A growing number of managers of very large, well-known hedge fund firms have been going on a shopping spree, placing big bets on name-brand retailers or their suppliers in recent weeks.
The disclosures are being made in 13G filings, meaning they are passive stakes of at least 5 percent.
Many of these positions have been taken since the beginning of October, so they won’t show up in the 13F filings that investors must make over the next two weeks to disclose holdings in their equity portfolios as of September 30.
Those filings, however, could shed further light on whether there was a more pervasive, extensive move into retail stocks among hedge funds in the third quarter, since they will show positions of less than 5 percent as well.
Chicago-based Citadel’s Kenneth Griffin is one of the managers taking these recent large stakes. Others include several Tiger Cubs, such as Stephen Mandel Jr. of Greenwich, Connecticut–based Lone Pine Capital, and Charles (Chase) Coleman III and Feroz Dewan of New York–based Tiger Global Management.
It is not clear what exactly motivated these managers to take these big positions. There could be a variety of reasons. For example, Omega Advisors’ Leon Cooperman, who disclosed a 6.93 percent stake in dELiA’s on Tuesday, says the position in the teen girls clothing chain is for his personal account.
“I got into it personally because a guy I respect recommended it to me,” he tells me in an e-mail. “I have done no original work other than taking my granddaughter shopping in one of their stores as she likes the merchandise. My friend tells me the new CEO is best-in-class.”
Cooperman disclosed his investment less than two weeks after David Gallo’s New York–based Valinor Management revealed that it owned 9.56 percent of the stock. Gallo can be called a Great-grandcub as well as a Tiger Cub. He previously worked at Bridger Management — founded by Roberto Mignone, who previously worked for Tiger Cub John Griffin’s Blue Ridge Capital — as well as at Tiger Management.
On October 28, Lone Pine disclosed a 5.4 percent stake in Gap. In addition, on August 26, Lone Pine disclosed a 5.4 percent position in discounter Dollar General Corp. and a 5.6 percent stake in shoe retailer DSW.
Managers like Mandel may be making a larger statement about the prospects for retail and consumer spending as well as a possible stock market rotation to consumer-oriented stocks from technology, Internet and media stocks.
Remember, while in recent years he has made big bucks on highfliers such as Google, priceline.com and Apple, Mandel built his reputation back in the 1990s as a consumer analyst while working for Julian Robertson Jr.’s Tiger Management Corp. before leaving in 1997 to launch his own firm.
Mandel was early to bail out of Apple before the stock collapsed, and in the third quarter Google fell out of the top ten positions in his portfolio, according to a recent third-quarter letter to investors. He may be rolling from tech stocks to consumer stocks.
Citadel’s recent 5.3 percent stake in Ann, the retailer known for its Ann Taylor and Loft chains, may be more nuanced. Citadel manages two multistrategy funds as well as equity-only funds, so it is not clear if this stake is a blending of positions of several funds or is held in a single fund.
Meanwhile, Tiger Global recently raised its stake in Carter’s to more than 5.65 million shares from 4 million at the end of June, bringing its position in the company to 10.4 percent. The passive stake was taken on October 24, the day the shares of the children’s clothing maker slumped 8 percent after reporting disappointing earnings.
We’ll be monitoring those 13F filings to see whether these are isolated events.
