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Where The Big Boys Play: Viacom, Chesapeake, Research in Motion, Homies

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A look at the 13F filings of the 14 biggest hedge funds.

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From time to time I find it interesting to go through the holdings of the largest hedge funds, not to copy them, but to see if there are themes in their buying and selling. Also, if the data is somewhat old – in this case end of Q4 '05 – sometimes one can find potential answers to otherwise "surprising" moves in certain stocks. To put in perspective the type of muscle these guys can throw around, their combined assets are in excess of $625 billion dollars.

Without further ado, and in no particular order, here are the names that have caught my attention either because I have an interest in them or because of recent action in the stocks.

Viacom (VIA/B): Probably one of my longest term positions seems to have caught the attention of a number of buyers as the stock languished at multi-year lows. More than 14 million shares were purchased in Q4 with Maverick Capital leading the way with 7.2M shares. Two thoughts: First, were these longs just plays on the Viacom – CBS (CBS) spin-off? And if so will these holders have a quick trigger if the value is not unlocked in short order? Second: Why didn't I wait to buy in?

Chesapeake Energy (CHK): Perhaps considered one of the highest quality natural gas names, it has lagged badly the energy party. Insiders have been buying stock left and right for months, while several of the big boys have punted the name, to the collective tune of 4.3M shares. Renaissance Tech Group was the sole buyer, with 1.4M shares. Also noteworthy that in late April, CHK's President Tom Ward entered into a forward sale of 2.5M shares, or 10% of his holdings.

Research In Motion (RIMM): Three gorillas did not feel like waiting around for the NTP settlement and sold more than 15M shares, led by Wellington Group's 11M. But if I had to guess, the NTP lawsuit was probably not the catalyst. Looming competition for push email technology is RIMM's much bigger problem.

Homies: There were interesting cross-currents in the homies group. Neuberger & Berman jumped on the Toll Bros' (TOL) bandwagon purchasing 6.7M shares. We do not know the entry price, but it is likely that it paid more than $250M. That may seem a lot until one considers that N&B manages almost $73 billion. On the other side of the ledger, Citadel unloaded 2.1M shares, but remains heavily invested in the group with 765,000 shares of MDC Hldgs. (MDC), "top 10" holdings DR Horton (DHI) (6.7M shares) and KB Homes (KBH) (3.8M shares), and 1.7M shares of Centex (CTX). I am very curious to see what Citadel's positions look like at the end of Q1 '06.

Next, but perhaps most interesting, is the activity in the Managed Care names. Of the 14 hedge funds I looked at, six were very active in Aetna (AET). AET was a "Top 10" holding for D.E. Shaw (4.2M shares purchased in Q4), Loomis Sayles (5.5M shares and its largest holding), Renaissance Tech (1.7M shares almost all bought in Q4), and AQR Capital (771,000 shares). In aggregate, these holdings are not that big (AET has 567M shares outstanding), but an additional 33.7% of the float is controlled by just 7 of the largest mutual fund companies. That suggests that the deepest pockets around were all leaning on the wrong side of the boat when AET last disappointed, and might explain the vicious sell-off in the stock. The question now is whether AET's sell-off was overdone.

The same suspects were also busy buying Cigna (CI), UnitedHealth (UNH), and Humana (HUM), though in much more modest sizes.

Lastly, an oddity: Boston Partners bought 3.3M shares of small cap Axcelis Tech. (ACLS) (3.2% of the company). I call it an oddity because the name does not really seem to fit in with the rest of top holdings and ACLS is the kind of small market cap name that might present liquidity issues for a buyer of that size. Is there something they know that we would like to know?
Positions in VIA/B, CBS, CHK, RIMM, TOL, UNH, CI
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