Investors have been chasing the “smart money” for years. The term is loosely defined and can be a little insulting to retail investors.
Perhaps a better way to define what investors are searching for is “deep pockets”. The idea that these smart investors simply have more capital that allows them to accept paper losses and wait for returns. These large positions provide stability to a stock.
One of the best places to find these deep pockets is by studying the quarterly release of 13F filings. We went through the latest filings to start a shopping list of beaten down names. One of the more interesting plays was an electric vehicle that is setting up a nice base on the charts.
Let’s review our findings.
Last week, hedge funds with at least $100 million in assets under management disclosed their holdings in 13Fs. These reports provide the public insight into what these funds purchased and sold in the fourth quarter.
There are a couple of things we need to know about these 13Fs:
- Hedge Funds are required to file within 45 days of the closing period. HFs usually wait until the last minute to post positions.
- Bearish bets like short selling are not included on the holdings. That means some of these holdings could be hedges against puts.
- These filings could reflect investment decisions that were made months ago and no longer reflect a funds position.
It is important to keep in mind the general price action we have seen to kick off 2022:
- Non-U.S. markets, including Emerging Markets, Developed Markets, and Asia, are outperforming the U.S. markets after underperforming last year. (EM +0.4%, Asia Top 50 -0.6%, Developed X-U.S. -4.6%, U.S. -9.1%, Russell -10%, Nasdaq -13%).
- Energy (+20%) and Financials (-0.5%) have been outperforming Healthcare (-10%), Consumer Discretionary (-12%), Real Estate (-12%), and Technology (-13%).
- Value has outperformed Growth. Small Cap Value (-1.9%), Midcap Value (-3.0%), Large Cap Value (-3.9%), Midcap Growth (-11%), Large Cap Growth (-13%), and Small Cap Growth (-15%).
- Midcap (-7.2%) has outperformed Large Cap (-9%), and Small Cap (-10%).
Now that we understand the price action that has defined 2022, let us look at some of the more interesting 13F moves.
Greenlight Capital’s David Einhorn added new positions in Global Payments (GPN), Intel (INTC), and Cassava Sciences (SAVA). The fund exited positions in FuboTV (FUBO) and Expedia (EXPE).
Glenview Capital, managed by Larry Robbins and Mark Horowitz, disclosed new positions in Activision (ATVI), Alibaba (BABA), and Amazon (AMZN). It closed its stake in Viacom (VIAC), Meta Platforms (FB) and Visa (V).
Dan Loeb’s Third Point jumped into EV car maker Rivian (RIVN), Opendoor Technologies (OPEN), Expedia (EXPE), and Comcast (CMCSA). It unloaded its holdings in Intel (INTC), Meta Platforms (FB), and Activision (ATVI).
Viking Global, led by Andreas Halvorsen, was busy last quarter. The Hedge Fund added positions in EV players RIVN, Li Auto (LI) and Xpeng (ZPEV). It started adding positions in beaten down tech names including Twilio (TWLO), Workday (WDAY), and Take Two (TTWO).
David Tepper’s Appaloosa was busy in the retail sector as it added Nordstrom (JWN), Gap (GPS), Dicks Sporting (DKS) and Foot Locker (FL). It closed positions in several tech names like Twitter (TWTR), Alibaba (BABA) and Qualcom (QCOM).
Tiger Global added new positions in NU Holdings (NU), Grab Holdings (GRAB), Rivian (RIVN) and Marquetta (MQ). It closed its position in software play Splunk (SPLK).
Finally, we wanted to peak at Soros Fund Management which was founded in 1970 by legendary investor George Soros. Mr. Soros made his name in the 1992 when he actually ‘broke the pound’, forcing the Bank of England to exit the European Exchange Rate Mechanism by removing its currency.
Soros is viewed as a major political figure in world markets. That is why it was so interesting to see him take a major stake in RIVN. The Soros Fund has made this name the largest holding in its portfolio, representing 28% of the total Q4 securities. Soros was joined by notables Viking Global, Third Point and Tiger Global. Those are some deep pockets buying this name.
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Shares of RIVN have had a difficult start to 2022. The stock is down 38% year to date. However, the stock held support in this $55-60 area over the past few weeks. This is in the face of broader selling pressure in the markets.
We have seen evidence of smart money flowing into the name in Q4. It is possible that some of these funds sold the name in January but the size of the position by Soros and others suggests a longer-term vision for the name. There is a solid base of money in play.
If you are interested in following the smart money into RIVN you have a well-defined risk as a break below $55 support would signal some of the smart money has left the business. RIVN is a name we would certainly add to your shopping list.
We will continue to build out our shopping list in the coming weeks.