Jan 2014 $85 calls are $4.13. Jan 2014 $87.50 calls are $3.21. Jan 2015 $85 calls are $7.40. Jan 2015 $90 calls are $5.60. Preference is Jan 2015 calls at a strike of $85.

5) Insider Sentiment: No insider purchases since 2009. Three insider sales in May 2013; none of significant size.

6) 13D/13G Owners: FMR owns 10.2%, Vanguard Group owns 6.1%, and Iridian Asset Management owns 5.8%. 14 Hedge Fund Alpha

5. WR Grace & Co (GRA) : Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund WR GRACE & CO GRA SH N 278819 1% 4.1% Iridian Asset Management WR GRACE & CO GRA SH N 232530 28% 2.9% Blue Ridge Capital WR GRACE & CO GRA SH N 194639 15% 5.2% Chilton Investment Company WR GRACE & CO GRA SH N 140986 -10% 8.3% Hound Partners WR GRACE & CO GRA SH N 132388 40% 0.5% OZ Management WR GRACE & CO GRA SH N 118978 -46% 1.8% Tiger Global Management LLC WR GRACE & CO GRA SH N 115791 New 0.6% Lone Pine Capital WR GRACE & CO GRA SH N 107915 15% 5.7% Gates Capital Management WR GRACE & CO GRA SH N 100763 0% 7.4% Marble Arch Investments WR GRACE & CO GRA SH N 96888 0% 7.5% H Partners Management

See the entire list and the history of hedge fund positions in this stock! 15 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

6. MetroPCS Communications (PCS)

Was acquired by T-Mobile USA, completed on May 1st.

Current Price: NA Price when first recommended: $10.35 (Feb 15, 2013) Dividends Paid: 0 No of HFs: 46 16 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

7. Owens Corning (OC)

A favorite of many investors betting on a housing market recovery, Owens Corning is the quintessential leader in roofing and various glass fiber products, including insulation and reinforcements.

1) Special Situations: No

2) Short Interest: 6.7% of float short.

3) Developments/Catalysts: Roofing and insulation are two of the most important beneficiaries of the continued housing market recovery, with the former (insulation) showing a slight lag in comparison to industry-level Current Price: $44.87 growth. Shares of OC are up more than 21% since the start of the year, and Price when first trade at price-to-sales parity with an attractive forward earnings multiple recommended: $42.79 below 15.0.

(Feb 15, 2013) S&P holds a "positive" outlook for the building products industry, citing Dividends Paid: 0 expectations of "ongoing gains in existing home sales, and more home No of HFs: 47 improvement projects" in the intermediate term.

4) Options: Jan 2014 $45 calls are $3.80. Jan 2014 $46 calls are $2.80. Jan 2014 $47 calls are $2.75. Jan 2014 $50 calls are $1.72. Preference is Jan 2014 calls at a strike of $46.

5) Insider Sentiment: No insider buys in 2013. Three insider sales in the last three months.

6) 13D/13G Owners: Wayzata Investment Partners owns 7.2%, Blue Ridge Capital owns 6.2%, and Artisan Partners owns 5.3%. 17 Hedge Fund Alpha

7. Owens Corning (OC): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund OWENS CORNING OC SH N 325561 -8% 35.8% Wayzata Investment Partners OWENS CORNING OC SH N 282122 7% 3.5% Blue Ridge Capital OWENS CORNING OC SH N 125190 80% 2.4% Pennant Capital Management OWENS CORNING OC SH N 106599 14% 2.3% Appaloosa Management LP OWENS CORNING OC SH N 106365 -1% 0.5% SAC Capital Advisors OWENS CORNING OC SH N 74604 179% 3.2% Valinor Management LLC OWENS CORNING OC SH N 61972 New 1.9% Samlyn Capital OWENS CORNING OC SH N 53861 71% 1.8% Ascend Capital OWENS CORNING OC SH N 52245 9% 2.3% Sigma Capital Management OWENS CORNING OC SH N 45917 -50% 0.7% Iridian Asset Management

See the entire list and the history of hedge fund positions in this stock! 18 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

8. CommonWealth REIT (CWH)

There are battleground stocks, and then there are outright wars. The developing situation surrounding CommonWealth REIT's fight with Icahn cub Corvex Management and Related Fund Management is one of a kind, if not the first of its kind.

Corvex and Related are currently engaged in a hostile takeover of the Maryland-based office REIT, after originally disclosing a 9.8% stake in CWH this past February--and an outright offer of $25 per share. CWH's stock price immediately rose above this level when the news broke, but Mr. Market's optimism over a successful takeover has fallen since, with shares losing more than 18% since March; they now trade in the mid-range of the original Current Price: $20.49 price and the buyout offer's price (Corvex’s latest 13D filing shows a 9.2% Price when first stake (see their presentation)). recommended: $20.43 CWH has a poison pill defense in place that limits outside buyers from taking (May 16, 2013) positions greater than 10% of the REIT, and more troublingly, a staggered Dividends Paid: 0 board means that CWH can resist the hedge fund duo's efforts for two years No of HFs: 41 before giving up a majority.

Additionally, a provision initially adopted without shareholders' support, exists that makes all disputes with shareholders up for arbitration--adding more months, and maybe years, to the process. If this provision is rejected by CHW's home-state legal system, it would strike a major blow to CHW management, but Corvex and Related also need a loophole in the REIT's documents--allowing for all directors to be removed by written consent--to be held in place by Maryland's legislature.

If Corvex and Related can successfully use the loophole, and have the ability to avoid arbitration, shares do have upside to $25 a piece. It's this scenario, which is viewed as probable by many analysts, that almost all bulls are betting on. Frankly, the twisted nature of this entire situation is one reason why retail investors may not have recognized the buying opportunity that's present.

1) Special Situations: Takeover

2) Short Interest: 6.8% of float short.

3) Developments/Catalysts: CWH's stock price hasn't fared very well post- recession. Shares are down more than 30% over the past five years, in a time when the office REIT industry is up around 4%. It is this underperformance that Corvex and Related seek to change, and is a likely reason why they will receive shareholder support in their takeover quest.

Still, this will be up to the courts, hence the discount that's currently available. 19 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

8. CommonWealth REIT (CWH), Cont.

4) Options: Oct 2013 $22.50 calls at $1.15. No contracts available beyond this date, due to the legal uncertainty surrounding CWH.

5) Insider Sentiment: No insider buys or sales on record.

6) 13D/13G Owners: Aside from Corvex and Related, Vanguard Group owns 9.7%. Perry Corp owns 5.6%.

Current Price: $20.49 Price when first recommended: $20.43 (May 16, 2013) Dividends Paid: 0 No of HFs: 41 20 Hedge Fund Alpha

8. CommonWealth REIT (CWH) : Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund COMMONWEALTH REIT CWH SH N 145860 New 4.6% Perry Capital COMMONWEALTH REIT CWH SH N 125148 -12% 2.4% Luxor Capital Group COMMONWEALTH REIT CWH SH N 121743 New 3.6% Corvex Capital COMMONWEALTH REIT CWH SH CALL 96492 New 1.8% Fir Tree COMMONWEALTH REIT CWH SH N 96169 New 2.8% Owl Creek Asset Management COMMONWEALTH REIT CWH SH N 84324 New 0.8% Highfields Capital Management COMMONWEALTH REIT CWH SH N 67320 New 0.8% Senator Investment Group COMMONWEALTH REIT CWH SH N 51658 New 0.2% OZ Management COMMONWEALTH REIT CWH SH N 47611 New 1.0% York Capital Management COMMONWEALTH REIT CWH SH N 44880 New 0.9% Empyrean Capital Partners

See the entire list and the history of hedge fund positions in this stock! 21 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

9. Newcastle Investment (NCT)

Multiple empirical studies have shown that spinoffs and the entities that perform them: a) outperform the market, b) are typically underrated by Wall Street, and c) are undervalued post-split. In 45 years of data from the Purdue duo of McConnell and Ovtchinnikov, freshly split entities have outperformed Mr. Market by more than 19% twelve months after the split, with 24-month (24.4%) and 36-month (26.3%) returns of even greater significance. Newcastle Investment, which recently spun off its its residential real estate assets into New Residential (NRZ), falls into this category.

1) Special Situations: Spinoff

Current Price: $5.95 2) Short Interest: 0.9% of float short. Price when first recommended: $5.72 3) Developments/Catalysts: Looking at shares of the mortgage REIT in mid- May, Newcastle's stock price has risen 27.8% in just one month's time, and (May 16, 2013) the combination of impressive first-quarter results with a full-year guidance Dividends Paid: 0 boost have bulls clamoring. No of HFs: 39 In addition the the fundamental bullishness of a post-spinoff environment, Newcastle's focus on the senior living segment of the marketplace is expected to boost overall performance in the intermediate term; diversity will continue to be key advantage it has over most competitors. Non-agency mortgages, MSRs, and commercial real estate are the other primary areas that this mREIT operates in, and a yield of 7.20% places it in the upper- fourth of its industry.

4) Options: Jan 2014 $7.50 calls are $0.10. Jan 2015 $7.50 calls are $0.30. Preference is Jan 2015 calls at a strike of $7.50.

5) Insider Sentiment: Two insider purchases since the start of 2013. No insider sales.

6) 13D/13G Owners: Vanguard Group holds 7.4%. FMR holds 7.3%. Credit Suisse holds 5.7%.

22 Hedge Fund Alpha

9. Newcastle Investment (NCT) : Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund NEWCASTLE INVESTMENT CNCT SH N 69751 207% 0.3% SAC Capital Advisors NEWCASTLE INVESTMENT CNCT SH N 66733 New 1.4% York Capital Management NEWCASTLE INVESTMENT CNCT SH N 62185 New 2.4% Osterweis Capital Management NEWCASTLE INVESTMENT CNCT SH N 52291 77% 1.8% Ascend Capital NEWCASTLE INVESTMENT CNCT SH N 45381 1254% 0.7% Omega Advisors NEWCASTLE INVESTMENT CNCT SH N 36288 105% 0.6% Two Sigma Advisors NEWCASTLE INVESTMENT CNCT SH N 34092 390% 0.1% Renaissance Technologies NEWCASTLE INVESTMENT CNCT SH N 29601 New 2.1% Hutchin Hill Capital NEWCASTLE INVESTMENT CNCT SH N 21225 7% 5.0% Locust Wood Capital Advisers NEWCASTLE INVESTMENT CNCT SH N 18431 -21% 0.3% Moore Global Investments

See the entire list and the history of hedge fund positions in this stock! 23 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

10. Fortinet (FTNT)

At first glance, nothing really special stands out about this IT security player. Down more than 10% since the start of 2013, Fortinet hasn’t given investors much to be excited about of late.

1) Special Situations: No

2) Short Interest: 1.4% of float short.

3) Developments/Catalysts: Recently, most of investors’ pessimism on Fortinet is related to the fact that it pre-announced its first quarter financials, missing Wall Street’s revenue numbers by 3% while coming short Current Price: $18.96 on EPS estimates by 16%. Industry-wide reports haven’t been mind-blowing, Price when first but it’s difficult to think that any bull expected Fortinet to miss so poorly. recommended: $18.50 On the bright side, however, this short-term dip may give value-hunters an (May 16, 2013) even better entry point into the stock, as shares now trade at a “modest” 48 Dividends Paid: 0 times trailing earnings—20% below its average over the past year. No of HFs: 39 An acquisition of enterprise solutions firm Coyote Point Systems, announced in March, should also give Fortinet a stronger foothold in the budding cloud security segment. It’s this longer-term cyber security potential that gives Fortinet some real bite, and while the Coyote deal won’t make or break this stock, it certainly adds some allure to the investment.

4) Options: Jan 2014 $20 calls are $2.67. Jan 2014 $21 calls are $1.85. Jan 2015 $20 calls are $4. Preference is Jan 2014 calls at a strike of $21.

5) Insider Sentiment: No insider purchases, three bearish insiders in 2013.

6) 13D/13G Owners: Wells Fargo owns 13.1%, and Vanguard Group owns 5.3%. 24 Hedge Fund Alpha

10. Fortinet (FTNT): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund FORTINET INC FTNT SH N 57378 115% 1.5% Eminence Capital FORTINET INC FTNT SH N 56282 New 1.8% Hoplite Capital Management FORTINET INC FTNT SH N 49960 New 0.6% Maverick Capital FORTINET INC FTNT SH N 46946 36% 2.2% Tremblant Capital FORTINET INC FTNT SH N 38862 2% 0.1% Citadel Investment Group FORTINET INC FTNT SH N 22980 New 2.4% Jericho Capital Asset Management FORTINET INC FTNT SH N 21653 New 0.6% Sandler Capital Management FORTINET INC FTNT SH N 17168 New 1.7% Empire Capital Management FORTINET INC FTNT SH N 16736 -81% 0.4% Brookside Capital FORTINET INC FTNT SH N 13439 53% 0.2% Balyasny Asset Management

See the entire list and the history of hedge fund positions in this stock! 25 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

11. Carter’s (CRI)

Though it often flies under the radar, Carter's is the single largest branded marketer of baby apparel in the U.S., with the iconic OshKosh in its staple. Known for its value-priced products with reasonable quality, Carter’s is a domestic consumer confidence play through and through, with some attractive international growth prospects as well.

1) Special Situations: No

2) Short Interest: 3.8% of float short.

3) Developments/Catalysts: A 2011 acquisition of Bonnie Togs has boosted Current Price: $70.06 Carter’s footprint in Canada considerably, with most estimates predicting Price when first annual growth in the mid-teens over the next five years. Carter’s Japanese recommended: $68.98 expansion is also expected to experience similar growth, judging by most estimates. (Aug 31, 2012)

Dividends Paid: 0 As with most apparel producers, one major challenge that Carter’s has faced No of HFs: 39 quite well has been an industry-wide shift to e-commerce, specifically in direct-to-consumer offerings. This, in turn, has led Carter’s to rely less on wholesale revenues—a promising sign that on the whole, brand awareness is headed in the right direction.

The icing on the cake here, though, is that cotton prices are headed in the right direction, close to a third of their 2011 highs. The spot price of Upland cotton has fallen by 14% since March, and the desirable combination of falling demand and rising production has most forecasts predicting further price depreciation through next year.

Implicitly, this will have a favorable effect on Carter’s gross margins, which are already at their highest level in four years.

In early May, Carter’s also declared its first ever quarterly dividend of $0.16 a share, good for a forward yield near 1.0%; the ex-dividend date is May 29. A $300 million share repurchase program was also announced at this time. The growth catalysts just keep on coming.

4) Options: Sep 2013 $75 calls are $0.70. Dec 2013 $80 calls are $1.85. Preference is Dec 2013 calls at a strike of $80.

5) Insider Sentiment: No insider purchases in 2013, three insider sales since the beginning of May.

6) 13D/13G Owners: Viking Global owns 6%, Hoplite Capital owns 5.7%, Matrix Capital owns 5.2%, and Tiger Global owns 5.1%.

26 Hedge Fund Alpha

11. Carter’s (CRI): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund CARTERS INC CRI SH N 196372 -8% 1.2% Viking Global CARTERS INC CRI SH N 186844 9% 6.0% Hoplite Capital Management CARTERS INC CRI SH N 170378 0% 18.6% Matrix Capital Management CARTERS INC CRI SH N 168374 New 2.6% Tiger Global Management LLC CARTERS INC CRI SH N 158298 10% 9.3% Hound Partners CARTERS INC CRI SH N 129293 179% 0.6% SAC Capital Advisors CARTERS INC CRI SH N 97880 -1% 0.3% Royce & Associates CARTERS INC CRI SH N 84050 196% 1.8% Alkeon Capital Management CARTERS INC CRI SH N 64592 0% 3.8% Polaris Capital Management CARTERS INC CRI SH N 63267 -38% 0.6% Highfields Capital Management

See the entire list and the history of hedge fund positions in this stock! 27 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

12. Genworth Financial (GNW)

Through mid-May, Genworth Financial has gained more than 40% since the start of 2013. A generally cheery market notwithstanding, most investors’ optimism has been related to a potential three-way breakup.

1) Special Situations: Impending breakup and related value potential.

2) Short Interest: 2.9% of float short.

3) Developments/Catalysts: Genworth Financial is expected to IPO its Australian mortgage insurance unit for $800 million in the short- to intermediate-term, in addition to the expected sales of its wealth Current Price: $10.74 management and alternative investment businesses for $400 million in total, Price when first according to most estimates. recommended: $9.06 Genworth itself has said that it’s waiting for “more evidence of a good IPO (Feb 15, 2013) market” as recently as this month, but all three moves could allow the Dividends Paid: 0 company to focus its efforts on core U.S. mortgage and long-term care No of HFs: 39 insurance operations.

Though it’s difficult to place an exact post-breakup value on Genworth Financial as of yet, Wall Street believes that shares have further upside from here, with average price targets surpassing the $11.20 mark. High estimates predict a 20% upside, with greater appreciative potential once an exact date is set on the Australian IPO.

4) Options: Jan 2014 $11 calls are $1.40. Jan 2014 $12 calls are $1.07. Jan 2015 $12 calls are $2.06. Preference is Jan 2014 calls at a strike of $11.

5) Insider Sentiment: One insider buy, one insider sale in May.

6) 13D/13G Owners: Dodge & Cox own 9.2%, Vanguard Group owns 7.7%, FMR owns 7.2%, and State Street owns 5%.

28 Hedge Fund Alpha

12. Genworth Financial (GNW): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund GENWORTH FINANCIAL INCGNW SH N 131676 -52% 1.2% Highfields Capital Management GENWORTH FINANCIAL INCGNW SH N 90000 131% 0.5% Paulson & Co GENWORTH FINANCIAL INCGNW SH N 83826 -31% 2.1% ESL Investments GENWORTH FINANCIAL INCGNW SH N 81224 34% 1.4% Legg Mason Capital Management GENWORTH FINANCIAL INCGNW SH N 58065 286% 0.1% Renaissance Technologies GENWORTH FINANCIAL INCGNW SH N 38532 -24% 0.3% Arrowstreet Capital GENWORTH FINANCIAL INCGNW SH N 22153 New 1.0% ZWEIG DIMENNA PARTNERS GENWORTH FINANCIAL INCGNW SH N 22063 29% 2.2% Fine Capital Partners GENWORTH FINANCIAL INCGNW SH N 19882 -13% 2.7% Saba Capital GENWORTH FINANCIAL INCGNW SH N 16500 371% 0.3% Moore Global Investments

See the entire list and the history of hedge fund positions in this stock! 29 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

13. Lear Corp (LEA)

Lear Corporation is a play on the auto space, and is one of the world's largest suppliers of seating and electrical power management systems to automakers. We’ve discussed hostile takeovers before, but Lear is a much, much different situation. Hedge funds Marcato Capital Management and Oskie Capital Management originally announced their intent to place a group of nominees for election to Lear’s Board, but after the Board itself announced a few value stimulating moves of their own, the activist duo agreed to withdraw their candidates in April.

More importantly, Marcato and Oskie have now pledged their full support to Lear’s existing Board of Directors, with the implicit understanding that Current Price: $61.03 shareholder value will be its first and foremost priority moving forward. Price when first recommended: $38.83 1) Special Situations: Activist influence; continued shareholder value stimulation. (Aug 31, 2012)

Dividends Paid: $0.45 2) Short Interest: 13.7% of float short. No of HFs: 39 3) Developments/Catalysts: On April 1, Lear announced that it would accelerate its existing $1 billion share repurchase program with an additional $750 million. With Marcato, Oskie and Lear’s board on the same page, this stock has risen more than 11% since the start of April through mid-May, and the sell-side’s average price target estimates upside of another 9% in the short- to intermediate-term. Most recently, S&P Capital IQ raised their outlook on Lear from a Hold to a Buy in late April.

As we’ve discussed in our analysis of Visteon above, most analysts expect the auto supplier space to be bullish in the next 1-2 years, with rising domestic and Chinese demand expected to be primary contributors to growth. Record-high levels for vehicle age in the U.S. are also expected to benefit companies like Lear moving forward.

4) Options: Sept 2013 $65 calls are $1.80. Sept 2013 $70 calls are $0.45. Dec 2013 $65 calls are $2.70. Preference is Dec 2013 calls at a strike of $65.

5) Insider Sentiment: No insider purchases, one insider sale in 2013.

6) 13D/13G Owners: Robeco Investment Management owns 7.3%, Marcato Capital Management owns 6%, and Harris Associates owns 5%.

30 Hedge Fund Alpha

13. Lear Corp (LEA): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund LEAR CORP LEA SH N 310182 107% 42.8% Marcato Capital Management LEAR CORP LEA SH N 122154 -25% 5.3% Valinor Management LLC LEAR CORP LEA SH N 106044 -26% 0.2% Citadel Investment Group LEAR CORP LEA SH N 80613 -5% 0.3% Adage Capital Management LEAR CORP LEA SH N 74881 44% 0.2% D E Shaw LEAR CORP LEA PRN N 73658 766% 2.2% Corvex Capital LEAR CORP LEA SH N 43937 2% 6.4% Redwood Capital Management LEAR CORP LEA SH N 43013 -16% 0.1% Renaissance Technologies LEAR CORP LEA SH N 34487 5% 0.7% York Capital Management LEAR CORP LEA SH N 32373 -11% 4.0% North Run Capital

See the entire list and the history of hedge fund positions in this stock! 31 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

14. Dean Foods (DF)

Dean Foods is the U.S.’s largest dairy processor and distributor, whose products range from milk to creamers. Dean’s WhiteWave Foods (WWAV) segment, which focuses on alternative and organic milk products, will be spun off later this month.

1) Special Situations: Spinoff

2) Short Interest: 6.3% of float short.

3) Developments/Catalysts: At first glance, a post-split Dean Foods without its highest-growing segment seems a little bland. Peeking a bit under the Current Price: $20.95 hood of a company that’s already in the midst of an operational overhaul, Price when first however, there’s beauty in a breakup. recommended: $20.59 On nearly every basis, Dean Foods’ dairy business is abnormally cheap in (May 16, 2013) comparison to industry peers, but until the WhiteWave spinoff is complete, Dividends Paid: 0 the markets will be unable to recognize it. Even with a slight multiples No of HFs: 38 expansion, there’s substantial appreciation potential here.

Longer term worries over the lack of growth in milk aside, Dean represents a solid value play in the short-run; the sell-side’s average price target predicts an 8% upside from current levels. The more bullish analysts predict shares can flirt with the $27 after WhiteWave spins off later this month.

4) Options: Jan 2014 $21 calls are $2. Jan 2014 $22 calls are $1.65. Jan 2014 $23 calls are $0.90. Jan 2015 $22 calls are $2.55. Preference is Jan 2014 calls at a strike of $23.

5) Insider Sentiment: No insider purchases or sales in 2013.

6) 13D/13G Owners: Vanguard Group owns 9.6%, FMR owns 5.7%, T Rowe Price owns 5%.

32 Hedge Fund Alpha

14. Dean Foods (DF): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund DEAN FOODS CO NEW DF SH N 76655 4% 0.3% Adage Capital Management DEAN FOODS CO NEW DF SH N 62544 112% 15.2% Sheffield Asset Management DEAN FOODS CO NEW DF SH N 60736 New 0.8% Scout Capital Management DEAN FOODS CO NEW DF SH N 45417 New 0.2% OZ Management DEAN FOODS CO NEW DF SH N 44471 33% 2.6% Hound Partners DEAN FOODS CO NEW DF SH N 40040 3% 0.6% HBK Investments DEAN FOODS CO NEW DF SH N 30870 95% 1.0% Ascend Capital DEAN FOODS CO NEW DF SH N 30767 0% 1.5% East Side Capital (RR Partners) DEAN FOODS CO NEW DF SH N 27869 -11% 0.6% Appaloosa Management LP DEAN FOODS CO NEW DF SH N 27739 New 0.3% Highfields Capital Management

See the entire list and the history of hedge fund positions in this stock! 33 Hedge Fund Alpha Analysis of Small Cap Strategy’s Picks:

15. Community Health Systems (CYH)

Community Health Systems has been a high-flyer in 2013, with shares up a whopping 45% year to date. The hospital operator, cited as an “Obamacare” play by many analysts, is assumed to benefit from the Affordable Care Act by as early as 2014.

1) Special Situations: No

2) Short Interest: 2.8% of float short.

3) Developments/Catalysts: Mr. Market isn’t placing an overwhelming bet Current Price: $44.66 one way or another on just how Obamacare will affect healthcare Price when first companies. Therein lies the opportunity in Community Health Systems as a recommended: $45.22 value play.

(Aug 31, 2012) For investors believing that industry-wide supply declines are on the horizon Dividends Paid: 0 in addition to the inevitable demand boom that Affordable Care will bring, No of HFs: 37 higher healthcare costs will benefit operators like Community Health Systems, which trades at a mere 9.6 times forward earnings and 0.3 times sales.

Wall Street’s average price target on CYH shares represents an upside of 18% from current levels, with high estimates predicting a price of $67 by next year.

4) Options: Dec 2013 $45 calls are $5.20. Dec 2013 $46 calls are $4.60. Dec 2013 $47 calls are $4.20. Dec 2013 $48 calls are $3.30. Dec 2013 $49 calls are $2. Dec 2013 $50 calls are $2.80. Preference is Dec 2013 calls at a strike of $49.

5) Insider Sentiment: No insider buys, seven insider sales since the start of May.

6) 13D/13G Owners: Glenview Capital owns 10.3%, Lord, Abbett & Co owns 6.7%, Bamco owns 5.8%, and Vanguard Group owns 5.3%.

34 Hedge Fund Alpha

15. Community Health Systems (CYH): Popularity over the last 4 quarters

Top 10 Hedge Funds with Positions in the Stock:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Fund COMMUNITY HEALTH SYS ICYH SH N 427229 5% 4.5% Glenview Capital COMMUNITY HEALTH SYS ICYH SH N 116439 New 1.5% Maverick Capital COMMUNITY HEALTH SYS ICYH SH N 79426 New 0.5% Viking Global COMMUNITY HEALTH SYS ICYH SH N 58939 3% 0.2% AQR Capital Management COMMUNITY HEALTH SYS ICYH SH N 54626 -65% 2.7% TPG-AXON Management LP COMMUNITY HEALTH SYS ICYH SH N 37228 181% 0.3% Arrowstreet Capital COMMUNITY HEALTH SYS ICYH SH N 29382 New 1.8% Deerfield Management COMMUNITY HEALTH SYS ICYH SH N 27249 New 0.4% Point State Capital COMMUNITY HEALTH SYS ICYH SH N 22511 New 0.7% Corvex Capital COMMUNITY HEALTH SYS ICYH SH N 20776 -61% 0.8% Clough Capital Partners

See the entire list and the history of hedge fund positions in this stock! 35 Hedge Fund Alpha Brief Discussion: Here are a few stocks that Berkshire was buying in the first quarter of 2013:

Wells Fargo. In the fourth quarter of 2012, Wells Fargo (WFC) overtook long-time Buffett favorite Coca-Cola (KO) to become Berkshire Hathaway's largest holding by market value; Berkshire kept buying early in this year, and owned about 460 million shares at the end of March. At a price-to-book ratio of 1.4, Wells Fargo actually trades at a premium to the book value of its equity, rare among megabanks in the current environment. It does feature earnings multiples in line with its peers, however, as the Warren Buffett - bank has been able to monetize these assets quite well. Wells Fargo had made our list of the most popular financial stocks among hedge funds in the fourth quarter of 2012. Berkshire Hathaway Chicago Bridge & Iron. The largest "new pick" in Buffett's portfolio- although, in fact, many of Berkshire's new investments are currently being made by Buffett's designated successors- was $6.2 billion market cap engineering and construction services company New Positions Chicago Bridge & Iron (CBI). The holding company disclosed ownership of 6.5 million shares in the 13F; on the news of Berkshire's buy, the stock rose 3% in after hours - Starz (STRZA) trading. Chicago Bridge & Iron carries a beta of 1.9, signifying considerable dependence - Chicago B&I (CBI) on the broader economy. While the company's earnings fell in the first quarter of 2013 versus a year earlier, this was entirely due to acquisition related items; when adding those back, pretax income rose 48%. Wall Street analysts are quite bullish, going by the forward earnings multiple of 11 and the five-year PEG ratio of 0.6. SAC Capital Advisors, Increased Positions managed by billionaire Steve Cohen, had owned 2.7 million shares of the stock at the end of December.

-Wells Fargo(WFC) Davita. Berkshire has a large percentage stake in DaVita (DVA), a provider of kidney -DirecTV (DTV) dialysis services at both hospitals and at specialized dialysis centers, and slightly increased its holdings during Q1 to a total of about 15 million shares. DaVita also had a special item pull its net income growth negative last quarter, and correcting for that, pretax income grew 39% compared to the first quarter of 2012. The market capitalization of $14 billion represents a multiple of 16 on forward earnings estimates; Reduced Positions those targets do include an expectation of significant increases in earnings per share -Bank of NY Mellon (BK) over the next couple years. Still, given the company's impressive earnings growth (and -Mondelez (MDLZ) revenue rising over 50% over the same time frame) we'd be interested in considering it as a growth stock. Billionaire David Shaw's D.E. Shaw has been another major shareholder of DaVita in the past.

Berkshire didn't sell a significant number of shares of any of its ten largest positions, Sold Out even as the holding company announced a buyout of Heinz (HNZ) and made the purchases we've mentioned here. As such Buffett and his team appear to like stocks at -Archer Daniels (ADM) this point in time, and considering the high beta at Chicago Bridge & Iron they seem -General Dyn. (GD) confident in the broader economy. We think that these three names are worthy of consideration by investors, though it's important to note that both DaVita and Chicago Bridge & Iron are dependent on continuing their strong recent performance rather than being traditional value stocks. In addition, we would advise considering other large banks as well before buying Wells Fargo. 36 Hedge Fund Alpha

Warren Buffett’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio WELLS FARGO & CO NEW WFC SH N 16947720 4% 19.9% COCA COLA CO KO SH N 16176000 0% 19.0% INTERNATIONAL BUSINESS MACHS COR IBM SH N 14530420 0% 17.1% AMERICAN EXPRESS CO AXP SH N 10227658 0% 12.0% PROCTER & GAMBLE CO PG SH N 4068235 0% 4.8% WAL MART STORES INC WMT SH N 3685170 4% 4.3% DIRECTV DTV SH N 2109415 10% 2.5% U S BANCORP DEL USB SH N 2085274 0% 2.5% PHILLIPS 66 PSX SH N 1900660 0% 2.2% DAVITA INC DVA SH N 1775756 10% 2.1% MOODYS CORP MCO SH N 1515101 0% 1.8% CONOCOPHILLIPS COP SH N 1449847 0% 1.7% WASHINGTON POST CO WPO SH N 772311 0% 0.9% GENERAL MOTORS CO GM SH N 695500 0% 0.8% LIBERTY MEDIA CORP DELAWARE CL A LMCA SH N 627622 New 0.7% M & T BANK CORP MTB SH N 555211 0% 0.7% BANK OF NEW YORK MELLON CORP BK SH N 530106 -4% 0.6% NATIONAL OILWELL VARCO INC NOV SH N 529514 41% 0.6% VIACOM INC NEW VIAB SH N 467691 0% 0.6% COSTCO WHOLESALE CORP NEW COST SH N 459813 0% 0.5% U S G CORP USG SH N 451389 0% 0.5% CHICAGO BRIDGE & IRON CO N V CBI SH N 404185 New 0.5% VERISIGN INC VRSN SH N 386389 122% 0.5% PRECISION CASTPARTS CORP PCP SH N 374942 0% 0.4% DEERE & CO DE SH N 342094 0% 0.4% WABCO HOLDINGS INC WBC SH N 287748 0% 0.3% VISA INC V SH N 264179 0% 0.3% TORCHMARK CORP TMK SH N 253302 0% 0.3% MASTERCARD INC MA SH N 219158 0% 0.3% Mondelez International Inc MDLZ SH N 215919 -45% 0.3% SANOFI SNY SH N 207573 0% 0.2% STARZ - LIBERTY CAPITAL NASDAQ STRZA SH N 124535 New 0.1% VERISK ANALYTICS INC VRSK SH N 96339 0% 0.1% ARCHER DANIELS MIDLAND CO ADM SH N Sold Out 0.0% GENERAL DYNAMICS CORP GD SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 37 Hedge Fund Alpha Brief Discussion: Switching e-commerce companies. The fund reduced its stake in eBay (EBAY) from 4.6 million shares to 2.6 million, and instead more than tripled the size of its position in Amazon (AMZN) to make that company its second largest single-stock position by market value. Amazon’s valuation is entirely based on expectations for better earnings numbers in the future, as the $120 billion market cap company is actually unprofitable on a trailing basis (and is valued at over 80 times expected earnings for 2014). We’d note that Amazon was one of the most popular consumer services stocks among hedge funds in Q4 2012. Steve Cohen- While eBay’s multiples certainly aren’t as high in relative terms, that stock is also dependent on future growth with the current market cap of $74 billion making for a SAC Capital trailing earnings multiple of 28. eBay (which owns Paypal as part of its Payments segment) did experience double-digit growth rates in both revenue and earnings in its most recent quarter compared to the same period in the previous year, though this multiple might still be a bit high. New Positions EQT. The new top pick in SAC’s portfolio is integrated natural gas company EQT (EQT), with -Suncor (SU) the filing disclosing ownership of 4.3 million shares. Natural gas prices have been very low -WW Grainger (GWW) (at least domestically) over the last couple of years, as overexpansion in onshore U.S shale plays have resulted in a supply glut. There’s some hope that higher demand- including, possibly, from exporting- will emerge going forward though. Cohen and his team are pretty dependent on growth unfolding here as EQT currently trades at 25 times forward earnings estimates. So far this quarter, EQT has agreed to buy a portion of Chesapeake (CHK)’s Marcellus assets as that company tries to raise cash and focus on its core assets. Billionaire Increased Positions has also been buying EQT.

-EQT (EQT) Suncor. EQT isn’t the only energy company Soros likes: he also added shares of Suncor -Amazon (AMZN) (SU), which is best known for its assets in Alberta oil sands, to make two unconventional energy players among his top three picks. The company’s earnings fell 24% last quarter compared to the first quarter of 2012 despite a small rise in revenue. Analysts, however, are expecting Suncor’s business to grow considerably over the next couple years and as a Reduced Positions result the forward P/E is 10. Of course, it might not be wise to place too much weight on sell-side forecasts. -Ebay (EBAY) -Sirius XM (SIRI) The Alberta oil sands do have a good deal of potential as an energy source, and could certainly drive Suncor’s business, but it might be best to wait until the company is recording increases in its net income. We actually don’t like Amazon right now- certainly the business is doing well in expanding its scope but we’re worried that it is quite a way out from earnings numbers which would make us feel comfortable with its valuation- and Sold Out as we’ve mentioned eBay is pricy enough that we are skeptical it is a value play at this time. EQT might also be a bit speculative, and we’re not sure it merits its premium to -Coach (COH) Chesapeake among others, but merits notice as a way that some billionaires are playing a -Dover (DOV) potential natural gas recovery. Billionaire Jorge Paulo Lemann’s 3G Capital initiated a new position in SU during the first quarter. 38 Hedge Fund Alpha

Steve Cohen’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio SPDR S & P 500 ETF TRUST SPY SH PUT 732654 69% 3.5% E Q T CORP EQT SH N 288728 205% 1.4% ISHARES TRUST TLT SH PUT 246019 226% 1.2% AMAZON COM INC AMZN SH N 235530 234% 1.1% SUNCOR ENERGY INC NEW SU SH N 213038 19293% 1.0% VISA INC V SH N 211119 330% 1.0% MICRON TECHNOLOGY INC MU SH N 188438 300% 0.9% MICHAEL KORS HOLDINGS LIMITED KORS SH N 183656 84% 0.9% S M ENERGY CO SM SH N 183376 144% 0.9% STARBUCKS CORP SBUX SH N 181681 -9% 0.9% NOBLE ENERGY INC NBL SH N 169081 -10% 0.8% G N C HOLDINGS INC GNC SH N 167999 2430% 0.8% SIRIUS X M RADIO INC SIRI SH N 164812 -23% 0.8% BOEING CO BA SH N 154530 7% 0.7% PRICELINE COM INC PCLN SH N 150645 20% 0.7% VISTEON CORP VC SH N 150134 3% 0.7% EBAY INC EBAY SH N 140607 -43% 0.7% DISNEY WALT CO DIS SH N 138304 834% 0.7% EQUINIX INC EQIX SH N 133398 77% 0.6% TRANSOCEAN LTD RIG SH N 132726 229% 0.6% VMWARE INC VMW SH N 130700 100% 0.6% CARTERS INC CRI SH N 129293 179% 0.6% RENAISSANCERE HOLDINGS LTD RNR SH N 126898 1031% 0.6% WHOLE FOODS MARKET INC WFM SH N 125796 184% 0.6% GRAINGER W W INC GWW SH N 122918 37016% 0.6% BAKER HUGHES INC BHI SH N 120710 27426% 0.6% CHESAPEAKE ENERGY CORP CHK SH PUT 119290 New 0.6% PLAINS EXPLORATION & PROD CO PXP SH N 117726 67% 0.6% STARWOOD HOTELS & REST WLDWD INC HOT SH N 117540 74% 0.6% HARLEY DAVIDSON INC HOG SH N 116190 166% 0.6% SANOFI SNY SH N 207573 0% 0.2% COACH INC COH SH N Sold Out 0.0% DOVER CORP DOV SH N Sold Out 0.0% VIRGIN MEDIA INC VMED SH N Sold Out 0.0% ISHARES INC JAPAN EWJ SH CALL Sold Out 0.0%

Click to see the entire portfolio and historical filings. 39 Hedge Fund Alpha Brief Discussion: News Corp. We don't show Druckenmiller owning any shares of News Corp (NWSA) at the beginning of 2013, but by the end of Q1 his family office had bought 2.3 million shares. Value investors have been crowding into News Corp as the company prepares to break into two; this situation is thought to have similar effects to a spinout, with management of the new companies being better able to focus on operations (read more about why hedge funds like investing in spinouts). The stock has risen 67% in the last year on this investor interest as well as a general rally among media and entertainment stocks. Stan Druckenmiller- Currently, the company as it exists is valued at 17 times forward earnings estimates. That multiple is not particularly high, meaning that even after the rally the market's Family Office expectations for the benefits of the breakup are not that high.

Dumping Merck. The 13F reported that Druckenmiller had closed his position in Merck (MRK), which had been one of his top stock picks at the beginning of 2013. Large New Positions positions in Pfizer (PFE) and Eli Lilly (LLY) remain, showing that he is not bearish on drug manufacturers generally. Merck has some attractive defensive characteristics, with a -Gold ETF Calls (GLD) dividend yield of 3.7% at current prices and a beta of 0.4, but of course the same is the -News Corp (NWSA) case for many large pharmaceutical companies. At first glance, Merck doesn't look so great as a value investment with a trailing P/E of 24 and with both revenue and earnings down by 8-9% last quarter compared to the first quarter of 2012. Wall Street analysts are predicting that the company will rebound, but Druckenmiller's move here is understandable. Pfizer and Merck had both made our list of the most popular healthcare stocks among hedge funds in the fourth quarter of 2012. Increased Positions Changing planes. Druckenmiller cut his stake in US Airways (LCC) from about 4 million -Delta (DAL) shares down to 1.2 million, and more than doubled the size of his position in Delta (DAL) making that stock another of his ten largest holdings by market value. The much-derided airline industry has been on a tear in the last year, in part because investors expect US Airways' acquisition of American out of bankruptcy to result in higher prices. Both of these companies are valued at only 6 times consensus earnings for 2014, and while we Reduced Positions don't recommend buying any stock solely off of sell-side forecasts that is a low enough figure that we find Delta and US Airways at least somewhat interesting. Billionaire David -Google (GOOG) Tepper's Appaloosa Management has been bullish on airlines in the past. -US Airways (LCC) We'd be interested in doing more research on the airlines, though we would note that US Airways does face integration risk from its acquisition. We're not sure what has caused Merck's financials to fall off, but we are certainly skeptical that it is any better a value than its peers when we look at the numbers. As for News Corp, while the stock is well Sold Out above its levels from a year ago it apparently isn't all that expensive in terms of the company's fundamentals. It may be worth trying to determine how much upside the -Emerging Mkts. (EEM) breakup could result in- it seems that the market is currently expecting very little. -Merck (MRK) 40 Hedge Fund Alpha

Stanley Druckenmiller’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio SPDR GOLD TRUST GLD SH CALL 282680 New 19.5% LENNAR CORP LEN SH N 115928 0% 8.0% PFIZER INC PFE SH N 98701 0% 6.8% D R HORTON INC DHI SH N 84185 0% 5.8% GOOGLE INC GOOG SH N 83588 -25% 5.8% LILLY ELI & CO LLY SH N 78001 0% 5.4% NEWS CORP NWSA SH N 70234 New 4.9% INC DAL SH N 63753 127% 4.4% JOHNSON & JOHNSON JNJ SH N 58457 0% 4.0% PIONEER NATURAL RESOURCES CO PXD SH N 39760 New 2.7% NOBLE CORP BAAR NE SH N 39447 New 2.7% GOLDMAN SACHS GROUP INC GS SH N 33491 New 2.3% GILEAD SCIENCES INC GILD SH N 29888 New 2.1% PROCTER & GAMBLE CO PG SH N 26647 New 1.8% ABT SH N 26056 New 1.8% CABOT OIL & GAS CORP COG SH N 25759 New 1.8% CHARTER COMMUNICATIONS INC CHTR SH N 23128 New 1.6% E Q T CORP EQT SH N 22493 New 1.6% U S AIRWAYS GROUP INC NEW LCC SH N 20890 -69% 1.4% ADOBE SYSTEMS INC ADBE SH N 20452 New 1.4% THE ADT CORP ADT SH N 18940 0% 1.3% LIBERTY GLOBAL INC LBTYA SH N 16290 New 1.1% WISDOMTREE TRUST DXJ SH N 15199 New 1.1% SOUTHWESTERN ENERGY CO SWN SH N 14382 New 1.0% DISH NETWORK CORPORATION DISH SH N 14023 -42% 1.0% PBF ENERGY INC PBF SH N 11987 New 0.8% TENET HEALTHCARE CORP THC SH N 11895 0% 0.8% SECTOR SPDR TRUST XLP SH N 11610 New 0.8% SECTOR SPDR TRUST XLU SH N 11539 New 0.8% SECTOR SPDR TRUST XLV SH N 11533 New 0.8% ISHARES TRUST EEM SH N Sold Out 0.0% MERCK & CO INC NEW MRK SH N Sold Out 0.0% TIME WARNER INC NEW TWX SH N Sold Out 0.0% AMERICAN INTERNATIONAL GROUP INC AIG SH N Sold Out 0.0% SOUTHERN CO SO SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 41 Hedge Fund Alpha Brief Discussion: Apache. Pickens initiated a position of about 120,000 shares in Apache (APA) during the first quarter of 2013. The oil and gas exploration and production company has been struggling, reporting lower revenue and earnings in Q1 versus a year earlier, and is currently priced at a premium to the oil majors with a trailing price-to-earnings multiple of 17. Analyst estimates suggest that Apache has more of an upside than its larger peers, however, resulting in a forward P/E of 8. Citadel Investment Group, managed by billionaire Ken Griffin, had been buying Apache during Q4 2012. T. Boone Pickens- Selling Valero. At the beginning of 2013, BP Capital's largest holding by market value was BP Capital Valero (VLO), a $22 billion market cap oil and gas refining and marketing company. However, Pickens looks to have cut his stake by about 80% between January and March. Like many other companies in the industry, Valero has been on a tear in the last year (it has nearly doubled in price) and yet is still trading at value levels with both its trailing and New Positions forward P/E multiples coming in at 7. Wall Street analysts are expecting at least some earnings growth going forward, which would make the stock undervalued if that turns -Apache (APA) out to be the case; the five-year PEG ratio is 0.8. Arrowstreet Capital had been another -Tesoro (TSO) major shareholder at the end of 2012.

Getting out of oilfield services. None of Pickens's ten largest positions are oilfield equipment and services companies, after he sold National Oilwell Varco (NOV) and reduced his stake in Halliburton (HAL) with none of those companies' peers taking their places. This is interesting because both of these particular stocks had made our list of the Increased Positions most popular energy stocks among hedge funds during the fourth quarter of 2012. Halliburton is actually not looking that cheap at this time; while the sell-side is optimistic -Pioneer Natural Re (PXD) here as well, with consensus forecasts for 2014 implying a forward P/E of 11, revenue -Goodrich Petr. (GDP) growth last quarter compared to the first quarter of 2012 was light. National Oilwell Varco's recent results were more mixed, as higher costs offset an impressive performance on the top line resulting in a 17% decrease in net income.

Reduced Positions Goodrich. In addition to Apache, the billionaire was buying Goodrich Petroleum (GDP) between January and March of this year. Goodrich's market cap is only about $480 -Anadarko(APC) million, but on average 1.2 million shares of the stock are traded per day. Like Apache, it -Halliburton (HAL) is an exploration and production company; its acreage is primarily in the Texas-Louisiana region in onshore shale plays. We'd note that Goodrich has been recording operating losses in the past several quarters, and in fact has been missing estimates in the process as well.

Sold Out Contra to Pickens, we think that oilfield services is an interesting industry at this time, and National Oilwell Varco seems to be a good place to start looking for value in that -Southwestern En (SWN) area. Refiners- including Valero as well as its peers- also look to be priced attractively -Range Resources (RRC) even after their run-up in price. As for the oilman's E&P picks, Goodrich seems a bit dependent on a turnaround for our liking. Apache is certainly better positioned, and if the company can match the trajectory analysts are looking for it would turn out to be a good value, but we aren't sure it's necessarily a better buy than the majors. 42 Hedge Fund Alpha

T. Boone Pickens’ Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio PIONEER NATURAL RESOURCES CO PXD SH N 12922 71% 12.8% APACHE CORP APA SH N 9632 New 9.5% GOODRICH PETROLEUM CORP GDP SH N 9390 580% 9.3% DEVON ENERGY CORP NEW DVN SH N 6900 0% 6.8% OCCIDENTAL PETROLEUM CORP OXY SH N 6136 24% 6.1% TESORO CORP TSO SH N 5835 New 5.8% MARATHON PETROLEUM CORP MPC SH N 5804 New 5.8% GULFPORT ENERGY CORP GPOR SH N 5729 New 5.7% PHILLIPS 66 PSX SH N 5578 New 5.5% CONSOL ENERGY INC CNX SH N 5048 214% 5.0% ONCHO RESOURCES INC CXO SH N 4384 New 4.3% ANADARKO PETROLEUM CORP APC SH N 3935 -51% 3.9% HALCON RESOURCES CORP HK SH N 3882 New 3.8% ARCH COAL INC ACI SH N 3530 175% 3.5% VALERO ENERGY CORP NEW VLO SH N 3313 -79% 3.3% BASIC ENERGY SERVICES INC BAS SH N 3076 New 3.0% HALLIBURTON COMPANY HAL SH N 2021 -67% 2.0% GASTAR EXPLORATION LTD GST SH N 2007 0% 2.0% NEWMONT MINING CORP NEM SH N 503 New 0.5% FREEPORT MCMORAN COPPER & GOLD FCX SH N 261 -92% 0.3% ENTERPRISE PRODUCTS PARTNERS LP EPD SH N 241 New 0.2% GENERAL ELECTRIC CO GE SH N 231 New 0.2% APPLE INC AAPL SH N 221 New 0.2% B P PLC BP SH N 212 New 0.2% DOW CHEMICAL CO DOW SH N 121 New 0.1% SOUTHWESTERN ENERGY CO SWN SH N Sold Out 0.0% RANGE RESOURCES CORP RRC SH N Sold Out 0.0% NATIONAL OILWELL VARCO INC NOV SH N Sold Out 0.0% MARATHON OIL CORP MRO SH N Sold Out 0.0% NEWFIELD EXPLORATION CO NFX SH N Sold Out 0.0% TRANSOCEAN LTD RIG SH N Sold Out 0.0% WEATHERFORD INTL LTD NEW WFT SH N Sold Out 0.0% SANDRIDGE ENERGY INC SD SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 43 Hedge Fund Alpha Brief Discussion: Stephen Mandel is a Tiger Cub, having previously worked at legendary investor- and billionaire- Julian Robertson’s Tiger Management. Mandel has become a billionaire himself through managing Lone Pine Capital, which has over $15 billion in assets under management. Read on for our analysis of three themes in the hedge fund’s portfolio and compare its holdings to those reported in previous filings.

News Corp. The fund increased the size of its position in News Corp (NWSA) to a total of Stephen Mandel- about 22 million shares. News Corp has been a very popular stock among the hedge funds which we track in our database- at the beginning of this year, it was actually the Lone Pine Capital most popular consumer services stock (see more consumer services stocks hedge funds loved). It actually isn't that expensive in terms of its earnings multiples, with analyst consensus for the fiscal year ending in June 2014 implying a forward P/E of 17. That's with the media and entertainment company reporting very good results, and with the New Positions potential for the breakup of News Corp to increase shareholder value as management of the new companies becomes better able and incentivized to improve operations. As such -Valeant (VRX) we'd suggest News Corp as a potential target for further research. -Virgin Media (VMED) Selling Cognizant. Lone Pine still owned 8.7 million shares of Cognizant Technology Solutions (CTSH), a $19 billion market cap IT consulting company and outsourcing services provider, but this was down considerably from what it had owned three months earlier. Cognizant had actually recorded high growth on both top and bottom lines last quarter compared to the first quarter of 2012; earnings for example, were up 17%. Increased Positions William Gray's Orbis Investment Management has been another major shareholder in Cognizant. -News Corp (NWSA) -Mead Johnson (MJN) Still likes retail. Once again three of Mandel's eight largest holdings are retailers- this quarter we have two dollar stores (Dollar General (DG) and Dollar Tree (DLTR)) and Gap (GPS). The dollar stores stand out for having very limited exposure to the broader economy, with each carrying a beta of 0.1. Dollar General and Dollar Tree also grew their Reduced Positions earnings in their most recent quarter compared to the same period in the previous fiscal year, though Dollar Tree did considerably better with 22% earnings growth (driven -Google (GOOG) mostly by higher sales). Their trailing P/Es are in the 18-19 range, so these valuations are -Cognizant (CTSH) dependent on future improvements. Gap, which is up 51% in the last year, trades at about the same level relative to trailing earnings. It experienced double-digit growth rates in revenue and net income over the same time frame that the dollar stores did well.

All five of the stocks we've covered here are doing well in business terms. Neither News Sold Out Corp nor the retailers is a classic value stock, given their P/E multiples, but there's at least some potential for each of these stocks which Mandel and his team like. News Corp, of -Facebook (FB) course, has the additional catalyst of the breakup; between that factor and the secular -Crown Castle (CCI) trends in its financials it's certainly of interest to us. The dollar stores could be of particular interest to investors trying to make their portfolios more defensive, and Dollar Tree has certainly been doing well enough going by its 10-K that it might be worth its premium to the larger discount retailers. Gap might also be worth looking into to see how the company can sustain its current performance. 44 Hedge Fund Alpha

Stephen Mandel’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio PRICELINE COM INC PCLN SH N 1218190 0% 6.3% GOOGLE INC GOOG SH N 1110685 -10% 5.8% DOLLAR GENERAL CORP NEW DG SH N 720451 7% 3.7% GAP INC GPS SH N 713488 9% 3.7% MONSANTO CO NEW MON SH N 703765 24% 3.7% NEWS CORP NWSA SH N 673549 30% 3.5% COGNIZANT TECHNOLOGY SOLS CORP CTSH SH N 663827 -21% 3.4% DOLLAR TREE INC DLTR SH N 581496 2% 3.0% VERISIGN INC VRSN SH N 562509 -19% 2.9% QUALCOMM INC QCOM SH N 555578 27% 2.9% MEAD JOHNSON NUTRITION CO MJN SH N 544224 87% 2.8% KINDER MORGAN INC KMI SH N 534470 -8% 2.8% RALPH LAUREN CORP RL SH N 534438 -20% 2.8% EBAY INC EBAY SH N 528139 14% 2.7% EQUINIX INC EQIX SH N 496108 -18% 2.6% ULTA SALON COSMETICS & FRAG INC ULTA SH N 488548 42% 2.5% CHARTER COMMUNICATIONS INC CHTR SH N 476851 -5% 2.5% MICHAEL KORS HOLDINGS LIMITED KORS SH N 458582 -11% 2.4% INTUITIVE SURGICAL INC ISRG SH N 436511 118% 2.3% TRANSDIGM GROUP INC TDG SH N 390896 -12% 2.0% VALEANT PHARMACEUTICALS INTL INC VRX SH N 368535 New 1.9% WYNDHAM WORLDWIDE CORP WYN SH N 357718 -6% 1.9% TRIPADVISOR INC TRIP SH N 341479 -1% 1.8% LULULEMON ATHLETICA INC LULU SH N 335118 11% 1.7% VISA INC V SH N 332689 -13% 1.7% KINDER MORGAN INC KMI SH N 318598 5% 1.7% B E AEROSPACE INC BEAV SH N 286853 -1% 1.5% AMERICAN INTERNATIONAL GROUP INC AIG SH N 285079 5% 1.5% CAPITAL ONE FINANCIAL CORP COF SH N 279103 15% 1.4% VIRGIN MEDIA INC VMED SH N 277161 New 1.4% WABCO HOLDINGS INC WBC SH N 243104 -2% 1.3% OCEANEERING INTERNATIONAL INC OII SH N 240793 -24% 1.2% FACEBOOK INC FB SH N Sold Out 0.0% CROWN CASTLE INTERNATIONAL CORP CCI SH N Sold Out 0.0% HERBALIFE LTD HLF SH CALL Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 45 Hedge Fund Alpha Brief Discussion: Tech giants. The three largest single-stock holdings in Dalio's portfolio at the end of March were (MSFT), Oracle (ORCL), and Intel (INTC)- tech companies with market caps of over $100 billion in each case. These businesses have had a range of reactions to the decline of the PC. Intel is currently in the worst shape, with net income falling 25% last quarter compared to the first quarter of 2012, though we can't imagine the continuation of this trend being good for Microsoft either (currently that company's revenue and earnings are up, but it's possible that that is due to the release of Windows Ray Dalio- 8 giving a temporary boost to the business). All three companies' forward earnings multiples are in the 11-12 range. In Oracle's case this does represent a significant Bridgewater Associates increase in earnings per share, even though the enterprise software company's numbers have been about flat. Microsoft and Oracle had made our list of the most popular tech stocks among hedge funds for the fourth quarter of 2012 (find more tech stocks hedge funds loved). New Positions Dumping Apollo. At the beginning of this year, Bridgewater owned 1.8 million shares of -CenturyLink (CTL) Apollo Group (APOL) but the fund closed its position in the for-profit education company -General Electric (GE) between January and March. Apollo's stock price is down 41% in the last year as society's skepticism about the benefits of for-profit education increase- which may not only hurt business directly, but may also lead to changes in the student lending programs which currently serve as a major source of funding for the industry. Earnings were down almost 80% in the most recent quarter (which ended in February) compared to the same period in the previous fiscal year. Wall Street analysts are somewhat optimistic, and as a result Increased Positions the forward P/E is 9, but many investors actually find Apollo overvalued with 21% of the float held short. Donald Yacktman has a large position in APOL. -Oracle (ORCL) -Intel (INTC) Lockheed Martin. After a number of tech companies- including those we've mentioned and EMC- the largest single-stock holding in the fund's portfolio was its roughly 220,000 shares of Lockheed Martin (LMT). The company recently reported an increase in earnings compared to the first quarter of 2012, but revenue was down slightly and there is a good Reduced Positions deal of speculation that the business will be impacted by cuts in U.S. military spending. The trailing P/E of 12 is just a bit higher than what we see at other aerospace and -Microsoft (MSFT) defense companies. Billionaire Ken Griffin's Citadel Investment Group reported a position -CVS Caremark (CVS) of 1.2 million shares at the end of December (check out Griffin's stock picks). Lockheed Martin pays a dividend yield of 4.5% at current prices and dividend levels.

Lockheed Martin might not be the best value in the aerospace industry, however, and so even with the yield it might be better to check out the company's peers. Microsoft and Sold Out Intel are potential value plays, we suppose, but we are skeptical that these companies will be able to maintain their current business going forward and with earnings multiples -Apollo Group (APOL) above 10 we wouldn't call them "extremely" cheap; in Oracle's case, we think that we'd -Hewlett Packard (HPQ) have to wait to see the company's earnings actually growing before buying at these prices. For profit education, including Apollo, certainly looks cheap but has all of the components of a classic value trap and so we'd tread carefully when evaluating the company's financials. Billionaire Steven Cohen’s SAC Capital boosted its LMT stake significantly during the first quarter. 46 Hedge Fund Alpha

Ray Dalio’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio VANGUARD INTL EQUITY INDEX FUNDS VWO SH N 3602637 25% 32.8% SPDR S & P 500 E T F TRUST SPY SH N 3274685 3% 29.8% ISHARES TRUST EEM SH N 2848627 17% 25.9% ISHARES TRUST LQD SH N 43614 0% 0.4% MICROSOFT CORP MSFT SH N 40353 -9% 0.4% ORACLE CORP ORCL SH N 29604 116% 0.3% ISHARES TRUST IVV SH N 27538 0% 0.3% INTEL CORP INTC SH N 22832 38% 0.2% E M C CORP MA EMC SH N 21350 34% 0.2% LOCKHEED MARTIN CORP LMT SH N 21155 340% 0.2% C V S CAREMARK CORP CVS SH N 18721 -44% 0.2% JUNIPER NETWORKS INC JNPR SH N 17244 769% 0.2% INTUIT INC INTU SH N 16799 634% 0.2% CENTURYLINK INC CTL SH N 16521 New 0.2% EXPRESS SCRIPTS INC ESRX SH N 16369 98% 0.1% F 5 NETWORKS INC FFIV SH N 16329 256% 0.1% HUMANA INC HUM SH N 15710 248% 0.1% UNITEDHEALTH GROUP INC UNH SH N 14993 75% 0.1% MONSANTO CO NEW MON SH N 14979 69% 0.1% CITRIX SYSTEMS INC CTXS SH N 14849 432% 0.1% GENERAL ELECTRIC CO GE SH N 14172 New 0.1% ST JUDE MEDICAL INC STJ SH N 13788 -19% 0.1% C A INC CA SH N 13678 -50% 0.1% CH ROBINSON WORLDWIDE INC CHRW SH N 13564 2642% 0.1% NORTHROP GRUMMAN CORP NOC SH N 13219 23% 0.1% DISNEY WALT CO DIS SH N 13218 New 0.1% WHOLE FOODS MARKET INC WFM SH N 12955 295% 0.1% EXPEDITORS INTERNATIONAL WA INC EXPD SH N 12734 New 0.1% QUALCOMM INC QCOM SH N 12395 -39% 0.1% K L A TENCOR CORP KLAC SH N 12120 89% 0.1% XEROX CORP XRX SH N 11386 -47% 0.1% APOLLO GROUP INC APOL SH N Sold Out 0.0% HEWLETT PACKARD CO HPQ SH N Sold Out 0.0% SAFEWAY INC SWY SH N Sold Out 0.0% DELL INC DELL SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 47 Hedge Fund Alpha Brief Discussion: Bill Ackman, the billionaire manager of Pershing Square, has been in the news quite a bit in the last several months thanks to his public statements about his large short position in Herbalife. In December he accused the company of being a pyramid scheme; fellow billionaire and longtime Ackman rival Carl Icahn (see Icahn's stock picks) began buying the stock after it fell in price, and slugged it out with Ackman himself on CNBC (though the angry conversation focused on their history rather than the merits of Herbalife as an investment). We have gone through Ackman’s most recent filing compared to what Pershing Square has previously reported owning and Bill Ackman- here are three things which we noticed:

Pershing Square Mondelez. Pershing Square was buying Mondelez International (MDLZ) during the first quarter of 2013 and owned about 6 million shares at the end of March. Mondelez was

formed from the breakup of Kraft, with the North American grocery business currently New Positions operating under the name Kraft Foods Group. The company’s financial statements have shown that it trades at 20 times trailing earnings, and given the stability of its business that does seem a bit high from a value perspective (though 20 is about where - Mondelez (MDLZ) many other large food stocks are trading). There has been some speculation that Mondelez could merge with giant beverage and snack foods company PepsiCo, though buying a stock primarily based on rumors such as these is likely not a smart move.

Selling Matson. The fund reported owning a little over 3 million shares of $1.1 billion market cap shipping company Matson (MATX), down slightly from the beginning of Increased Positions 2013. Matson, which was formerly known as Alexander & Baldwin Holdings, primarily operates container ships, experienced an 8% rise in revenue last quarter compared to -NA the first quarter of 2012. Earnings more than doubled, but obviously it’s not sustainable for net income to continue increasing at a much faster rate than the top line. The market is pricing in growth going forward, with a trailing P/E of 21, and Wall Street analysts are at least forecasting that earnings per share will indeed increase significantly over the next couple of years.

Reduced Positions Consumer stocks. Adding Mondelez to his portfolio only further increases Ackman’s -Proctor & Gamble Calls emphasis on consumer stocks in his long portfolio. His second and third largest (PG) holdings, respectively, are Procter & Gamble (PG) and General Growth Properties -Matson (MATX) (GGP), with other names including Beam and Burger King. Procter & Gamble is a classic defensive stock, with a beta of 0.3 and a dividend yield of 3% at current prices, though the hunt for stocks meeting this criteria has resulted in it carrying earnings multiples in the high teens despite its business (similarly to that of Mondelez) not Sold Out showing much growth potential. General Growth, which is a retail-focused real estate investment trust, pays a fairly low yield for a REIT at 2.1% (real estate investment -NA trusts receive favorable tax treatment conditional on distributing a large share of taxable income to shareholders, often resulting in high yields). Note that while Pershing Square likes a large number of consumer stocks, it’s not necessarily a reflection of bullishness- many of these companies are consumer staples.

We do find Pershing Square’s focus on consumer stocks relative to, say, financials or tech companies worth noting. However, we’re not sure that General Growth, Procter & Gamble, or Mondelez are actually good values at this time; it is true that buying Mondelez would result in upside in the event of a merger but that seems like too speculative a move for us. As for Matson (which, as a container ship company, could also be read as tied to consumer demand), it’s probably best to wait for another quarter or two of results to see how earnings numbers unfold, as the current rate of revenue growth doesn’t seem high enough to justify the current valuation. 48 Hedge Fund Alpha

Bill Ackman’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio CANADIAN PACIFIC RAILWAY LTD CP SH N 3152141 0% 31.3% PROCTER & GAMBLE CO PG SH N 2153588 0% 21.4% GENERAL GROWTH PPTYS INC NEW GGP SH N 1485707 0% 14.8% BEAM INC BEAM SH N 1322811 0% 13.1% BURGER KING WORLDWIDE INC BKW SH N 732908 0% 7.3% PENNEY J C CO INC JCP SH N 590435 0% 5.9% HOWARD HUGHES CORP HHC SH N 299036 0% 3.0% Mondelez International Inc MDLZ SH N 183016 New 1.8% MATSON INC MATX SH N 74636 -17% 0.7% PROCTER & GAMBLE CO PG SH CALL 73793 -78% 0.7%

Click to see Pershing Square’s historical filings. 49 Hedge Fund Alpha Brief Discussion: Paul Singer, now a billionaire, founded Elliott Management in 1977. It now has about $15 billion in assets under management. Elliott occasionally engages in activism against underperforming companies or those which it believes could be managed more effectively. Read on to see some moves the fund made in its portfolio in the fourth quarter of 2012 and research Singer's previous filings.

Hess. Singer increased the size of his position in Hess (HES) to a total of about 17 million shares- over ten times as many as his fund had owned at the beginning of 2013. Elliott Paul Singer- had been trying to push the oil and gas company into divesting its downstream operations in order to focus on exploration and production activities (which Hess has Elliott Management been doing) and also fighting with the company for control of the Board of Directors (in a recent deal, the fund will gain three Board seats in exchange for dropping its proxy fight). Currently Hess trades at 12 times forward earnings estimates, which while low in absolute terms would actually represent a small premium to many oil majors. New Positions Dumping Brocade. According to the 13F, the fund sold all its shares of Brocade -Range Res. Calls (RRC) Communications Systems (BRCD) after the $2.5 billion market cap networking and data -Virgin Media (VMED) storage systems company had been one of its top picks during Q4. Brocade has often been thought of as a potential acquisition, but the company’s new CEO has, at least publicly, rejected the idea of selling. While Wall Street analysts like the business- their forecasts for the fiscal year ending in September 2014 imply a forward P/E of only 8- these projections are highly dependent on earnings growth as trailing earnings per share Increased Positions is currently well below what the sell-side is expecting going forward. Revenue was up only 5% in Brocade’s last quarterly report compared to the same period in the previous -Hess (HES) fiscal year. -Compuware (CPWR) Acquisition targets (though one might be gone). During the quarter Elliott was buying shares of Compuware (CPWR) and of Virgin Media (VMED) which looks ready to be acquired by Liberty Global. Elliott had launched a takeover bid for Compuware, though this was eventually rejected by the company. There have been rumors that the fund will Reduced Positions now partner with private equity and propose another buyout, but it’s probably not wise to get too excited about the stock on that basis. The market seems to have already -Delphi (DLPH) accounted for some prospect for a deal, with both trailing and forward P/Es above 25. -NetApp (NTAP) The Virgin Media-Liberty Global deal, meanwhile, is scheduled to close in the second quarter of 2013. Merger arbitrage is a common strategy among hedge funds, since the returns on buying the acquired company’s stock depend on whether or not the transaction closes and so tend to be independent of market fluctuations. Sold Out As we’ve mentioned, the Compuware rumors are probably not enough reason to buy the -SPY Puts (SPY) stock at this time. The Virgin Media acquisition, being more of a sure thing, might be -Brocade (BRCD) worth a look but it’s possible that the stock is already very close to the takeover price and might not offer a high enough return particularly for investors with limited leverage. Given how dependent Brocade is on increasing its earnings per share in line with analyst expectations, we’d also avoid that company at least for now. We like Hess’s increased focus on one aspect of its business, and it’s possible that will lead management to improve operations, but its valuation isn’t that low compared to where its peers trade and so Hess might be better placed on a watch list for further developments. 50 Hedge Fund Alpha

Paul Singer’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio HESS CORP HES SH N 1074149 1136% 22.5% DELPHI AUTOMOTIVE PLC DLPH SH N 972447 -14% 20.3% B M C SOFTWARE INC BMC SH N 634458 2% 13.3% NEWS CORP NWS SH N 310445 0% 6.5% ISHARES TRUST IWM SH PUT 242684 New 5.1% COMPUWARE CORP CPWR SH N 232688 54% 4.9% RANGE RESOURCES CORP RRC SH CALL 201569 New 4.2% VIRGIN MEDIA INC VMED SH N 141136 New 3.0% SPDR SERIES TRUST XOP SH PUT 120980 New 2.5% JPMORGAN CHASE & CO JPM SH PUT 71189 New 1.5% POWERSHARES QQQ TRUST QQQ SH PUT 68969 -43% 1.4% NATIONAL BANK HOLDING NBHC SH N 68043 0% 1.4% VERIFONE SYSTEMS INC PAY SH CALL 60112 New 1.3% NETAPP INC NTAP SH PUT 59643 -13% 1.2% EMULEX CORP ELX SH N 58285 0% 1.2% JPMORGAN CHASE & CO JPM SH N 44188 New 0.9% MELCO CROWN ENTERTAINMENT LTD MPEL SH N 43235 0% 0.9% NETAPP INC NTAP SH CALL 42699 New 0.9% NETAPP INC NTAP SH N 39311 -41% 0.8% CORONADO BIOSCIENCES INC CNDO SH N 36230 0% 0.8% BORGWARNER INC BWA SH PUT 34802 0% 0.7% CABOT CORP CBT SH CALL 34009 New 0.7% SOUTHWESTERN ENERGY CO SWN SH CALL 33601 New 0.7% ULTRA PETROLEUM CORP UPL SH CALL 26039 New 0.5% RIVERBED TECHNOLOGY INC RVBD SH CALL 18201 New 0.4% GENERAL MOTORS CO GM SH PUT 14674 -66% 0.3% UNITED STATES STEEL CORP NEW X PRN N 10392 0% 0.2% CADENCE DESIGN SYSTEMS INC CDNS PRN N 9377 0% 0.2% SECTOR SPDR TRUST XLI SH PUT 8351 0% 0.2% LINEAR TECHNOLOGY CORP LLTC SH N 8027 New 0.2% GENERAL MOTORS CO GM SH N 7498 0% 0.2% SPDR S & P 500 E T F TRUST SPY SH PUT Sold Out 0.0% NEXEN INC NXY SH N Sold Out 0.0% BROCADE COMMUNICATIONS SYS INC BRCD SH N Sold Out 0.0% ISHARES TRUST OEF SH PUT Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 51 Hedge Fund Alpha Brief Discussion: Trian Partners, known for its activist ways, is a hedge fund founded and managed by Nelson Peltz, Peter May and Edward Gardner. The fund generally meshes a value- based approach with their activist positions, with over $2 billion in 13F capital at their disposal.

Recently, Peltz and his team have opened large positions in consumer-centric companies, namely PepsiCo (PEP) and Mondelez (MDLZ). But first, let’s go over a bit of Nelson Peltz - background on a couple of their other, more bearish moves.

Trian Partners Selling Tiffany and State Street. In Q1, Peltz and Trian sold a boatload of luxury jeweller Tiffany & Co. (TIF). At the end of 2012, the fund reported ownership of a little over 1 million shares; on March 31, Trian held approximately 10,000 shares—a 99% decrease. Sitting here in mid-May, Tiffany’s stock price has surged 33% since the start New Positions of 2013, with shares currently trading at a little over $77 a pop. TIF is about as expensive as industry norms, with its trailing P/E (23.85) nearly equalling its peer - Mondelez (MDLZ) group-average of 23.50, so it’s possible that Peltz doesn’t see a value opportunity here -PepsiCo (PEP) any longer.

Trian also sold shares of State Street Corporation (STT), an investment management services provider that has its fair share of hedge fund bulls. Peltz’s move didn’t really come as much of a surprise though, as Trian sold more than half their STT stake last year, before cutting it by another 25% (qoq) in the first three months of 2013. Trian Increased Positions still owns 2.3 million shares, worth about $140 million, but we wouldn’t overlook his consistent selling behaviour. On the bright side, shares of State Street now rest near NA $65 a share, significantly higher than their July 2012 high of $45.

Post-split Mondelez. On the flip side, Peltz went even longer on Mondelez, the snacks and soft drinks producer, adding almost 21 million shares to their existing position. As of March 31, the total value of the 40 million MDLZ shares held by Trian was more Reduced Positions than $1.2 billion. Mondelez was formally part of Kraft Foods (KRFT) and was spun off on October 1, 2012, when Trian began building its holding. Eight months later, the -State Street (STT) stock price has managed a modest 6% advance, with shares currently trading just -Tiffany & Co (TIF) above the $30 mark halfway through May.

Pepsi. Trian is also heavily invested is PepsiCo. Peltz and his colleagues started buying shares of the soft drink producer in the final quarter of 2012. As of the start of 2013, the fund reportedly owned 3.9 million shares and since then, they’ve upped their Sold Out stake by more than 200%. As of its most recent 13F, Trian holds over 12 million PepsiCo shares, worth approximately $952 million. Since the start of the year, -MeadWestvaco (MWV) PepsiCo’s stock price has risen by 23%; the company posted earnings of $0.77 per share and revenue of $12.6 billion during its latest quarter, surpassing Wall Street expectations. Analysts expect even stronger performance in the second quarter of 2013, so we’ll be watching closely. 52 Hedge Fund Alpha

Nelson Peltz’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio Mondelez International Inc MDLZ SH N 1233801 New 26.4% PEPSICO INC PEP SH N 951760 New 20.3% INGERSOLL RAND PLC IR SH N 741021 0% 15.8% FAMILY DOLLAR STORES INC FDO SH N 529611 0% 11.3% WENDYS CO WEN SH N 471026 0% 10.1% LEGG MASON INC LM SH N 414231 0% 8.9% LAZARD LTD LAZ SH N 191093 0% 4.1% STATE STREET CORP STT SH N 139195 -25% 3.0% HEINZ H J CO HNZ SH N 7697 0% 0.2% TIFFANY & CO NEW TIF SH N 741 -99% 0.0% MEADWESTVACO CORP MWV SH N Sold Out 0.0%

Click to see Trian’s historical filings. 53 Hedge Fund Alpha Brief Discussion:

Hated companies. Because of their Gulf of Mexico disaster and government bailout, respectively, BP (BP) and American International Group (AIG) are characterized by pretty poor investor sentiment. Klarman and his team were buying both stocks during Q1, and they are now both among the fund's three largest holdings by market value. There's a value case to be made for either of these two companies: BP trades at 8 times forward earnings estimates (though this isn't particularly out of the ordinary for an oil major in the current environment, as can be seen from looking at the company's peers) Seth Klarman- while AIG's price-to-book ratio is only 0.7 (meaning the stock is priced at a significant discount to book value). While AIG was the most popular stock among hedge funds Baupost during the fourth quarter of 2012, it is not widely owned by large institutional investors such as mutual funds. BP also merits attention for a dividend yield of 5% at current prices and dividend levels.

New Positions Selling News Corp. One of Baupost's largest holdings at the beginning of this year had been News Corp (NWSA), but the fund sold a large portion of its shares between -Elan (ELN) January and March. The pending breakup of News Corp has attracted considerable -Citigroup (C) attention from value investors, and the stock is currently up 67% from its levels a year ago. The forward P/E here is only 17, and while that isn't value territory it could leave the stock undervalued if business grows at a pace similar to current rates (revenue rose 14% last quarter compared to the fourth quarter of 2012) and if management capitalizes on the breakup by improving efficiencies at the child companies. Increased Positions Selling Oracle. News Corp wasn't the only one of Klarman's favorites from three months -AIG (AIG) ago to get demoted during Q1, with Baupost cutting its stake in Oracle (ORCL) by about -Rovi Corp (ROVI) two-thirds. The company's most recent 10-Q showed flat performance versus a year earlier, but the stock carries a trailing earnings multiple of 16 (implying that at least some earnings growth is already priced into the stock). As a result Oracle doesn't look too exciting to us, and some of the company's peers might be better values.

Reduced Positions Rovi. Turning away from large caps, the fund increased its holdings of digital program guide and recommendations provider Rovi (ROVI) to a total of 8.2 million shares. Wall -News Corp (NWS) Street analysts like the $2.4 billion market cap company, with consensus earnings -Oracle (ORCL) forecasts implying a forward P/E of10 and a five-year PEG ratio of 0.9. However, revenue shrunk 10% in its most recent quarter compared to the same period in the previous year, while those projections assume an increase in earnings per share. As a result, we'd have to see that Rovi can sustain its current business and possibly Sold Out provide some growth before considering it as a value stock. BP and AIG certainly look cheap, and we'd recommend that investors do further research on the companies, -News Corp (NWSA) although in BP's case in particular some industry peers may be better buys. As for -Genworth Finl (GNW) Baupost's big sales, they are certainly dependent on growing their earnings going forward but at least in the case of News Corp we can see that recent performance has been good even without accounting for the potential benefits of the breakup. 54 Hedge Fund Alpha

Seth Klarman’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio B P PLC BP SH N 725322 57% 23.3% VIASAT INC VSAT SH N 532840 0% 17.1% AMERICAN INTERNATIONAL GROUP INC AIG SH N 460025 69% 14.8% THERAVANCE INC THRX SH N 320141 0% 10.3% ROVI CORP ROVI SH N 174706 97% 5.6% NEWS CORP NWS SH N 124498 -69% 4.0% ORACLE CORP ORCL SH N 109498 -68% 3.5% ELAN PLC ELN SH N 107689 New 3.5% IDENIX PHARMACEUTICALS INC IDIX SH N 92189 26% 3.0% NOVAGOLD RESOURCES INC NG SH N 78729 0% 2.5% THERAVANCE INC THRX PRN N 60435 0% 1.9% MICROSOFT CORP MSFT SH CALL 57210 0% 1.8% CITIGROUP INC C SH N 47634 New 1.5% SYNERON MEDICAL LTD ELOS SH N 40880 0% 1.3% A V E O PHARMACEUTICALS INC AVEO SH N 36036 0% 1.2% ALLIANCE ONE INTERNATIONAL INC AOI SH N 31632 -7% 1.0% ENZON PHARMACEUTICALS INC ENZN SH N 29228 -2% 0.9% CENTRAL PACIFIC FINANCIAL CORP CPF SH N 28260 0% 0.9% ITURAN LOCATION & CONTROL LTD ITRN SH N 20978 -21% 0.7% DIRECTV DTV SH N 11731 New 0.4% AMERICAN INTERNATIONAL GROUP INC AIG SH N 9712 New 0.3% NOVACOPPER INC NCQ SH N 9160 0% 0.3% NEWS CORP NWSA SH N Sold Out 0.0% GENWORTH FINANCIAL INC GNW SH N Sold Out 0.0% ALLIED NEVADA GOLD CORP ANV SH N Sold Out 0.0%

Click to see Baupost’s historical filings. 55 Hedge Fund Alpha Brief Discussion: Here are some themes that we noticed in Omega’s most recent 13F portfolio compared to previous filings:

High yielding energy stocks. Cooperman and his team remained interested in energy, and interested in particular with energy stocks paying high yields at current prices and dividend payments. Their eight largest holdings included Linn Energy (LINE) (which the fund had added to considerably during the first quarter of the year), Kinder Morgan (KMI), and Atlas Pipeline Partners (APL). Linn's current yield is over 8%; it is an $8.4 Leon Cooperman - billion market cap oil and gas company. It did underperform analyst estimates last quarter, even as revenue grew 36% compared to the first quarter of 2012, and doesn't Omega Advisors look like too good a value at a forward P/E of 21.

Kinder Morgan and Atlas are both pipeline companies, paying dividend yields of close to 4% and 6% respectively. Kinder Morgan boasts a market capitalization of over $40 New Positions billion, and its large size may offer more confidence in the company's stability. Acquisitions helped fuel large increases on both top and bottom lines in its most recent -LyondellBasell (LYB) quarter compared to the same period in the previous year. Atlas looks quite expensive -Occidental Pet. (OXY) in terms of its trailing earnings, but Wall Street analysts are bullish on the company. Still, the stock trades at 17 times its forward earnings estimates and should only be of interest to investors who place a good deal of emphasis on current yield.

Sprint. Sprint Nextel (S) had been the fund's largest holding at the beginning of the Increased Positions year, and Omega actually added shares between January and March. Dish Network and SoftBank are currently bidding for the opportunity to acquire Sprint Nextel; merger -Sprint (S) arbitrage is a popular strategy among hedge fund managers as the returns on the stock -Linn Energy (LINE) of the acquisition target depend on whether or not the transaction closes and are therefore somewhat independent of market conditions. Currently, Sprint is actually trading a bit above Softbank's offer price.

Qualcomm. Omega increased its stake in Qualcomm (QCOM) to a total of 3.3 million Reduced Positions shares by the end of the quarter. The $110 billion market cap communications equipment company's net income fell last quarter versus a year earlier, but this was -Dish Network (DISH) because of earnings from discontinued operations in the year-ago period; earnings from -KKR & Co(KKR) continuing operations actually came in 30% higher. The stock is valued at 18 times its trailing earnings, so we wouldn't call it a pure value stock, but the recent performance is quite strong and so Qualcomm may offer "growth at a reasonable price." That's certainly what the sell-side thinks, as their earnings estimates imply a forward P/E of 13 Sold Out and a five-year PEG ratio of 0.8.

-Humana (HUM) As a result Qualcomm looks interesting to us, and we'd be interested in taking a closer -WellPoint (WLP) look at the company to see how it might grow enough over the next several years to merit a higher valuation. We're wary of getting involved in Sprint at a price higher than the takeover offer- it seems a bit speculative to us, and would certainly require a good deal of confidence that bids will be raised. As for the energy dividend plays, we certainly don't like those in value terms. Income investors could of course find yields of up to 8% attractive, but even in that case it's probably wise to examine why the stock is trading at its current multiples and what the chances are of a severe decline in price.

56 Hedge Fund Alpha

Leon Cooperman’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio SPRINT NEXTEL CORP S SH N 405083 16% 6.3% S L M CORP SLM SH N 306894 -4% 4.8% AMERICAN INTERNATIONAL GROUP INC AIG SH N 300750 -1% 4.7% LINN ENERGY LLC LINE SH N 271307 68% 4.2% SIRIUS X M RADIO INC SIRI SH N 221610 1% 3.4% QUALCOMM INC QCOM SH N 220942 38% 3.4% KINDER MORGAN INC KMI SH N 195050 1% 3.0% ATLAS PIPELINE PARTNERS L P APL SH N 175284 1% 2.7% ATLAS ENERGY L P ATLS SH N 171477 0% 2.7% TRANSOCEAN LTD RIG SH N 164949 2% 2.6% HALLIBURTON COMPANY HAL SH N 162040 7% 2.5% N Y S E EURONEXT NYX SH N 159537 7% 2.5% EXPRESS SCRIPTS INC ESRX SH N 157921 3% 2.4% MCMORAN EXPLORATION CO MMR SH N 156904 5% 2.4% CHIMERA INVESTMENT CORP CIM SH N 155689 122% 2.4% K K R FINANCIAL HOLDINGS L L C KFN SH N 152777 -1% 2.4% SANDRIDGE ENERGY INC SD SH N 140159 9% 2.2% MOTOROLA SOLUTIONS INC MSI SH N 132926 1% 2.1% BOSTON SCIENTIFIC CORP BSX SH N 128656 13% 2.0% X L GROUP PLC XL SH N 122210 0% 1.9% DISH NETWORK CORPORATION DISH SH N 121279 -13% 1.9% WILLIAMS COS WMB SH N 118411 0% 1.8% METLIFE INC MET SH N 115147 1% 1.8% POLYCOM INC PLCM SH N 108680 73% 1.7% EASTMAN CHEMICAL CO EMN SH N 107767 94% 1.7% FREEPORT MCMORAN COPPER & GOLD FCX SH N 102345 0% 1.6% CITIGROUP INC C SH N 99191 147% 1.5% CAPITAL ONE FINANCIAL CORP COF SH N 94492 38% 1.5% FACEBOOK INC FB SH N 93758 16% 1.5% UNITEDHEALTH GROUP INC UNH SH N 92694 1% 1.4% ALTISOURCE PORTFOLIO SLTNS S A ASPS SH N 87016 29% 1.3% HUMANA INC HUM SH N Sold Out 0.0% WATSON PHARMACEUTICALS INC WPI SH N Sold Out 0.0% WELLPOINT INC WLP SH N Sold Out 0.0% WESTERN UNION CO WU SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 57 Hedge Fund Alpha Brief Discussion: Disney. Griffin and his team increased the size of their position in Walt Disney (DIS) to a total of 6.6 million shares. It’s been a good year for media and entertainment stocks, and Disney is no exception having risen 50% in the last year. The company’s most recent fiscal quarter ended in March, with the 10-Q reporting that earnings had grown 32% versus a year earlier, so the rise in the stock price has somewhat tracked fundamental improvements in Disney’s business. Currently markets are expecting growth to continue, at least moderately, with the stock being valued at 20 times trailing earnings. Disney does Ken Griffin- have some very strong assets, including ESPN, and remains dedicated to pushing out its new content libraries from its Marvel and Lucasfilm acquisitions across its television, film, Citadel Investment Gr. and theme park platforms.

EOG. Citadel was also buying EOG Resources (EOG) between January and March, closing the quarter with 2.6 million shares in its portfolio. The oil and gas exploration and New Positions production company has been growing rapidly: in the first quarter of 2013, revenue increased 27% compared to Q1 2012 with net income rising 53%. The market has already - Norfolk Southern (NSC) incorporated high growth over the next several years into the current stock price, but Wall -Foot Locker (FL) Street analysts judge that EOG is about fairly valued. Specifically, their consensus forecasts have EOG trading at 17 times forward earnings estimates and at a five-year PEG ratio of 1. Oil majors are generally cheaper than EOG in terms of trailing numbers, but also have far fewer growth opportunities.

Selling defensive consumer stocks. Two of Citadel’s three largest holdings by market value Increased Positions at the beginning of 2013 were McDonalds (MCD) and Procter & Gamble (PG). McDonalds and Procter & Gamble are similar in that they are commonly thought of as classic -Invesco (IVZ) defensive stocks: in fact, both the fast food restaurant and the personal products company -Disney (DIS) carry a beta of 0.3 and pay a dividend yield of just over 3% at current prices. However, Griffin cut his McDonalds stake roughly in half in the first quarter of the year while selling over 80% of his Procter & Gamble shares. It’s possible that this is a signal that Citadel has become more bullish on the market. Of course, it’s also possible that the fund believes Reduced Positions that high demand for safe assets has also made these stocks less attractively priced. Recent growth rates have been quite low at both McDonalds and Procter & Gamble, and -Apple Calls (AAPL) judging by sell-side forecasts that is expected to continue, yet partly because of their -Google (GOOG) defensive characteristics they boast trailing P/E multiples in the high teens.

We don’t think you have to be bullish for Griffin’s move in these two stocks to make sense- it does appear that the market may be a bit too excited about the yield and relative safety that McDonalds and Procter & Gamble offer. EOG’s growth rates are impressive, though Sold Out the stock price does account for quite a bit of that growth and it might be best to wait and see how future quarters compare to the trajectory that analysts are expecting. As for -NetApp(NTAP) Disney, it’s not a classic value stock either and we’d suggest comparing the company to its -Newell Rubb. (NWL) peers before deciding if its good performance and brand are enough to make it a buy given where it is trading.

58 Hedge Fund Alpha

Ken Griffin’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio APPLE INC AAPL SH CALL 2766198 -39% 4.2% APPLE INC AAPL SH PUT 1742882 -40% 2.6% GOOGLE INC GOOG SH PUT 654154 -2% 1.0% GOOGLE INC GOOG SH CALL 506782 -13% 0.8% INVESCO LTD IVZ SH N 415653 93% 0.6% DISNEY WALT CO DIS SH N 375917 878% 0.6% AMERICAN TOWER CORP AMT SH N 341914 22% 0.5% EOG RESOURCES INC EOG SH N 332613 100% 0.5% ALLSTATE CORP ALL SH N 317287 52% 0.5% CITIGROUP INC C SH N 296310 3% 0.4% U S BANCORP DEL USB SH N 290979 22% 0.4% PRICELINE COM INC PCLN SH PUT 287486 10% 0.4% APPLE INC AAPL SH N 283642 -38% 0.4% ANADARKO PETROLEUM CORP APC SH N 275306 -9% 0.4% CABOT OIL & GAS CORP COG SH N 269088 49% 0.4% VERISIGN INC VRSN PRN N 268990 32% 0.4% KELLOGG CO K SH N 268336 22% 0.4% TIME WARNER INC NEW TWX SH N 263903 -26% 0.4% MCDONALDS CORP MCD SH N 261035 -49% 0.4% QUALCOMM INC QCOM SH N 253181 190% 0.4% UNITED TECHNOLOGIES CORP UTX SH N 247876 14% 0.4% VISA INC V SH N 246076 154% 0.4% P N C FINANCIAL SERVICES GRP INC PNC SH N 245928 227% 0.4% BROADCOM CORP BRCM SH N 244404 42% 0.4% AFFILIATED MANAGERS GROUP INC AMG SH N 242052 101% 0.4% CIMAREX ENERGY CO XEC SH N 238553 243% 0.4% S B A COMMUNICAITONS CORP SBAC SH N 237602 0% 0.4% CONAGRA INC CAG SH N 229377 -15% 0.3% MORGAN STANLEY DEAN WITTER & CO MS SH N 224944 -32% 0.3% MICROCHIP TECHNOLOGY INC MCHP PRN N 223138 2% 0.3% LOCKHEED MARTIN CORP LMT SH N 221873 92% 0.3% NETAPP INC NTAP SH N Sold Out 0.0% BIOMARIN PHARMACEUTICAL INC BMRN PRN N Sold Out 0.0% NEWELL RUBBERMAID INC NWL SH N Sold Out 0.0% RENAISSANCERE HOLDINGS LTD RNR SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 59 Hedge Fund Alpha Brief Discussion: The legendary Julian Robertson- who not only became a billionaire himself through his success at Tiger Management, but also groomed several "Tiger Cubs" who have gone on to become successful hedge fund managers themselves- has filed his 13F for the first quarter of 2013. These filings disclose many of an investor's long positions in U.S. stocks as of the end of the quarter. We track these filings as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average) but Julian Robertson - also like to see what big names such as Robertson did over the previous quarter. We have compared his most recent 13F to the one from the end of December (see Robertson's Tiger Management previous filings) and here are three trends which investors might find interesting:

Dumping Apple. Robertson had cut his stake in Apple (AAPL) by 58% during Q4 2012, but it had still been one of his five largest holdings by market value at the beginning of this year. New Positions Between January and March, however, he kept selling and owned no shares by the end of March. Apple had lost its place as the most popular stock among hedge funds to AIG in the -H&R Block (HRB) fourth quarter. Apple's stock price has done poorly recently, and it currently trades at 10 -McGraw-Hill (MHFI) times earnings whether we consider trailing results or forward projections from analysts (and that doesn't account for the fact that a sizable portion of the company's value is composed of cash). Shrinking margins have caused earnings to decline even as revenue rises, and the current valuation implies that markets are expecting net income to go even lower. Peer Google (GOOG) is now Robertson's largest position by market value as he increased his stake somewhat and the stock saw a large gain in price during the quarter. Increased Positions -Google (GOOG) Businesses' financial data. Two of the largest buys in Robertson's portfolio were Moody's -Junior Gold Miners ETF (MCO) and McGraw-Hill, which has since changed its name to McGraw-Hill Financial (GDXJ) (MHFI) to reflect the sale of the company's education unit to private equity. McGraw-Hill Financial owns Standard & Poor's and Capital IQ and following the sale is now primarily a provider of financial and business information. The same is true of Moody's, making this an interesting investment theme for the billionaire. Moody's reported a 13% increase in Reduced Positions revenue and a 9% rise in net income in the first quarter of 2013 versus a year earlier, but at a trailing price-to-earnings multiple of 22 it might be a bit expensive for us. ValueAct -Charter Comm (CHTR) Capital, Akre Capital, and Warren Buffett’s Berkshire are bullish about MCO though. -Ocwen Finl (OCN) And yours, too. The 13F reported that Robertson initiated a position of about 850,000 shares in tax prep company H&R Block (HRB). The stock has nearly doubled in the last year. This places it at a valuation of more than 20 times its trailing earnings, but analyst consensus is that the fourth quarter of its fiscal year, which ended in April (unsurprisingly Sold Out this is by far H&R Block's biggest quarter and often the only profitable one of its year) will show nearly 30% EPS growth against last fiscal year's Q4. The forward P/E is 15, which is -Apple (AAPL) quite a bit lower but would require further growth from that point. H&R Block pays a -Dole Food (DOLE) dividend yield of almost 3%. Billionaire (and Tiger Cub) Andreas Halvorsen's Viking Global has been a major shareholder in the company.

We're not sure that we'd follow Robertson's lead in selling Apple, but his bearishness on the stock is certainly something shareholders in the company should be aware of. We'd avoid Moody's and McGraw-Hill Financial for now- the former seems pricy, and we'd like to see at least one quarter of results from the latter as it is currently composed (though the sale of the education unit could lead to improved efficiencies as management is better able to concentrate on the operations of the financial information business). H&R Block looks interesting, though of course its attractiveness is dependent on its results from last quarter and it might not be too wise to trust in sell-side estimates. 60 Hedge Fund Alpha

Julian Robertson’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio GOOGLE INC GOOG SH N 27272 19% 3.7% BLOCK H & R INC HRB SH N 24983 New 3.4% KINDER MORGAN INC KMI SH N 24867 -4% 3.4% MASTERCARD INC MA SH N 24231 -8% 3.3% H C A HOLDINGS INC HCA SH N 23537 -4% 3.2% MARKET VECTORS E T F TRUST GDXJ SH N 22530 128% 3.0% VALEANT PHARMACEUTICALS INTL INC VRX SH N 22123 0% 3.0% MCGRAW HILL FINANCIAL MHFI SH N 21249 New 2.9% CHARTER COMMUNICATIONS INC CHTR SH N 21159 -18% 2.9% MOODYS CORP MCO SH N 20997 New 2.8% FLEETCOR TECHNOLOGIES INC FLT SH N 20801 -10% 2.8% DOLLAR TREE INC DLTR SH N 20610 10% 2.8% CHICAGO BRIDGE & IRON CO N V CBI SH N 20350 6% 2.7% BERKSHIRE HATHAWAY INC DEL BRK-B SH N 20288 -13% 2.7% MONSANTO CO NEW MON SH N 20281 New 2.7% DUNKIN BRANDS GROUP INC DNKN SH N 20136 New 2.7% CITIGROUP INC C SH N 19868 New 2.7% OCWEN FINANCIAL CORP OCN SH N 19824 -23% 2.7% VISA INC V SH N 19786 -10% 2.7% DOLLAR GENERAL CORP NEW DG SH N 19721 New 2.7% PRICELINE COM INC PCLN SH N 19681 -5% 2.7% VERISIGN INC VRSN SH N 19664 -6% 2.7% LIBERTY GLOBAL INC LBTYA SH N 19027 -27% 2.6% AMERICAN INTERNATIONAL GROUP INC AIG SH N 18929 -10% 2.6% QUALCOMM INC QCOM SH N 18149 -14% 2.5% WUXI PHARMATECH CAYMAN INC WX SH N 17809 -10% 2.4% ROYAL CARIBBEAN CRUISES LTD RCL SH N 16411 New 2.2% SEALED AIR CORP NEW SEE SH N 16361 1296% 2.2% DAVITA INC DVA SH N 16235 0% 2.2% RYMAN HOSPITALITY PROPERTIES RHP SH N 15788 -25% 2.1% THE ADT CORP ADT SH N 15284 -40% 2.1% CAPITAL ONE FINANCIAL CORP COF SH N 15243 -16% 2.1% APPLE INC AAPL SH N Sold Out 0.0% DOLE FOOD INC DOLE SH N Sold Out 0.0% TRIPADVISOR INC TRIP SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 61 Hedge Fund Alpha Brief Discussion: Paulson & Co., the hedge fund which notoriously nailed the popping of the housing bubble during the financial crisis (making its founder, John Paulson, a billionaire due to high returns on its short positions) and which has notoriously underperformed the past couple years, has filed its 13F for the first quarter of 2013 with the SEC. We maintain a database of quarterly 13F filings from hundreds of hedge funds and other notable investors as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds beat John Paulson - the S&P 500 by an average of 18 percentage points per year). This database also allows us to compare filings from individual over managers over time and try to get an Paulson & Co. idea of what they are thinking. Here are three trades that Paulson (see Paulson's picks over time) was making between January and March:

Sprint. Sprint (S) had been one of the fund's largest holdings by market value at the New Positions beginning of the year, but that wasn't enough for Paulson: he bought over 100 million shares of the telecom company last quarter and owned about 230 million shares at - Family Dollar (FDO) the beginning of April. Currently Sprint is trading above a proposed takeover price -Hess Corp (HES) from SoftBank, though Dish Network (DISH), another potential acquirer, recently issued debt in order to give it enough cash to fully pursue the transaction and might outbid SoftBank. Paulson actually got his start in merger arbitrage before moving into macro when his investment team got the idea to short subprime mortgages. Generally, acquisition targets trade just below the takeover price, resulting in an arbitrage opportunity. While returns are low in absolute terms, they can be attractive Increased Positions on an annualized basis and are generally uncorrelated with the market.

-Sprint (S) Selling Mylan. According to the 13F, Paulson reduced his stake in Mylan (MYL), a $12 -Aetna (AET) billion market cap manufacturer of generic and specialized pharmaceuticals, to about 18 million shares from about 25 million three months earlier. At current prices, Mylan trades at 21 times its trailing earnings, though Wall Street analysts are projecting high growth in earnings per share over the next couple years and as a result the forward Reduced Positions P/E is only 10. However, the company actually reported a 17% decline in earnings last quarter compared to the first quarter of 2012, with revenue being up but only slightly -Mylan (MYL) so. Billionaire David Shaw's D.E. Shaw had sold 63% of its shares of Mylan during the -Delphi (DLPH) fourth quarter of 2012.

Selling Delphi. Paulson was also selling Delphi Automotive (DLPH), and in this case it was a continuation from the last few months of 2012 when he had sold nearly half the shares he had owned at the beginning of October. The fund was left with 8.7 million Sold Out shares at the beginning of April. Like Mylan, Delphi hasn't been doing too well in recent quarters and as a result the valuation is a bit high considering its trailing -AngloGold Ashanti (AU) financial performance; like that company (as well as a number of Delphi's peers in the -Murphy Oil (MUR) auto space), the sell-side is expecting good numbers over the next several years. Specifically, the auto parts manufacturer is valued at 10 times forward earnings estimates and a five-year PEG ratio well below 1. Billionaires Paul Singer, Howard Marks, and Dan Loeb have been selling their Delphi holdings during the first quarter.

We'd stay away from Sprint for now, seeing where the stock is trading close to the acquisition price; it seems a bit speculative to buy on the theory that Dish and SoftBank will get into a bidding war here. Mylan and Delphi are similar in that they are dependent on delivering at least moderate earnings growth going forward to justify their current valuation, a reversal of recent business trends, and so we would avoid those stocks as well at least until earnings growth turned positive and looked to be sustainable for the next couple of years. 62 Hedge Fund Alpha

John Paulson’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio SPDR GOLD TRUST GLD SH N 3372810 0% 19.0% SPRINT NEXTEL CORP S SH N 1435460 81% 8.1% LIFE TECHNOLOGIES CORP LIFE SH N 954824 6% 5.4% ANGLOGOLD ASHANTI LTD AU SH N 665404 0% 3.8% REALOGY HLDGS CORP RLGY SH N 649686 0% 3.7% PLAINS EXPLORATION & PROD CO PXP SH N 607616 0% 3.4% GRIFOLS S A GRFS SH N 581778 -1% 3.3% MYLAN INC MYL SH N 523044 -26% 3.0% M G M RESORTS INTERNATIONAL MGM SH N 491647 -1% 2.8% EQUINIX INC EQIX SH N 454251 0% 2.6% METROPCS COMMUNICATIONS INC PCS SH N 395670 14% 2.2% DELPHI AUTOMOTIVE PLC DLPH SH N 386280 -36% 2.2% A M C NETWORKS INC AMCX SH N 374657 0% 2.1% AETNA INC NEW AET SH N 332280 44% 1.9% PIONEER NATURAL RESOURCES CO PXD SH N 316092 154% 1.8% FREEPORT MCMORAN COPPER & GOLD FCX SH N 297900 0% 1.7% FAMILY DOLLAR STORES INC FDO SH N 295250 New 1.7% HARTFORD FINANCIAL SVCS GRP INC HIG SH N 282723 -40% 1.6% MCMORAN EXPLORATION CO MMR SH N 263235 3% 1.5% CABLEVISION SYSTEMS CORP CVC SH N 249712 37% 1.4% POPULAR INC BPOP SH N 243767 69% 1.4% CAESARS ENTMT CORP CZR SH N 196233 0% 1.1% HESS CORP HES SH N 192887 New 1.1% BANK OF AMERICA CORP BAC SH N 155803 0% 0.9% C N O FINANCIAL GROUP INC CNO SH N 154363 -37% 0.9% MGIC INVT CORP WIS NOTE 2.000% 4/0 MTG SH N 152438 New 0.9% INTERDIGITAL INC IDCC SH N 143490 0% 0.8% INTEROIL CORP IOC SH N 142326 New 0.8% H C A HOLDINGS INC HCA SH N 138748 -51% 0.8% SCRIPPS NETWORKS INTERACTIVE INC SNI SH N 135114 0% 0.8% NOVAGOLD RESOURCES INC NG SH N 130439 0% 0.7% ROCK TENN CO RKT SH N 129906 -13% 0.7% WELLS FARGO & CO NEW WFC SH N 129132 0% 0.7% NEXEN INC NXY SH N Sold Out 0.0% RALCORP HOLDINGS INC NEW RAH SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 63 Hedge Fund Alpha Brief Discussion: Renaissance Technologies has been a very successful hedge fund over the course of its history, and founder Jim Simons is now a multi-billionaire. We have gone through the fund’s 13F for the fourth quarter of 2012, compared it to previous filings, and picked out what we thought were some interesting themes in Renaissance’s trading activity over the course of Q1. Read on for our discussion of these stocks the fund was buying or selling:

IBM. Renaissance increased its stake in IBM (IBM) to 2.3 million shares, up from about 410,000 shares at the end of December. The company experienced a 5% decline in Jim Simons- revenue last quarter compared to the first quarter of 2012, and even though it was able to cut costs to the point where net margins actually increased IBM’s earnings were still down Renaissance Tech. slightly. Currently the stock trades at 14 times trailing earnings, a level which suggests that the market is looking for at least small increases in earnings per share going forward (and therefore a reversal of these recent trends). Warren Buffett’s Berkshire Hathaway has been a major shareholder of IBM, and owned over 65 million shares at the beginning of New Positions the year (find Buffett's favorite stocks). IBM’s stock price has been up only 5% in the last year, underperforming broader market indices. -Google (GOOG) -EMC Corp (EMC) Selling Qualcomm. The fund was a seller of Qualcomm (QCOM) between January and March, reducing its holdings from 5.3 million shares to 1.2 million over the course of this period. Qualcomm’s revenue and earnings from continuing operations rose strongly in its most recent quarter compared to the same period in the previous year, and Wall Street analysts expect that trend to continue. Going by their expected earnings figures, Increased Positions Qualcomm is valued at 14 times forward earnings estimates and at a five-year PEG ratio of 0.8. As such while Qualcomm is not a pure value stock it’s possible that it offers “growth at -IBM (IBM) a reasonable price.” Viking Global, managed by billionaire Andreas Halvorsen, has been a -Eli Lilly (LLY) large shareholder in Qualcomm.

Drug manufacturers. According to the 13F, Renaissance’s two largest holdings by market value were drug manufacturers: it owned about 11 million shares of Eli Lilly (LLY) and about 14 million shares of Bristol-Myers Squibb (BMY). Each of these positions was Reduced Positions increased somewhat from three months earlier as well. Both of these stocks are priced a bit high for a value investor, with forward price-to-earnings multiples of about 20. -Microsoft (MSFT) However- as is common for pharmaceutical stocks- their performance is mostly -Philip Morris (PM) independent of macro factors (Eli Lilly’s beta is 0.4, while Bristol-Myers Squibb’s is 0.1) and they pay dividend yields of about 3.5%. Given their sizable market capitalizations (over $60 billion in each case) they may be of interest for investors looking for defensive opportunities or low-risk yields. We would be careful when looking at Bristol-Myers Sold Out Squibb, however, as that company’s most recent financial results showed steep declines in both sales and net income from their levels in the first quarter of 2012. -Apple (AAPL) -Cisco (CSCO) Of course, a number of other large-cap stocks in the healthcare sector offer comparable dividend yields and betas, so income or defensive investors would be advised to review other opportunities rather than blindly following Renaissance. As for the other two moves we’ve covered here, we’re not sure we agree with the investment team’s line of thinking; certainly, Qualcomm could easily prove undervalued if it was able to sustain double-digit growth rates on the bottom line for the next several years and given the more moderate expectations currently priced into the stock we think that it is worthy of further research. 64 Hedge Fund Alpha

Jim Simon’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio LILLY ELI & CO LLY SH N 599464 30% 1.5% BRISTOL MYERS SQUIBB CO BMY SH N 581434 6% 1.4% INTERNATIONAL BUSINESS MACHS COR IBM SH N 491038 456% 1.2% COLGATE PALMOLIVE CO CL SH N 490934 31% 1.2% MCDONALDS CORP MCD SH N 460358 28% 1.1% NOVO NORDISK A S NVO SH N 424357 13% 1.0% GOOGLE INC GOOG SH N 415716 14440% 1.0% PHILIP MORRIS INTERNATIONAL INC PM SH N 376393 -13% 0.9% INTEL CORP INTC SH N 365575 -14% 0.9% LINEAR TECHNOLOGY CORP LLTC SH N 339716 8% 0.8% TAIWAN SEMICONDUCTOR MFG CO LTD TSM SH N 339552 44% 0.8% PEPSICO INC PEP SH N 337409 67% 0.8% BIOGEN IDEC INC BIIB SH N 311687 -3% 0.8% HOME DEPOT INC HD SH N 297235 141% 0.7% CELGENE CORP CELG SH N 286375 109% 0.7% ALASKA AIRGROUP INC ALK SH N 285185 6% 0.7% MASTERCARD INC MA SH N 261203 12% 0.6% HERSHEY CO HSY SH N 243859 34% 0.6% PRICELINE COM INC PCLN SH N 219179 -19% 0.5% C F INDUSTRIES HOLDINGS INC CF SH N 209521 8% 0.5% WHOLE FOODS MARKET INC WFM SH N 206292 13% 0.5% INTUITIVE SURGICAL INC ISRG SH N 194447 58% 0.5% E M C CORP MA EMC SH N 188731 New 0.5% PANERA BREAD CO PNRA SH N 185315 17% 0.4% LORILLARD INC LO SH N 181571 251% 0.4% ASTRAZENECA PLC AZN SH N 181277 45% 0.4% LINKEDIN CORP LNKD SH N 176553 163% 0.4% SEADRILL LTD SDRL SH N 173107 69% 0.4% DIAMOND OFFSHORE DRILLING INC DO SH N 171104 61% 0.4% T J X COMPANIES INC NEW TJX SH N 170264 66% 0.4% MICROSOFT CORP MSFT SH N 162127 -30% 0.4% DIRECTV DTV SH N 155475 -34% 0.4% APPLE INC AAPL SH N Sold Out 0.0% CISCO SYSTEMS INC CSCO SH N Sold Out 0.0% GILEAD SCIENCES INC GILD SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 65 Hedge Fund Alpha Brief Discussion: James Dinan founded York Capital Management in 1991 and has since become a billionaire due to the fund’s strong performance even as its assets under management have grown. We have gone through York’s 13F for the end of December and picked out some trends that might help illuminate what Dinan and his team were thinking last quarter. Read on for our analysis and review York's previous filings.

Merger arbitrage. The fund took large positions in Heinz (HNZ) and Virgin Media (VMED), which are currently in the process of being acquired by Warren Buffett's Berkshire James Dinan- Hathaway (with an assist from a private equity fund) and Liberty Global respectively. Acquisition targets generally trade at a small discount to the proposed takeover price, York Capital Man. with the return on investing in these stocks depends on whether or not the transaction closes as opposed to the financial performance of the company (which can be dependent on the overall economy). Particularly if leverage is used, this discount- if the transaction does close on time- can result in decent annualized returns which are uncorrelated with New Positions market indices, and so merger arbitrage is often favored by hedge funds.

-Heinz (HNZ) Breaking companies apart. Two more big buys from Dinan's team were News Corp -Virgin Media (VMED) (NWSA), which is in the process of splitting into two, and Hess (HES), which plans to spin out its downstream operations possibly due to pressure from activists at billionaire Paul Singer's Elliott Management, who recently settled a proxy battle with the company at least for the time being. Breakups and spinouts often attract attention from value investors because, in theory, management of the newly independent companies should Increased Positions be able to improve operations by focusing on their own business rather than the larger organization as a whole. Currently Hess trades at only 12 times forward earnings -Chemtura (CHMT) estimates (though this is actually about even, and possibly something of a premium, to -General Motors (GM) other large E&P companies) and is therefore a potential value stock. News Corp is a bit more expensive, but the media and entertainment industry has been doing quite well recently and News Corp is no exception with revenue up 14% last quarter compared to the same period in the previous fiscal year.

Reduced Positions Selling Petrologistics. York dumped all of its shares of Petrologistics (PDH), which had been one of its largest holdings at the beginning of 2013. The $1.9 billion market cap -AIG (AIG) company operates a propylene production facility; propylene is an input needed by -Sprint (S) chemical and petrochemical companies. Petrologistics recently paid out an abnormally large dividend; while its payments do fluctuate (with propylene prices, among other factors) and it is an MLP with somewhat different tax considerations, it has now paid $1.42 in dividends since going public about a year ago, which is roughly a 10% yield Sold Out against the current price. Of course we wouldn't count on the business being similarly generous going forward, but Petrologistics looks like a prospective dividend stock for -Petrologistics (PDH) income investors willing to tolerate the accompanying risk. -Yahoo (YHOO) We've noticed in our analysis of other billionaires' Q1 moves that a number of them have been buying into News Corp, and with the business doing well and the breakup impending we think that it is an interesting target for investors to research. We'll also have to see how Hess does, though many oil and gas stocks are trading at a discount to that stock and might be more attractive from a value perspective. Even with Dinan getting out of Petrologistics, it's possible that there is an income opportunity there if the company can maintain the same level of payments it made in the last year. 66 Hedge Fund Alpha

James Dinan’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio HEINZ H J CO HNZ SH N 343147 New 7.5% REALOGY HLDGS CORP RLGY SH N 270886 6% 5.9% AMERICAN INTERNATIONAL GROUP INC AIG SH N 263770 -23% 5.7% HERTZ GLOBAL HOLDINGS INC HTZ SH N 242565 -6% 5.3% VIRGIN MEDIA INC VMED SH N 238651 New 5.2% C B R E GROUP INC CBG SH N 160313 New 3.5% NEWS CORP NWSA SH N 147907 New 3.2% HESS CORP HES SH N 133493 New 2.9% CHEMTURA CORP CHMT SH N 102584 73% 2.2% SPRINT NEXTEL CORP S SH N 101603 -42% 2.2% HARTFORD FINANCIAL SVCS GRP INC HIG SH N 99453 New 2.2% MARKET VECTORS E T F TRUST GDX SH CALL 94625 New 2.1% LIBERTY MEDIA CORP DELAWARE CL A LMCA SH N 91897 New 2.0% MANITOWOC CO INC MTW SH N 91011 -22% 2.0% TYCO INTERNATIONAL LTD SWTZLND TYC SH N 89446 54% 1.9% SPECTRA ENERGY PARTNERS L P SEP SH N 84627 New 1.8% GENERAL MOTORS CO GM SH N 84095 272% 1.8% AMERISOURCEBERGEN CORP ABC SH N 82398 New 1.8% VULCAN MATERIALS CO VMC SH N 79957 New 1.7% VISTEON CORP VC SH N 79659 -23% 1.7% DIGITALGLOBE INC DGI SH N 77294 582% 1.7% CANADIAN PACIFIC RAILWAY LTD CP SH N 71831 -18% 1.6% ANHEUSER BUSCH INBEV SA NV BUD SH N 70547 New 1.5% NEWCASTLE INVESTMENT CORP NCT SH N 66733 New 1.4% CARNIVAL CORP CCL SH N 64968 193% 1.4% BEAM INC BEAM SH N 61950 -3% 1.3% FORTUNE BRANDS HOME & SECUR INC FBHS SH N 61878 -4% 1.3% SECTOR SPDR TRUST XLE SH PUT 61069 New 1.3% LIBERTY GLOBAL INC LBTYK SH N 56400 New 1.2% NORTHSTAR REALTY FINANCE CORP NRF SH N 49663 New 1.1% OCWEN FINANCIAL CORP OCN SH N 49006 New 1.1% COMMONWEALTH REIT CWH SH N 47611 New 1.0% PETROLOGISTICS LP PDH SH N Sold Out 0.0% GENERAL GROWTH PPTYS INC NEW GGP SH N Sold Out 0.0% YAHOO INC YHOO SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 67 Hedge Fund Alpha Brief Discussion: He’s a hedge fund kahuna that needs no introduction, so let’s take a look at George Soros and the rest of his investment team’s key moves from the first quarter.

Selling finance & insurance. At the beginning of 2013, the two largest stock positions by market value in Soros’s portfolio were Citigroup (C) and American International Group (AIG). The investor then slashed both stakes between January and March; his AIG position decreased in size by about two-thirds and he reported owning only about 540,000 shares of Citi (down from 8.1 million shares three months earlier). We’d note that none of his top George Soros - ten picks according to the 13F were from the finance & insurance sector. AIG had briefly grabbed the title of most popular stock among hedge funds during the fourth quarter of Soros Fund Man. 2012, but last quarter Apple (AAPL) regained the #1 slot (read more about hedge funds' favorite stocks).

AIG currently trades at a significant discount to the book value of its equity, at a P/B ratio New Positions of 0.7. Citi is also seeing skepticism from the market in terms of the value of its assets, and it’s P/B happens to be 0.7 as well. This is the case even though Citi has nearly doubled in - Liberty Global (LBTYA) price over the last year. The bank’s forward earnings multiple of 10 is in line with that of its -MeadWestvaco (MWV) peers, though other large banks have generally been doing better over the last several quarters in terms of their net income.

Google. Soros was buying Google (GOOG) during the first quarter of 2013 and closed March with about 340,000 shares in his portfolio, making it the second largest equity Increased Positions position reported on the 13F. In the first quarter of 2013, Google experienced earnings growth of 16% versus a year earlier. The company continues to integrate its acquisition of -S&P 500 Puts (SPY) Motorola Mobility Holdings, which has helped it take a leading role in tablets and -Google (GOOG) smartphones, and also continues to generate earnings growth from its core advertising- related businesses such as search. Billionaire Stephen Mandel’s Lone Pine Capital has been another major shareholder in Google.

US Airways. The filing showed Soros roughly doubling his holdings of US Airways (LCC) to a Reduced Positions total of 7.8 million shares. US Airways is in the process of buying American Airlines out of bankruptcy, which will allow greater industry consolidation and potentially higher prices -AIG (AIG) (particularly, in the minds of analysts, on routes where the combined US Airways-American -Motorola Soln (MSI) will have a high market share). In addition, the traditional poor performance of airlines has left many of these stocks candidates for value status; US Airways, for example, is valued at 6 times its trailing earnings. The billionaire trimmed his stake in Delta (DAL) during the quarter, but due to the rise in that stock’s price Soros’s top ten picks now include both Sold Out airlines.

-JP Morgan (JPM) We think that the airline industry is worth taking a look at- even with its notoriety for -General Electric (GE) bankruptcy, stocks are cheap enough that we don’t think they should be ignored (though in the particular case of US Airways we’d be somewhat concerned with integration risk). We’re more uncertain about Google: we like the business, but a good deal of future growth is already priced into the stock and so it might be fairly valued already. Citi and AIG, Soros’s sales, are cheap in book terms though many of Citi’s peers are also potential value plays and investors who are looking at it should consider other megabanks as well. 68 Hedge Fund Alpha

George Soros’ Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio LUCENT TECHNOLOGIES INC. 549463 PRN N 605231 -1% 7.1% MICRON TECHNOLOGY INC MU PRN N 429480 -49% 5.0% SPDR S & P 500 E T F TRUST SPY SH PUT 409957 249% 4.8% PIONEER NATURAL RESOURCES CO PXD SH N 288606 11% 3.4% WEBMD HEALTH CORP WBMD PRN N 274988 0% 3.2% GOOGLE INC GOOG SH N 267804 79% 3.1% DIGITAL RIVER INC DRIV PRN N 266473 1% 3.1% CHARTER COMMUNICATIONS INC CHTR SH N 234250 16% 2.7% E Q T CORP EQT SH N 209036 49% 2.4% CIENA CORP CIEN PRN N 207004 0% 2.4% JOHNSON & JOHNSON JNJ SH N 206599 -2% 2.4% HOLOGIC INC FRNT 2.000%12/1 HOLX PRN N 205837 New 2.4% ADECOAGRO S A AGRO SH N 199260 0% 2.3% ROVI CORP ROVI PRN N 195750 5% 2.3% DELTA AIR LINES INC DAL SH N 148877 -6% 1.7% U S AIRWAYS GROUP INC NEW LCC SH N 133128 99% 1.6% QUANTUM CORP QTM PRN N 124104 0% 1.4% NETAPP INC NTAP SH N 121269 -12% 1.4% CONSTELLATION BRANDS INC STZ SH N 119672 68% 1.4% AMERICAN INTERNATIONAL GROUP INC AIG SH N 112106 -67% 1.3% SHUTTERFLY INC SFLY SH N 112046 -17% 1.3% ACACIA RESEARCH CORP ACTG SH N 109450 -9% 1.3% MOTOROLA SOLUTIONS INC MSI SH N 108127 -35% 1.3% MARKET VECTORS E T F TRUST GDX SH N 100908 75% 1.2% WEBMD HEALTH CORP WBMD PRN N 99109 0% 1.2% MOSAIC COMPANY NEW MOS SH N 97961 181% 1.1% LIBERTY GLOBAL INC LBTYA SH N 95145 3073% 1.1% CAESARS ENTMT CORP CZR SH N 90678 114% 1.1% SANDISK CORP SNDK PRN N 82696 -1% 1.0% VIRGIN MEDIA INC VMED SH N 82018 958% 1.0% SPDR GOLD TRUST GLD SH N 81998 -12% 1.0% CEMEX S A B DE C V CX SH N 76313 229% 0.9% JPMORGAN CHASE & CO JPM SH N Sold Out 0.0% GENERAL ELECTRIC CO GE SH N Sold Out 0.0% C F INDUSTRIES HOLDINGS INC CF SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 69 Hedge Fund Alpha Brief Discussion: David Tepper, the manager of Appaloosa Management, is one of the most prophetic hedgies out there; he oversees close to $16 billion in assets and returned 25% last year after fees (YTD through Dec. 17th). The fact that Carnegie Mellon’s business school was named after Tepper by the age of 55 only adds to the hedge fund manager’s allure. Late last year, he said equity markets have "a lot" of upside in 2013 (see the full prediction), so let’s see how he’s playing them.

David Tepper- Taking a little off the top. Appaloosa sold some of what had been its four largest holdings by market value at the beginning of January. The heaviest selling came in its Apple (AAPL) Appaloosa Man. position, which decreased in size by about 40%, and in American International Group (AIG) where Tepper and his team sold about 30% of their shares. This is an interesting move because Tepper has been publicly bullish on stocks- why then sell financial stocks such as AIG and Citigroup (C)? In addition, both Apple and AIG have been touted as potential value New Positions plays. In the case of AIG, this is because the stock is priced at a significant discount to the book value of its equity at a P/B ratio of 0.7. That suggests that it has a potential upside as -Comcast (CMCSA) the enterprise value converges to the value of AIG's assets. Apple trades at 10 times its -Prudential (PRU) trailing earnings, as the market is pricing in continued declines in net income as a result of falling margins at the consumer technology company. Apple and AIG had been the two most widely owned stocks among hedge funds at the end of December (find more stocks hedge funds loved).

Airlines. There wasn't really much change here aside from small sales at United Continental Increased Positions (UAL) and US Airways (LCC) and a slight increase in his position in Delta (DAL), but airlines now account for three of Tepper's top ten picks- remarkable considering the industry's -MetLife (MET) poor reputation as an investment opportunity. Analyst consensus for 2014 implies that all -Transocean (RIG) three stocks are cheap, with forward earnings multiples in the 7-8 range, and there is some potential for positive developments in the industry as US Airways looks set to buy American Airlines out of bankruptcy. This consolidation has been suggested as a catalyst for higher prices, and all three of these stocks are up at least 40% in the last year. We think Reduced Positions that the industry is worth a closer look, though we might de-prioritize US Airways due to integration risk. -Apple (AAPL) -AIG (AIG) Metlife. Appaloosa did buy a significant number of shares of Metlife (MET) between January and March, increasing its holdings from 3.4 million shares to 4.6 million. The $47 billion market cap life insurer's revenue grew by 9% in the first quarter of 2013 versus a year earlier, and the company beat adjusted earnings estimates as it had done in the previous few quarters as well. Like AIG, it trades at considerably less than the book value Sold Out of its equity; in addition, the forward P/E looks low at 8. Renaissance Technologies, founded by billionaire Jim Simons, owned 5.5 million shares at the end of 2012. -Oracle (ORCL) -Noble Corp (NE) Metlife looks like a prospective target for value investors as well, though analyst targets do look to be quite a bit higher than what the company has done on a trailing basis. We of course understand the mindset of any investors who would completely rule out airlines, and certainly some of any inherent value opportunity there has already been captured, but the industry is still worthy of further research in our view. The same is true for Apple and AIG: the former has been struggling recently but has a sizable cash hoard (and has very low expectations from the market) while we've mentioned AIG's upside potential given where it is trading relative to book value. 70 Hedge Fund Alpha

David Tepper’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio CITIGROUP INC C SH N 376905 -7% 8.0% UNITED CONTINENTAL HOLDINGS INC UAL SH N 272361 -7% 5.8% APPLE INC AAPL SH N 239020 -41% 5.1% QUALCOMM INC QCOM SH N 199507 8% 4.2% GOODYEAR TIRE & RUBBER CO GT SH N 192060 6% 4.1% U S AIRWAYS GROUP INC NEW LCC SH N 181525 -11% 3.8% H C A HOLDINGS INC HCA SH N 175746 0% 3.7% METLIFE INC MET SH N 175031 36% 3.7% AMERICAN INTERNATIONAL GROUP INC AIG SH N 167937 -29% 3.6% DELTA AIR LINES INC DAL SH N 162196 -5% 3.4% GENERAL MOTORS CO GM SH N 158057 6% 3.4% FORD MOTOR CO DEL F SH N 154118 5% 3.3% GOOGLE INC GOOG SH N 146975 0% 3.1% HUNTSMAN CORP HUN SH N 137566 0% 2.9% HARTFORD FINANCIAL SVCS GRP INC HIG SH N 136855 6% 2.9% TRANSOCEAN LTD RIG SH N 133026 71% 2.8% SPDR S & P 500 E T F TRUST SPY SH N 131090 0% 2.8% BROADCOM CORP BRCM SH N 125506 6% 2.7% OWENS CORNING NEW OC SH N 106599 14% 2.3% MICROSOFT CORP MSFT SH N 99715 11% 2.1% E M C CORP MA EMC SH N 96474 -2% 2.0% M G M RESORTS INTERNATIONAL MGM SH N 90730 0% 1.9% MASCO CORP MAS SH N 70875 -14% 1.5% COMCAST CORP NEW CMCSA SH N 68896 New 1.5% SANDISK CORP SNDK SH N 67100 26% 1.4% WHIRLPOOL CORP WHR SH N 66359 0% 1.4% WEATHERFORD INTL LTD NEW WFT SH N 55445 New 1.2% PRUDENTIAL FINANCIAL INC PRU SH N 50440 New 1.1% JPMORGAN CHASE & CO JPM SH N 47460 -57% 1.0% CELANESE CORP DEL CE SH N 46364 60% 1.0% MUELLER WATER PRODUCTS INC MWA SH N 43838 -2% 0.9% DELPHI AUTOMOTIVE PLC DLPH SH N 39315 0% 0.8% HESS CORP HES SH N 34337 New 0.7% POWERSHARES QQQ TRUST QQQ SH N Sold Out 0.0% ORACLE CORP ORCL SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 71 Hedge Fund Alpha Brief Discussion: Billionaire David Einhorn of Greenlight Capital is one of the most closely followed hedge fund managers in the world. In mid May, his fund filed its 13F with the SEC, disclosing many of its long equity positions in U.S. stocks as of the end of March. Even though the information in these is a bit old, we have shown that 13Fs can be used to develop profitable investment strategies (for example, our small cap hedge fund strategy generated an average excess return of 18 percentage points per year). In addition, investors can always treat movements that these managers made during the previous David Einhorn- quarter as initial ideas, going on to further research any which seem interesting on their own merits. We have gone through Einhorn's most recent 13F compared to previous filings Greenlight Capital (see what Greenlight has owned over time) and here are three things we noticed:

Loyal to Apple. We've noticed when looking at a number of billionaires' filings that they sold Apple (AAPL); this group includes David Tepper's Appaloosa Management and New Positions legendary investor Julian Robertson. Einhorn was buying, however, and by the end of March his fund owned 2.4 million shares- a position worth over $1 billion at the time. In its -Oil States Intl. (OIS) most recent quarter, Apple's earnings dropped by 18% compared to the same period in -Hess Corp (HES) the previous fiscal year even as revenue rose by 11% as investor fears of lower margins came true. Currently, Apple is valued at 10 times its trailing earnings (with cash comprising a significant share of the market cap). According to our database, Apple actually regained the title of the most popular stock among hedge funds during the first quarter of 2013.

Not to Microsoft, though. Greenlight wasn't as optimistic about Apple's longtime rival Increased Positions Microsoft (MSFT), cutting its stake by nearly 40% to 6.1 million shares. Microsoft trades at 11 times expected earnings for the fiscal year ending in June 2014, though if we were -Apple (AAPL) going to look at the company more closely we'd try to account for the fact that earnings in that year might be temporarily swelled by the release of Windows 8 and the new version of Office. We'd note that Microsoft also has a good deal of cash on hand, though not as much as Apple of course, and pays a dividend yield close to 3% at current prices and dividend levels. Platinum Asset Management, managed by billionaire Kerr Neilson, has Reduced Positions been another major shareholder of Microsoft.

-Computer Sci. (CSC) Some profit taking. Einhorn had been buying Computer Sciences (CSC) in the first several -Dephi (DLPH) months of 2012; it is currently up 41% from the end of September, and about 80% from the end of June. Delphi (DLPH) has more than doubled since the end of 2011, when Greenlight first reported a large stake. The fund trimmed its holdings of each by about 25% between January and March. Delphi, a $15 billion market cap auto parts company specializing in electrical, electronic, and powertrain components, has been seeing weaker Sold Out business conditions but Wall Street analysts are projecting high enough earnings growth that the five-year PEG ratio is only 0.6. Technology outsourcing and services provider -Ensco (ESV) Computer Sciences has been fairly stable in terms of its business, going by recent reports, -Xerox (XRX) and following the rise in price is just at the edge of value territory with trailing and forward P/Es in the 12-13 range.

We can understand why Greenlight is cashing out a bit at these two stocks- Computer Sciences has gotten to the point where it isn't a clear value stock anymore, while in the case of Delphi it seems advisable to look at other auto parts companies or automakers which might be cheaper. We're also not too excited about Microsoft, and at the very least it seems to be just getting into value territory by virtue of a favorable product cycle (though if Windows 8 sales pick up, or the company comes up with a plan to distribute more cash, it could be worth a look). Apple seems like at least a candidate for value status in our book, though it would have to slow its decline in earnings and it certainly seems risky for Einhorn to have increased his exposure to the stock as much as he did. 72 Hedge Fund Alpha

David Einhorn’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio APPLE INC AAPL SH N 1061370 83% 16.2% GENERAL MOTORS CO GM SH N 589007 0% 9.0% MARVELL TECHNOLOGY GROUP LTD MRVL SH N 547552 0% 8.4% CIGNA CORP CI SH N 510561 0% 7.8% AETNA INC NEW AET SH N 332764 0% 5.1% COMPUTER SCIENCES CORP CSC SH N 291258 -23% 4.4% DELPHI AUTOMOTIVE PLC DLPH SH N 266036 -25% 4.1% N C R CORP NEW NCR SH N 257956 -9% 3.9% VIRGIN MEDIA INC VMED SH N 240932 0% 3.7% MARKET VECTORS E T F TRUST GDX SH N 227289 0% 3.5% OIL STATES INTERNATIONAL INC OIS SH N 220239 New 3.4% SEAGATE TECHNOLOGY STX SH N 197135 -36% 3.0% ASPEN INSURANCE HOLDINGS LTD AHL SH N 189612 0% 2.9% MICROSOFT CORP MSFT SH N 173876 -44% 2.7% C B S CORP NEW CBS SH N 167420 -33% 2.6% D S T SYSTEMS INC DEL DST SH N 160002 0% 2.4% EINSTEIN NOAH RESTAURANT GRP INC BAGL SH N 159178 0% 2.4% SPRINT NEXTEL CORP S SH N 133437 0% 2.0% BABCOCK & WILCOX CO NEW BWC SH N 115311 0% 1.8% OAKTREE CAP GROUP LLC OAK SH N 94480 0% 1.4% HESS CORP HES SH N 89154 New 1.4% LEGG MASON INC LM SH N 81626 -25% 1.2% GREEN MOUNTAIN COFFEE ROASTERS I GMCR SH PUT 71994 New 1.1% BARRICK GOLD CORP ABX SH N 57844 0% 0.9% VODAFONE GROUP PLC NEW VOD SH N 45440 0% 0.7% COVENTRY HEALTH CARE INC CVH SH N 38879 0% 0.6% A E C O M TECHNOLOGY CORP ACM SH N 38479 0% 0.6% STATE BANK FINANCIAL CORP STBZ SH N 34377 0% 0.5% SPIRIT AEROSYSTEMS HOLDINGS INC SPR SH N 31390 New 0.5% WESTERN DIGITAL CORP WDC SH N 30174 0% 0.5% FIFTH STREET FINANCE CORP FSC SH N 22025 0% 0.3% IAC INTERACTIVECORP IACI SH N 19512 New 0.3% E N S C O PLC ESV SH N Sold Out 0.0% XEROX CORP XRX SH N Sold Out 0.0% APPLE INC AAPL SH CALL Sold Out 0.0%

Click to see the entire portfolio and historical filings. 73 Hedge Fund Alpha Brief Discussion: Dan Loeb, founder of the New York-based hedge fund Third Point, has built up a stellar reputation amongst his peers. With an equity portfolio in excess of $5 billion, Loeb’s stock picks are worth paying attention to, and his track record in activist investing is one of the best. Let’s take a look at some of the key moves he made last quarter.

Some new picks. Third Point bought 11 million shares of Virgin Media (VMED) during the quarter, and it also initiated a position of 2.7 million shares in Tiffany (TIF) making two Dan Loeb- of its six largest holdings by market value new positions for the fund. According to Loeb's letter to investors, buying Virgin Media allowed the fund to increase its exposure Third Point to Liberty Global (LBTYA), which plans to buy Virgin in a large cash and stock deal. In addition, merger arbitrage is a common hedge fund strategy as the returns from buying shares of the company to be acquired tend to exhibit little correlation with market returns. Tiffany, meanwhile, recorded a 4% increase in revenue in its most recent New Positions quarterly report (for the quarter ending in January, the fourth of its fiscal year) compared to a year ago with earnings showing very little change. This isn't necessarily a -Virgin Media (VMED) bad performance, but we would be a bit concerned about Tiffany from a value -Tiffany & Co (TIF) perspective as it is currently valued at over 20 times its trailing earnings and would need to deliver much higher growth in order to justify the current valuation.

Trimming Delphi. Loeb and his team cut their stake in auto parts manufacturer Delphi (DLPH) by about 70% and closed March with around 3 million shares in their portfolio. Wall Street analysts are predicting that the next several years will be good for Delphi: Increased Positions earnings will grow enough over the next couple of years to place the current valuation at 10 times consensus for 2014, with the stock's five-year PEG ratio being 0.6. We'd -Intl. Paper (IP) note that the sell-side is generally bullish on a number of auto related stocks, including -Abbvie (ABBV) the automakers themselves. In addition, the business has actually been seeing a decline in both revenue and earnings. Delphi was the largest holding of billionaire Paul Singer's Elliott Management at the beginning of 2013.

Reduced Positions International Paper. The fund added shares of International Paper (IP) during Q1, with 6.6 million shares in its portfolio per the 13F. Loeb's quarterly letter, in addition to -AIG (AIG) discussing Virgin and Liberty Global, described International Paper as moving into the -Yahoo (YHOO) very attractive containerboard industry (with a majority of EBITDA coming from that business segment this year) and also making significant progress in cleaning up its balance sheet which would allow the company to return more of its cash flow to shareholders. Currently, the dividend yield is 2.5% with the company making annualized payments of $1.20 per share; Loeb wrote that he expects these payments to eventually Sold Out rise as high as $2.

-Tesoro(TSO) We actually think that we'd avoid Tiffany and Delphi- their recent financial performance -Morgan Stanley (MS) has not been particularly strong, and their current valuation in terms of trailing earnings is well above value territory in each case. Delphi does look better in terms of forward estimates, but even if we were going to place high weight on the sell-side's targets we'd probably favor other stocks tied to the auto industry first. As for International Paper, Loeb has an interesting thesis but we might want to wait for further developments in the company, and in particular wouldn't want to recommend it to income investors until the company was closer to actually increasing its dividend. 74 Hedge Fund Alpha

Dan Loeb’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio YAHOO INC YHOO SH N 1458798 -15% 27.5% VIRGIN MEDIA INC VMED SH N 538670 New 10.1% AMERICAN INTERNATIONAL GROUP INC AIG SH N 524070 -27% 9.9% INTERNATIONAL PAPER CO IP SH N 307428 340% 5.8% NEWS CORP NWSA SH N 198315 -7% 3.7% TIFFANY & CO NEW TIF SH N 187758 New 3.5% MURPHY OIL CORP MUR SH N 159325 -60% 3.0% DELPHI AUTOMOTIVE PLC DLPH SH N 133200 -70% 2.5% B E AEROSPACE INC BEAV SH N 120560 New 2.3% ABBVIE INC ABBV SH N 120301 609% 2.3% DOLLAR GENERAL CORP NEW DG SH N 116334 7% 2.2% CHENIERE ENERGY INC LNG SH N 112000 0% 2.1% ANADARKO PETROLEUM CORP APC SH N 104940 New 2.0% THERMO FISHER SCIENTIFIC INC TMO SH N 99437 New 1.9% AGRIUM INC AGU SH N 97500 0% 1.8% CONSTELLATION BRANDS INC STZ SH N 95280 5% 1.8% EQUINIX INC EQIX SH N 91932 -19% 1.7% CABOT OIL & GAS CORP COG SH N 84512 New 1.6% N X P SEMICONDUCTORS N V NXPI SH N 75725 New 1.4% WESCO INTERNATIONAL INC WCC SH N 72610 -26% 1.4% HESS CORP HES SH N 71610 New 1.3% SENSATA TECHNOLOGIES HOLDING N V ST SH N 62453 -31% 1.2% TRANSDIGM GROUP INC TDG SH N 61168 167% 1.2% LYONDELLBASELL INDUSTRIES N V LYB SH N 60126 -60% 1.1% LIBERTY GLOBAL INC LBTYA SH N 58704 -52% 1.1% ARIAD PHARMACEUTICALS INC ARIA SH N 49720 10% 0.9% CHIMERA INVESTMENT CORP CIM SH N 47850 New 0.9% ENPHASE ENERGY INC ENPH SH N 46184 0% 0.9% LOUISIANA PACIFIC CORP LPX SH N 38880 -40% 0.7% LIBERTY GLOBAL INC LBTYK SH N 30884 -64% 0.6% T I B C O SOFTWARE INC TIBX SH N 20215 New 0.4% TESORO CORP TSO SH N Sold Out 0.0% MORGAN STANLEY DEAN WITTER & CO MS SH N Sold Out 0.0% NEXEN INC NXY SH N Sold Out 0.0% SYMANTEC CORP SYMC SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings. 75 Hedge Fund Alpha Brief Discussion: Tiger Global Management, which counts billionaire and Tiger Cub Chase Coleman among its investment managers, has filed its 13F for the first quarter of 2013. We track 13Fs from hundreds of hedge funds and other investors, and have found that they can be useful in developing investment strategies; for example, the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). A more conventional use of 13Fs, of course, is to use them as a guide to what top managers are thinking, potentially helping investors come up with new investment ideas. Read on for a brief discussion of three things which we noticed in Chase Coleman- Tiger Global's Q1 filing (which discloses many of its long equity positions as of the end of March) or compare the fund's picks to previous filings. Tiger Global Selling tech stocks. Tiger Global, known for being a tech-focused fund, cut its stake in Apple (AAPL) by about 75% between January and March, down to 260,000 shares. In addition, the fund sold all of its shares of Yahoo (YHOO) and- at least according to the 13F- Yandex New Positions (YNDX), a Russian Internet portal and search engine. We've noticed a number of top hedge funds selling Apple shares during the first quarter of the year, and certainly earnings at the -Dollar General (DG) company have been down. If Apple could manage to maintain its current business it would -Carter’s (CRI) be cheap at a trailing P/E of 10, but Tiger Global is apparently doubtful that it will do so. Yandex has been reporting very strong results- revenue and earnings were up over 30% last quarter compared to the first quarter of 2012- though the market is already pricing in at least somewhat high growth and as a result the stock trades at a little over 30 times trailing earnings. Yahoo's stock price has soared 74% over the last year- in part due to Increased Positions asset sales, in part due to the increased value of its Asian businesses- and so the fund may merely be taking profits there. Billionaire Dan Loeb's Third Point is a major shareholder in -Liberty Global (LBTYK) Yahoo (find Loeb's favorite stocks). -News Corp (NWSA) News Corp. A number of hedge funds have been beefing up their stakes in News Corp (NWSA) ahead of the media and entertainment company's pending breakup, and Tiger Global was no exception as it closed March with 9 million shares of the stock in its portfolio. News Corp is coming off a fiscal quarter in which its revenue rose by 14% Reduced Positions compared to the same period in the previous fiscal year, with earnings up at a higher (though unsustainably so) rate. With earnings multiples in the teens, the stock seems -Priceline (PCLN) priced about right for its current business; however, there is the potential for the split of -Amazon (AMZN) the company to unlock shareholder value as management of the resulting companies becomes more able to focus on their own operations. Hedge funds often like to invest in spinouts under a similar logic (read more about investing in spinouts).

Sold Out Liberty Media. The fund reported ownership of 5.5 million shares of Liberty Media (LMCA), making the $15 billion market cap company Tiger Global's new largest holding. Liberty -Yandex (YNDX) Media owns baseball's Atlanta Braves and has ownership stakes in a number of other -Yahoo (YHOO) companies including DirecTV (DTV). The company completed its spinout of Starz in January of this year, and recently acquired a large stake in Charter Communications; in doing so, it agreed to limit its ownership of Charter to less than 35% for the next few years and won four seats on the company's Board of Directors.

We think that investors should be considering News Corp ahead of its breakup, as there is quite a bit of potential for value creation there and the business seems to have significant tailwinds behind it as is. Even with Tiger Global dumping Yandex and Apple, there is enough interesting about either stock- the rapid growth of earnings at Yandex, and Apple facing quite low expectations in the market- that these companies are at least worth checking out in our view even if they do no turn out to be good picks at this time. 76 Hedge Fund Alpha

Chase Coleman’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio LIBERTY MEDIA CORP DELAWARE CL A LMCA SH N 611174 New 9.5% GROUPON INC GRPN SH N 397800 0% 6.2% MASTERCARD INC MA SH N 339830 -6% 5.3% VISA INC V SH N 326772 -3% 5.1% LIBERTY GLOBAL INC LBTYK SH N 295109 48% 4.6% NEWS CORP NWSA SH N 274590 683% 4.3% DOLLAR GENERAL CORP NEW DG SH N 269591 New 4.2% PRICELINE COM INC PCLN SH N 261502 -25% 4.1% GOOGLE INC GOOG SH PUT 238256 New 3.7% FLEETCOR TECHNOLOGIES INC FLT SH N 237677 19% 3.7% AMAZON COM INC AMZN SH N 237176 -28% 3.7% BAIDU INC BIDU SH N 225389 20% 3.5% MOTOROLA SOLUTIONS INC MSI SH N 185687 93% 2.9% CARTERS INC CRI SH N 168374 New 2.6% COLFAX CORP CFX SH N 162890 New 2.5% MCGRAW HILL COS INC MHP SH N 158844 48% 2.5% CHARTER COMMUNICATIONS INC CHTR SH N 143768 6% 2.2% BURGER KING WORLDWIDE INC BKW SH N 137520 0% 2.1% NETFLIX INC NFLX SH N 123978 New 1.9% GRACE W R & CO DEL NEW GRA SH N 118978 -46% 1.8% APPLE INC AAPL SH N 115092 -75% 1.8% DOLLAR TREE INC DLTR SH N 106546 New 1.7% MAKEMYTRIP LIMITED MMYT SH N 99870 0% 1.6% STRATASYS INC SSYS SH N 96486 New 1.5% COMCAST CORP NEW CMCSA SH N 93196 New 1.4% PENNEY J C CO INC JCP SH N 80839 New 1.3% MCGRAW HILL COS INC MHP SH PUT 78120 New 1.2% 3 D SYSTEMS CORP DEL DDD SH N 77811 132% 1.2% TAL EDUCATION GROUP XRS SH N 76366 -20% 1.2% LIBERTY GLOBAL INC LBTYA SH N 67510 -60% 1.0% YY INC YY SH N 64820 0% 1.0% LIBERTY MEDIA CORP LMCA SH N Sold Out 0.0% YANDEX N V YNDX SH N Sold Out 0.0% YAHOO INC YHOO SH N Sold Out 0.0% MOODYS CORP MCO SH N Sold Out 0.0%

Click to see the entire portfolio and historical filings here. 77 Hedge Fund Alpha Brief Discussion: Herbalife. If anyone's been living on another planet for the last six months, let's sum up: billionaire Bill Ackman of Pershing Square (see Ackman's stock picks) gave a presentation accusing Herbalife (HLF) of being a pyramid scheme, driving down the stock price. As it was recovering, Icahn criticized Ackman in the media, eventually dialing in to a CNBC interview with the hedge fund manager and engaging in a nasty fight. Since then Icahn has become a major shareholder in Herbalife (though he had apparently started buying before his confrontation with Ackman) and owned over 16 Carl Icahn- million shares at the end of March. He has suggested that he may try to take the multilevel marketer of health and fitness products private at a premium. Now Herbalife Icahn Capital is almost exactly at where it was before Ackman's short call.

Currently Ackman has a number of followers who consider the business overvalued, with 48% of the float held short. While we're skeptical that Icahn could find the debt New Positions he'd need to take Herbalife private, considering the regulatory risks, the company has been increasing its earnings over the last year (net income was up 10% last quarter -Herbalife (HLF) compared to the first quarter of 2012) and a conventional value analysis might actually -Dell (DELL) conclude that it is cheap given the trailing P/E of 10.

Energy. Icahn has also been a bit unfriendly with his moves at Transocean (RIG), a $20 billion market cap offshore driller where Icahn has taken a 5% stake (with over 20 million shares in his portfolio at the end of Q1). He has been pushing the company to pay out a higher dividend to shareholders, and also wants to place some of his own Increased Positions nominees on the company's Board of Directors as a reaction to what he sees as poor decisions that management has made over the years. Transocean trades at 9 times -Transocean (RIG) consensus earnings for 2014, as analysts expect the company to significantly increase earnings per share between now and then (the same is true for many other offshore drillers). Billionaire Leon Cooperman's Omega Advisors had owned 3.1 million shares at the end of December (find Cooperman's favorite stocks).

Reduced Positions With Icahn's interest in Transocean, he now counts two energy stocks among his largest holdings given his roughly 60 million shares of shale gas producer Chesapeake (CHK). NA Chesapeake- which ran into trouble early last year after the company became financially stressed as a result of its overexpansion, prompting Icahn's investment- is another favorite among sell-side analysts, with earnings forecasts over the next several years implying a forward earnings multiple of 10 and a five-year PEG ratio well below 1. Revenue grew by over 40% in its most recent quarter compared to the same period in the previous year. Sold Out Obviously Herbalife is still something of a battleground stock, and we'd have to be quite -NA sure it's safe from regulatory action before investing, but certainly at current prices we'd strongly advise against being short. We do think that Chesapeake looks interesting, and would be interested in learning more about the company. As for Transocean, we're skeptical that Icahn will be able to affect much change (due to its large size if nothing else) but the stock does look cheap assuming that the business can at least come close to analyst targets next year. Perhaps it could be a value prospect as well, particularly if next quarter's results place it on track. 78 Hedge Fund Alpha

Carl Icahn’s Portfolio:

Value % in Company Name Ticker SH/PRN Option (x1000) Activity Portfolio ICAHN ENTERPRISES L P IEP SH N 5329130 0% 31.4% C V R ENERGY CVI SH N 3675278 0% 21.7% CHESAPEAKE ENERGY CORP CHK SH N 1218450 0% 7.2% FOREST LABS INC FRX SH N 1166382 0% 6.9% NETFLIX INC NFLX SH N 1049534 0% 6.2% TRANSOCEAN LTD RIG SH N 1047204 245% 6.2% HERBALIFE LTD HLF SH N 612500 New 3.6% AMERICAN RAILCAR INDUSTRIES INC ARII SH N 554863 0% 3.3% FEDERAL MOGUL CORP FDML SH N 462488 0% 2.7% HAIN CELESTIAL GROUP INC HAIN SH N 442217 0% 2.6% NAVISTAR INTERNATIONAL CORP NAV SH N 409487 0% 2.4% MENTOR GRAPHICS CORP MENT SH N 290971 0% 1.7% TAKE TWO INTERACTIVE SOFTWR INC TTWO SH N 194135 0% 1.1% WEBMD HEALTH CORP WBMD SH N 162956 0% 1.0% CVR REFNG LP COMUNIT REP LT CVRR SH N 138760 New 0.8% DELL INC DELL SH N 100310 New 0.6% NUANCE COMMUNICATIONS INC NUAN SH N 76926 New 0.5% ENZON PHARMACEUTICALS INC ENZN SH N 22439 0% 0.1% MOTRICITY INC MOTR SH N 2475 0% 0.0%

Click to see Icahn’s historical filings. 79 Hedge Fund Alpha

5 Most Popular Stocks Among Hedge Funds 25 Most Popular Stocks At Insider Monkey, we track 450 hedge funds, from Warren Buffett to David 6 Qualcomm (QCOM) Einhorn. Our research has shown that retail investors can be rewarded by following the smart money. Marketwatch/Insider Monkey Billionaire Hedge Fund 7 JP Morgan (JPM) Index (BHFI) returned 24.3% last year, beating the S&P 500 ETF by 8 percentageQ1 2011 8 Bank of America (BAC) points. Hedge funds’ small-cap picks performed even better (see the details of our market-beating strategy). 9 Microsoft (MSFT) Four times a year, we rank hedge funds’ top consensus picks, and Apple (AAPL) 10 EBay (EBAY) has been the most popular stock among hedge funds for a very long time. Last quarter AIG took the top spot. Latest filings show that hedge funds dumped AIG 11 Visa (V) and we have a tie at the top of our table.

12 News Corp (NWSA) With 148 hedge funds holding long positions in the latest round of 13F filings from the SEC, we give the first place to Apple (AAPL). 13 Pfizer Inc (PFE) Google (GOOG) sits at No. 2 on this list, even though there were also 148 hedge 14 Wells Fargo (WFC) funds with Google positions. Egerton Capital, Cadian Capital, Brookside Capital, Partner Fund Management, and even billionaire Jeff Vinik were among new 15 Liberty Global (LBTYA) GOOG investors.

16 HCA Holdings (HCA) AIG, meanwhile, has lost 7 hedge funds and dropped to the third place. Still the total value of hedge fund positions in AIG is greater than hedge fund positions in 17 Equinix (EQIX) Apple and Google.

18 Amazon (AMZN ) Citigroup (C) is a great microcosm of hedge funds’ penchant for financials this past quarter, as six additional hedge funds initiated new positions in the stock. 19 Oracle (ORCL) General Motors (GM) is now held by 110 of the hedge funds we track, and the 20 Mondelez (MDLZ) automaker rounds out our top five. This bullish activity is an extension of what we observed in Q3 and Q4, when aggregate interest were increasing. 21 Mastercard (MA) Six new funds bought GM last quarter, and it appears that this interest came at 22 Express Scripts (ESRX) the expense of Microsoft (MSFT). A whopping 10 of our hedgies dropped the tech company last quarter, and the stock now sits at number 9. 23 Delta Airlines (DAL)

24 Hertz (HTZ)

25 SPDR Gold (GLD)

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hefty fees when you can buy the best stock picks of best hedge fund managers at a fraction of what they charge 80 Hedge Fund Alpha

What’s Next?

-An analysis of aggregate moves in hedge fund ownership. We list the most and least popular hedge fund stock picks by market cap. Hedge funds don’t have a large advantage over retail investors when it comes to large cap stocks. However, our historical analysis uncovered strategies in the small-cap space that beat the market as much as 20 percentage points per year. Our premium subscribers will have access to the list of 15 stocks that satisfy our proprietary strategy’s criteria. The stock picks of our Hedge funds tend to “secret” strategy in our previous issues beat the market by generate more alpha 6 percentage points between September 4th and May 16th. when they invest in Our premium subscribers will also be able to read in- underfollowed stocks because they are more depth analyses of 6 of these stocks in the next section. likely to uncover facts that aren’t widely -The stock picks of our small cap strategy in our previous known by investors. issues also beat the market by 29.5 percentage points in Imitating these stock 8.5 months. Our premium members will have access to picks has the potential these stock picks too. of delivering significantly higher returns. Subscribe Now! 81 Hedge Fund Alpha

30 Most Popular Large-Cap ($20+ Billion) Stocks:

Between 1999 and 2009 the 30 most popular stocks with $20+ billion in market cap had a monthly alpha of 18 basis points. These stocks outperformed the market by 12 basis points per month. This isn’t a mind numbing performance but it is still better than index funds.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Apple Inc. AAPL 148 11905890 148 16867919 0 -4962029 Google Inc. GOOG 148 14573965 137 13095722 11 1478243 American International Group, I AIG 146 15280123 153 16272328 -7 -992205 Citigroup, Inc. C 118 7259560 112 6410918 6 848642 General Motors Company GM 110 5812795 104 4934678 6 878117 QUALCOMM Incorporated QCOM 96 6488733 95 5485562 1 1003171 JPMorgan Chase & Co. JPM 94 5197563 97 5930859 -3 -733296 Bank of America Corporation BAC 93 5001582 101 5467885 -8 -466303 Microsoft Corporation MSFT 89 8608779 99 7142441 -10 1466338 eBay Inc. EBAY 89 4213646 92 3961418 -3 252228 Visa, Inc. V 88 6879571 81 6536830 7 342741 News Corp. NWSA 82 11745968 74 10400599 8 1345369 Pfizer Inc. PFE 81 5805456 78 4790096 3 1015360 Wells Fargo & Company WFC 78 21830527 85 20034552 -7 1795975 Liberty Global Inc. LBTYA 75 4129889 49 2598127 26 1531762 HCA Holdings, Inc. HCA 73 3515251 64 1983396 9 1531855 Equinix, Inc. EQIX 71 5262403 66 5003100 5 259303 Amazon.com Inc. AMZN 70 4113824 64 3905863 6 207961 Oracle Corporation ORCL 69 5218112 68 5794426 1 -576314 Mondelez International, Inc. MDLZ 69 6344101 64 4193003 5 2151098 Mastercard Incorporated MA 68 3845215 75 3683351 -7 161864 Express Scripts Inc. ESRX 68 3225362 81 3434275 -13 -208913 Delta Air Lines Inc. DAL 68 3443601 62 2344889 6 1098712 Hertz Global Holdings, Inc. HTZ 68 2425905 57 1657007 11 768898 SPDR Gold Shares GLD 67 6707363 73 12392038 -6 -5684675 priceline.com Incorporated PCLN 67 6127714 70 5535324 -3 592390 Berkshire Hathaway Inc. BRK-B 67 16262861 71 14936085 -4 1326776 Yahoo! Inc. YHOO 66 4264431 71 4215824 -5 48607 Johnson & Johnson JNJ 65 4815291 71 4229662 -6 585629 CBS Corporation CBS 65 3601784 50 1682587 15 1919197 82 Hedge Fund Alpha

30 Most Popular Mid-Cap ($10-$20 Billion) Stocks:

Between 1999 and 2009 the 30 most popular mid-cap ($10 - $20 billion in market cap) stocks had a monthly alpha of 20 basis points. These stocks outperformed the market by 34 basis points per month. Not outstanding, but again, it’s still better than index funds.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Liberty Global Inc. LBTYA 75 4129889 49 2598127 26 1531762 HCA Holdings, Inc. HCA 73 3515251 64 1983396 9 1531855 Equinix, Inc. EQIX 71 5262403 66 5003100 5 259303 Delta Air Lines Inc. DAL 68 3443601 62 2344889 6 1098712 Dollar General Corporation DG 61 4481786 47 3318506 14 1163280 Virgin Media, Inc. VMED 59 5453598 36 1975307 23 3478291 The ADT Corporation ADT 56 1969756 66 2422486 -10 -452730 Liberty Global Inc. LBTYK 56 3878751 28 2560770 28 1317981 Charter Communications Inc. CHTR 54 4668948 42 3014162 12 1654786 SanDisk Corp. SNDK 54 1967391 50 1557306 4 410085 Aetna Inc. AET 54 2735555 47 2195514 7 540041 Liberty Interactive, Inc. LINTA 51 2192527 54 2308907 -3 -116380 Sprint Nextel Corp. S 51 3421561 55 2550797 -4 870764 Michael Kors Holdings Ltd. KORS 49 3071660 42 1972362 7 1099298 Delphi Automotive PLC DLPH 49 3806839 42 4370241 7 -563402 Netflix, Inc. NFLX 48 2724836 35 1387567 13 1337269 The McGraw-Hill Companies, IncMHP 48 1595786 34 739142 14 856644.3 Transocean Ltd. RIG 48 2445475 41 1246495 7 1198980 United Continental Holdings, IncUAL 46 1544620 38 1078711 8 465909 Life Technologies Corporation LIFE 45 2888004 33 2004741 12 883263 Tyco International Ltd. TYC 45 1889933 44 1704124 1 185809 Hartford Financial Services GrouHIG 44 1938829 47 1842269 -3 96560 Melco Crown Entertainment Ltd MPEL 44 1131452 42 919892 2 211560 Liberty Capital Group LMCA 43 3767910 59 3693305 -16 74605 NetApp, Inc. NTAP 42 2626188 52 3180064 -10 -553876 Cardinal Health, Inc. CAH 42 665017 32 712702 10 -47685 Cigna Corp. CI 42 1839380 41 1803844 1 35536 CF Industries Holdings, Inc. CF 41 1161025 44 1485972 -3 -324947 Ingersoll-Rand Plc IR 41 2514934 33 1814211 8 700723 Eastman Chemical Co. EMN 40 1425100 48 1763252 -8 -338152 83 Hedge Fund Alpha

30 Most Popular Smid-Cap ($4-$10 Billion) Stocks:

Between 1999 and 2009 the 30 most popular smid-cap ($4 - $10 billion in market cap) stocks had a monthly alpha of 11 basis points. These stocks outperformed the market by 31 basis points per month. The alpha of these stocks is lower than the stocks’ outperformance because the stocks are riskier.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Hertz Global Holdings, Inc. HTZ 68 2425905 57 1657007 11 768898 Constellation Brands Inc. STZ 57 2850918 39 1065366 18 1785552 United Rentals, Inc. URI 50 1095155 53 975910 -3 119245 Lennar Corp. LEN 48 835193 49 974280 -1 -139087 Lamar Advertising Co. LAMR 47 2068392 38 1906105 9 162287 Owens Corning OC 47 1603935 41 1370233 6 233702 MetroPCS Communications, Inc. PCS 46 1381750 46 710451.6 0 671298.9 W.R. Grace & Co. GRA 46 2104019 42 1812467 4 291552 Cheniere Energy, Inc. LNG 46 1852283 34 1161509 12 690774 CIT Group Inc. CIT 46 1611567 44 1637554 2 -25987 Mohawk Industries Inc. MHK 45 1163277 35 904999 10 258278 Plains Exploration & Production PXP 43 2378196 41 1957457 2 420739 Tesoro Corporation TSO 42 1071166 34 681342 8 389824 Ulta Salon, Cosmetics & FragrancULTA 41 1696804 28 1435358 13 261446 Chicago Bridge & Iron Company CBI 41 1688498 38 1023091 3 665407 TripAdvisor Inc. TRIP 41 1793900 48 1682892 -7 111008 NXP Semiconductors NV NXPI 41 707657 24 264220 17 443437 Whirlpool Corp. WHR 41 1424932 32 1279646 9 145286 VeriSign, Inc. VRSN 40 4236177 56 3784141 -16 452036 Genworth Financial Inc. GNW 39 724305 38 715628 1 8677 Lear Corp. LEA 39 1126266 41 956282 -2 169984 Universal Health Services Inc. UHS 39 795666 33 574339 6 221327 PVH Corp. PVH 39 1229974 33 1336941 6 -106967 TransDigm Group Incorporated TDG 39 2369099 35 2031499 4 337600 Marvell Technology Group Ltd. MRVL 38 1094223 35 824098 3 270125 Advance Auto Parts Inc. AAP 38 1030754 39 1062698 -1 -31944 Monster Beverage Corporation MNST 38 668238 28 724484 10 -56246 Copart, Inc. CPRT 37 852579 23 548525 14 304054 Community Health Systems, Inc.CYH 37 1059663 19 525420 18 534243 Tenet Healthcare Corp. THC 37 1258559 28 868807 9 389752 84 Hedge Fund Alpha

30 Most Popular Small-Cap ($1-$4 Billion) Stocks:

Between 1999 and 2009 the 30 most popular small-cap ($1 - $4 billion in market cap) stocks had a monthly alpha of 74 basis points. These stocks outperformed the market by 105 basis points per month. These results make a lot of sense because we expect hedge funds to have an edge in stocks that are underfollowed.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Visteon Corp. VC 48 1304577 43 1283687 5 20890 US Airways Group, Inc. LCC 47 1270371 37 953167 10 317204 CommonWealth REIT CWH 41 1193352 13 225842 28 967510 Newcastle Investment Corp. NCT 39 580598 22 198580 17 382018 Carter's, Inc. CRI 39 1872588 34 1627941 5 244647 Fortinet Inc. FTNT 39 473237 29 341723 10 131514 Dean Foods Company DF 38 629348 29 379309 9 250039 Brookdale Senior Living Inc. BKD 37 914306 35 799776 2 114530 Gardner Denver Inc. GDI 37 1161227 51 813878 -14 347349 GNC Holdings Inc. GNC 37 1012064 31 665722 6 346342 Coinstar, Inc. CSTR 36 668051 32 385966 4 282085 Dana Holding Corporation DAN 36 483805 35 427615 1 56190 J. C. Penney Company, Inc. JCP 36 1109294 33 1218461 3 -109167 Radian Group Inc. RDN 35 507165 14 84802 21 422363 Tronox Incorporated TROX 35 299148 29 262088 6 37060 SUPERVALU Inc. SVU 34 357911 23 127274 11 230637 Medivation, Inc. MDVN 34 986979 31 990485 3 -3506 DigitalGlobe, Inc. DGI 33 719372 26 328113 7 391259 Avis Budget Group, Inc. CAR 33 791935 25 439307 8 352628 Abercrombie & Fitch Co. ANF 33 587101 37 868618 -4 -281517 Spirit AeroSystems Holdings Inc SPR 32 938391 28 658805 4 279586 Shutterfly, Inc. SFLY 31 459796 19 392397 12 67399 SemGroup Corporation SEMG 31 885376 34 610767 -3 274609 Louisiana-Pacific Corp. LPX 31 659344 28 611587 3 47757 E*TRADE Financial Corporation ETFC 31 638395 35 826271 -4 -187876 PHH Corporation PHH 30 451927 33 499218 -3 -47291 Emeritus Corp. ESC 30 181271 16 63791 14 117480 Deckers Outdoor Corp. DECK 30 528648 28 466327 2 62321 Polycom, Inc. PLCM 30 298781 25 280354 5 18427 Swift Transportation Company SWFT 30 309571 26 185305 4 124266 85 Hedge Fund Alpha

35 More Most Popular Small-Cap ($1-$5 Billion) Stocks:

Between 1999 and 2009 the 15 most popular small-cap stocks had a monthly alpha of 120 basis points. These stocks outperformed the market by 143 basis points per month. We already listed the 15 most popular small cap stocks on page 3. In this table you can find 35 more small cap stocks that are popular among hedge funds. Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Brookdale Senior Living Inc. BKD 37 914306 35 799776 2 114530 Gardner Denver Inc. GDI 37 1161227 51 813878 -14 347349 GNC Holdings Inc. GNC 37 1012064 31 665722 6 346342 Copart, Inc. CPRT 37 852579 23 548525 14 304054 Tenet Healthcare Corp. THC 37 1258559 28 868807 9 389752 Ocwen Financial Corp. OCN 37 637018 39 720595 -2 -83577 Coinstar, Inc. CSTR 36 668051 32 385966 4 282085 Dana Holding Corporation DAN 36 483805 35 427615 1 56190 J. C. Penney Company, Inc. JCP 36 1109294 33 1218461 3 -109167 Radian Group Inc. RDN 35 507165 14 84802 21 422363 Tronox Incorporated TROX 35 299148 29 262088 6 37060 Axiall Corporation AXLL 35 589359 3 32552 32 556807 SUPERVALU Inc. SVU 34 357911 23 127274 11 230637 Medivation, Inc. MDVN 34 986979 31 990485 3 -3506 NCR Corp. NCR 34 1224966 28 1188618 6 36348 DigitalGlobe, Inc. DGI 33 719372 26 328113 7 391259 Avis Budget Group, Inc. CAR 33 791935 25 439307 8 352628 Abercrombie & Fitch Co. ANF 33 587101 37 868618 -4 -281517 Assured Guaranty Ltd. AGO 33 1452362 28 1003333 5 449029 WABCO Holdings Inc. WBC 33 1603596 32 1553622 1 49974 Nabors Industries Ltd. NBR 33 291473 22 241087 11 50386 Market Vectors Gold Miners ETF GDX 33 1002569 36 1102451 -3 -99882 Spirit AeroSystems Holdings Inc SPR 32 938391 28 658805 4 279586 Hillshire Brands Company HSH 32 1023769 35 1154558 -3 -130789 Shutterfly, Inc. SFLY 31 459796 19 392397 12 67399 SemGroup Corporation SEMG 31 885376 34 610767 -3 274609 Louisiana-Pacific Corp. LPX 31 659344 28 611587 3 47757 E*TRADE Financial Corporation ETFC 31 638395 35 826271 -4 -187876 Penn National Gaming Inc. PENN 31 856972 31 512436 0 344536 Sealed Air Corporation SEE 31 375556 28 301380 3 74176 Foot Locker, Inc. FL 31 663843 30 442160 1 221683 PHH Corporation PHH 30 451927 33 499218 -3 -47291 Emeritus Corp. ESC 30 181271 16 63791 14 117480 Deckers Outdoor Corp. DECK 30 528648 28 466327 2 62321 Polycom, Inc. PLCM 30 298781 25 280354 5 18427 86 Hedge Fund Alpha

30 Least Popular Large-Cap ($20+ Billion) Stocks:

Between 1999 and 2009 the 30 least popular ($20+ billion in market cap) stocks had a monthly alpha of -3 basis points. These stocks outperformed the market by 4 basis points per month. It doesn’t make sense to have a position in these stocks as a group.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Nissan Motor Co., Ltd. NSANY 1 4052 1 3586 0 466 Westpac Banking Corporation WBK 1 1160 2 1087 -1 73 France Telecom FTE 2 1416 2 883 0 533 Mizuho Financial Group, Inc. MFG 4 4310 5 4630 -1 -320 NTT DOCOMO, Inc. DCM 4 42369 6 42943 -2 -574 Ecopetrol SA EC 4 153551 3 230969 1 -77418 Luxottica Group SpA LUX 5 83669 7 72512 -2 11157 Carnival plc CUK 5 14144 4 7863 1 6281 Prudential plc PUK 5 19066 7 16658 -2 2408 Sasol Ltd. SSL 6 4313 8 16708 -2 -12395 China Telecom Corp. Ltd. CHA 6 8121 5 9812 1 -1691 Honda Motor Co., Ltd. HMC 6 30939 11 22784 -5 8155 Eni SpA E 6 16305 7 17893 -1 -1588 WPP plc WPPGY 7 31736 8 20164 -1 11572 TELUS Corporation TU 7 76801 5 65501 2 11300 Wipro Ltd. WIT 7 10255 6 4261 1 5994 Telefonica Brasil, S.A. VIV 7 29014 5 29756 2 -742 Chunghwa Telecom Co. Ltd. CHT 7 22765 7 16065 0 6700 National Grid plc NGG 7 52787 9 44625 -2 8162 Banco Bilbao Vizcaya Argentaria,BBVA 7 14777 5 21205 2 -6428 Nomura Holdings, Inc. NMR 8 13770 5 11181 3 2589 Thomson Reuters Corporation TRI 8 144687 11 121497 -3 23190 ING Groep NV ING 8 47232 9 38249 -1 8983 Canon Inc. CAJ 8 58195 5 21838 3 36357 Mitsubishi UFJ Financial Group, IMTU 8 82663 13 48397 -5 34266 China Petroleum & Chemical Co SNP 8 25701 8 24188 0 1513 Total SA TOT 8 306709 10 493965 -2 -187256 PetroChina Co. Ltd. PTR 8 58779 10 54580 -2 4199 BHP Billiton plc BBL 9 104090 6 75652 3 28438 China Life Insurance Co. Ltd. LFC 9 39243 7 38153 2 1090 87 Hedge Fund Alpha

30 Least Popular Mid-Cap ($10-$20 Billion) Stocks:

Between 1999 and 2009 the 30 least popular stocks had a monthly alpha of 42 basis points. These stocks outperformed the market by 63 basis points per month. We believe this is just a statistical fluke because there doesn’t seem to be a theoretical explanation. These results also don’t fit the pattern we observe in smaller and larger cap stocks.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Kyocera Corp. KYO 1 23027 2 41181 -1 -18154 Cencosud S.A. CNCO 1 546 0 0 1 546 Reed Elsevier plc RUK 1 231 0 0 1 231 Kubota Corporation KUB 2 357 4 1250 -2 -893 Shinhan Financial Group CompanSHG 2 681 2 1252 0 -571 Banco de Chile BCH 2 16155 2 16974 0 -819 ORIX Corp. IX 3 3442 3 3102 0 340 Reed Elsevier NV ENL 3 3332 1 1725 2 1607 CPFL Energia S.A. CPL 3 15929 6 14171 -3 1758 CRH plc CRH 4 5062 6 5981 -2 -919 Pearson plc PSO 4 16673 5 8680 -1 7993 ONEOK Partners, L.P. OKS 4 13331 6 22441 -2 -9110 Shaw Communications, Inc. SJR 4 44901 5 40109 -1 4792 Huaneng Power International In HNP 5 3781 5 3258 0 523 Telecom Italia SpA TI 6 7057 6 30177 0 -23120 Smith & Nephew plc SNN 6 77623 7 64844 -1 12779 Fresenius Medical Care AG & CoFMS 6 25543 7 14312 -1 11231 Philippine Long Distance TelephPHI 7 142967 8 124284 -1 18683 Turkcell Iletisim Hizmetleri AS TKC 7 8419 5 2654 2 5765 Empresa Nacional de ElectricidadEOC 7 18357 8 14826 -1 3531 Ultrapar Holdings Inc. UGP 7 104710 6 85614 1 19096 Bancolombia S.A. CIB 7 45833 5 14359 2 31474 LAN Airlines S.A. LFL 7 17115 7 9349 0 7766 AEGON N.V. AEG 8 22450 8 22871 0 -421 Hormel Foods Corp. HRL 8 87202 8 64045 0 23157 LG Display Co., Ltd. LPL 8 20127 10 38029 -2 -17902 BRF - Brasil Foods S.A. BRFS 9 88881 5 34951 4 53930 Panasonic Corporation PC 9 17307 5 12197 4 5110 Korea Electric Power Corp. KEP 9 64773 10 53917 -1 10856 Sun Life Financial Inc. SLF 9 18870 9 58617 0 -39747 88 Hedge Fund Alpha

30 Least Popular Smid-Cap ($4-$10 Billion) Stocks:

Between 1999 and 2009 the 30 least popular smid-cap stocks had a monthly alpha of -6 basis points. These stocks outperformed the market by 4 basis points per month. It doesn’t make sense to have a position in these stocks as a group.

Q1 2013 Q4 2012 CHANGE

Total Value Total Value Total Value Company Ticker No of HFs (x1000) No of HFs (x1000) No of HFs (x1000) Market Cap China Southern Airlines Co. Ltd. ZNH 1 4012 1 3841 0 171 5623.46 China Eastern Airlines Corp. Ltd. CEA 1 5125 1 4484 0 641 4889.49 Net Servi NETC 1 241 1 186 0 55 4883.75 CorpBanca S.A. BCA 1 571 1 334 0 237 4744.69 Western Gas Equity Partners, LP WGP 2 16908 2 18826 0 -1918 7481.13 Veolia Environnement S.A. VE 2 1024 4 5394 -2 -4370 6630.54 Aviva plc AV 2 1018 1 62 1 956 4167.2 Terra Nitrogen Company, L.P. TNH 2 12277 2 14344 0 -2067 4070.37 Yanzhou Coal Mining Co. Ltd. YZC 3 868 7 5028 -4 -4160 6733.29 Western Gas Partners LP WES 3 12273 5 14613 -2 -2340 6217.85 Valhi, Inc. VHI 3 2819 5 6600 -2 -3781 5442.88 Aluminum Corporation Of China ACH 3 1024 5 1354 -2 -330 5263.74 Central Fund of Canada Limited CEF 3 24594 1 20536 2 4058 4928.31 Nidec Corp. NJ 4 4976 4 6688 0 -1712 8704.5 Cheniere Energy Partners LP. CQP 4 6793 5 24571 -1 -17778 5449.64 Brookfield Infrastructure PartneBIP 4 16820 7 17520 -3 -700 5407.18 AmeriGas Partners LP APU 4 10020 4 8643 0 1377 4170.4 Spectra Energy Partners, LP SEP 4 87924 4 2233 0 85691 4161.26 United States Natural Gas UNG 5 53847 6 103739 -1 -49892 9526.55 Enbridge Energy Partners LP EEP 5 18258 6 8832 -1 9426 9139.35 The Governor and Company of TIRE 5 6251 4 2784 1 3467 6381.21 Icahn Enterprises, L.P. IEP 5 5346020 3 4442457 2 903563 5888.72 Braskem S.A. BAK 5 3741 7 6577 -2 -2836 5397.45 Compania Cervecerias Unidas S. CCU 5 15955 5 15650 0 305 5267.99 Regency Energy Partners LP RGP 5 39532 4 35915 1 3617 4287.43 El Paso Pipeline Partners, L.P. EPB 6 8797 8 16825 -2 -8028 9657.53 Sunoco Logistics Partners L.P. SXL 6 69980 6 69395 0 585 6788.52 Gartner Inc. IT 6 178223 11 227058 -5 -48835 6310.47 Etablissements Delhaize Freres DEG 6 25849 6 19779 0 6070 5563.81 Pepco Holdings, Inc. POM 6 21566 7 19772 -1 1794 4923.5 8 9 Hedge Fund Alpha

NEW 30 Most Popular Stocks ($1-$10 Billion) Among Best Performing Hedge Funds:

One of our subscribers asked for the list of most popular small-cap stocks among the best performing hedge funds. We ranked hedge funds based on the performance of their third quarter picks during the fourth quarter. The list below shows the 30 most popular small-cap stocks among these top 100 hedge funds.

Total Value Market Company Ticker No of HFs (x1000) Cap Hertz Global Holdings, Inc. HTZ 23 1038628 8,885 United Rentals, Inc. URI 20 582565 5,113 Constellation Brands Inc. STZ 17 978334 8,749 Lear Corp. LEA 15 325714 5,251 Cheniere Energy, Inc. LNG 14 716432 6,762 NYSE Euronext, Inc. NYX 13 412500 9,390 CIT Group Inc. CIT 13 526612 8,743 Owens Corning OC 13 221249 4,684 Plains Exploration & Production Company PXP 12 278561 6,124 Copart, Inc. CPRT 12 98878 4,297 MetroPCS Communications, Inc. PCS 12 141269 4,010 US Airways Group, Inc. LCC 12 616286 2,764 Lamar Advertising Co. LAMR 11 605280 4,550 Cymer Inc. CYMI 11 238473 3,023 BMC Software Inc. BMC 10 863238 6,620 Genworth Financial Inc. GNW 10 86457 4,927 Gardner Denver Inc. GDI 10 487151 3,692 Louisiana-Pacific Corp. LPX 10 349705 3,009 Visteon Corp. VC 10 404369 2,996 Avis Budget Group, Inc. CAR 10 374033 2,985 McMoRan Exploration Co. MMR 10 284697 2,661 CommonWealth REIT CWH 10 287752 2,655 Tenet Healthcare Corp. THC 9 825264 4,962 Coventry Health Care Inc. CVH 9 611551 6,330 Community Health Systems, Inc. CYH 9 498840 4,367 Whirlpool Corp. WHR 9 340472 9,310 TripAdvisor Inc. TRIP 9 333196 7,506 Assured Guaranty Ltd. AGO 9 304139 4,004 Lennar Corp. LEN 9 295299 7,978 Swift Transportation Company SWFT 9 200641 1,981 90 Hedge Fund Alpha

NEW 60 Most Concentrated Hedge Fund Positions:

This is another new list we prepared for this issue. We believe you can find a lot of good investment ideas among these stocks. Hedge funds will have more influence on the management in these companies. This may not always be a good thing (i.e. in turnaround companies) but we believe these companies are more likely to spinoff units, buy back shares when they are trading at a deep discount, or sell themselves to unlock value.

Total Percent Value Owned by Company Ticker No of HFs (x1000) Market Cap HFs Icahn Enterprises, L.P. IEP 5 5346020 5,889 90.8 Nationstar Mortgage Holdings In NSM 21 2891166 3,338 86.6 CVR Energy, Inc. CVI 15 3761944 4,482 83.9 Harbinger Group Inc. HRG 11 871879 1,183 73.7 Loral Space & Communications, LORL 28 887053 1,316 67.4 Spectrum Brands Holdings, Inc. SPB 21 1893628 2,948 64.2 VeriSign, Inc. VRSN 40 4236177 7,212 58.7 Sears Holdings Corporation SHLD 19 3052540 5,316 57.4 Navistar International Corporati NAV 20 1541298 2,769 55.7 Carter's, Inc. CRI 39 1872588 3,399 55.1 Resolute Forest Products Inc. RFP 20 794045 1,533 51.8 Equinix, Inc. EQIX 71 5262403 10,556 49.9 US Airways Group, Inc. LCC 47 1270371 2,764 46.0 Lamar Advertising Co. LAMR 47 2068392 4,550 45.5 Six Flags Entertainment Corpora SIX 29 1645664 3,641 45.2 Lions Gate Entertainment Corp. LGF 24 1444570 3,213 45.0 CommonWealth REIT CWH 41 1193352 2,655 45.0 Charter Communications Inc. CHTR 54 4668948 10,541 44.3 Visteon Corp. VC 48 1304577 2,996 43.5 ViaSat Inc. VSAT 8 914637 2,158 42.4 DineEquity, Inc. DIN 21 551309 1,319 41.8 Pandora Media, Inc. P 28 1015510 2,448 41.5 Virgin Media, Inc. VMED 59 5453598 13,190 41.3 Coinstar, Inc. CSTR 36 668051 1,631 41.0 SemGroup Corporation SEMG 31 885376 2,170 40.8 The Washington Post Company WPO 19 1347119 3,317 40.6 Tempur Pedic International Inc. TPX 22 1190975 2,967 40.1 EXCO Resources Inc. XCO 17 617590 1,551 39.8 Plains Exploration & Production PXP 43 2378196 6,124 38.8 Texas Industries Inc. TXI 16 673842 1,776 37.9 91 Hedge Fund Alpha

60 Most Concentrated Hedge Fund Positions (Page 2):

This is another new list we prepared for this issue. We believe you can find a lot of good investment ideas among these stocks. Hedge funds will have more influence on the management in these companies. This may not always be a good thing (i.e. in turnaround companies) but we believe these companies are more likely to spinoff units, buy back shares when they are trading at a deep discount, or sell themselves to unlock value.

Total Percent Value Owned by Company Ticker No of HFs (x1000) Market Cap HFs Take-Two Interactive Software I TTWO 26 557874 1,480 37.7 Assured Guaranty Ltd. AGO 33 1452362 4,004 36.3 WABCO Holdings Inc. WBC 33 1603596 4,434 36.2 PHH Corporation PHH 30 451927 1,253 36.1 W.R. Grace & Co. GRA 46 2104019 5,859 35.9 Synageva BioPharma Corp. GEVA 7 527267 1,495 35.3 MetroPCS Communications, Inc. PCS 46 1381750 4,010 34.5 Spirit AeroSystems Holdings Inc SPR 32 938391 2,728 34.4 Owens Corning OC 47 1603935 4,684 34.2 PMC-Sierra Inc. PMCS 19 469447 1,380 34.0 Level 3 Communications Inc. LVLT 19 1508841 4,440 34.0 Sohu.com Inc. SOHU 15 640111 1,893 33.8 DigitalGlobe, Inc. DGI 33 719372 2,130 33.8 Sally Beauty Holdings Inc. SBH 27 1740337 5,165 33.7 J. C. Penney Company, Inc. JCP 36 1109294 3,320 33.4 SUPERVALU Inc. SVU 34 357911 1,076 33.3 The Wendy's Company WEN 15 741592 2,230 33.3 SandRidge Energy, Inc. SD 28 863884.4 2,603 33.2 Health Net, Inc. HNT 20 744986 2,268 32.8 McMoRan Exploration Co. MMR 26 872171 2,661 32.8 WebMD Health Corp. WBMD 15 397458 1,213 32.8 Ulta Salon, Cosmetics & Fragranc ULTA 41 1696804 5,184 32.7 The St. Joe Company JOE 14 641834 1,961 32.7 Constellation Brands Inc. STZ 57 2850918 8,749 32.6 Rockwood Holdings, Inc. ROC 34 1677702 5,170 32.4 AutoNation Inc. AN 20 1710903 5,293 32.3 Spirit Realty Capital, Inc SRC 19 518552 1,612 32.2 Advent Software, Inc. ADVS 9 447692 1,412 31.7 Gardner Denver Inc. GDI 37 1161227 3,692 31.5 Ryman Hospitality Properties, In RHP 25 749200 2,412 31.1 92 Hedge Fund Alpha

15 Stocks Dumped by Bonus Mid-Cap Strategy Hedge Funds

1 Facebook (FB) This is another strategy we have been working on. It invests in stocks smaller than $10 billion in market cap and uses a proprietary methodology 2 Abbott Labs (ABT) to pick 30 stocks. In our back tests it outperformed the S&P 500Q1 index 2011 by 1.9 percentage points per month and its monthly alpha was 1.5 3 Liberty Capital (LMCA) percentage points. We won’t disclose other details about this strategy but we will share its stock picks temporarily as a bonus to our premium 4 Ford (F) members. This strategy returned 6.9% since its inception three months 5 Express Scripts (ESRX) ago and underperformed the S&P 500 index by 2.3 percentage points:

6 Kohl’s (KSS) VeriSign, Inc. VRSN Harry Winston Diamond Corporation HWD 7 Freeport-McMoran (FCX) Gardner Denver Inc. GDI Werner Enterprises Inc. WERN 8 SPDR S&P 500 (SPY) Allscripts Healthcare Solutions, Inc. MDRX MB Financial Inc. MBFI 9 PNC Financial (PNC) Lumber Liquidators Holdings, Inc. LL 10 NetApp (NTAP) Aeropostale, Inc. ARO Mellanox Technologies, Ltd. MLNX 11 ADT Corp (ADT) Federated Investors, Inc. FII Gannett Co., Inc. GCI 12 Microsoft (MSFT) Sally Beauty Holdings Inc. SBH Illumina Inc. ILMN 13 iShares MSCI Emerging Markets ETF (EEM) PAREXEL International Corporation PRXL Carpenter Technology Corp. CRS 14 Petroleo Brasileiro (PBR) REGAL ENTERTAINMENT GROUP RGC Prosperity Bancshares Inc. PB 15 Kraft Foods Group (KRFT) Cliffs Natural Resources Inc. CLF Tupperware Brands Corporation TUP Fidelity National Financial, Inc. FNF Fortune Brands Home & Security, Inc. FBHS Tiffany & Co. TIF NYSE Euronext, Inc. NYX GrafTech International Ltd. GTI Titan International Inc. TWI Arch Coal Inc. ACI Fusion-io, Inc. FIO Don’t pay hedge funds Alpha Natural Resources, Inc. ANR hefty fees when you can DeVry, Inc. DV buy the best stock picks Bally Technologies, Inc. BYI

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