Hedge Fund Tracking: Eminence Capital (Ricky Sandler), Q3 2008

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.

• Timothy Barakett's Atticus Capital
• Whitney Tilson's T2 Partners
• Peter Thiel's Clarium Capital
• Bill Ackman's Pershing Square
• Bret Barakett's Tremblant Capital
• John Paulson's Paulson & Co
• David Einhorn's Greenlight Capital
• Dan Loeb's Third Point
• Paul Tudor Jones' Tudor Investment Corp
• Louis Bacon's Moore Capital Management
• Bruce Kovner's Caxton Associates
• George Soros Soros Fund Management
• Chase Coleman's Tiger Global
• Stephen Mandel's Lone Pine Capital
• Lee Ainslie's Maverick Capital
• John Griffin's Blue Ridge Capital
• Andreas Halvorsen's Viking Global
• Chris Shumway's Shumway Capital Partners
• Paul Touradji Touradji Capital
• Eric Mindich's Eton Park Capital
• Barry Rosenstein's Jana Partners
• Seth Klarman's Baupost Group
• Art Samberg's Pequot Capital Management

Next up, we have Eminence Capital. Eminence is a New York hedge fund ran by Ricky Sandler. As of this last quarter's filing, it held $4 billion in long U.S. equity exposure. Sandler attended the University of Wisconsin and holds a CFA designation. Prior to Eminence, Sandler started his career as a research analyst for Mark Asset Management and then went on to start Fusion Partners at the age of 25 with Wayne Cooperman. As their investment styles started to differ, Sandler went on to start Eminence. Sandler employs a 'quality value' approach to running his portfolio, spending equal time on both the long and short sides of his portfolio. In the past, he has said it employs gross leverage and typically is around 120% long and 70% short.

The following were its long equity, note, and options holdings as of September 30, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that it initiated in the last quarter):

• Sunpower (SPWRB)
• Lockheed Martin (LMT)
• Rockwell Collins (COL)
• Goldman Sachs (GS)
• Ebay (EBAY)
• Chipotle Class B (CMG.B)

Some Increased Positions (A few positions it already owned, but added shares to):

• Nike (NKE): Increased position by 2,954%
• Agilent Technologies (A): Increased position by 105%
• Eaton (ETN): Increased position by 83%
• Charles Schwab (SCHW): Increased position by 50%
• Qualcomm (QCOM): Increased position by 40%
• Abbott Labs (ABT): Increased position by 37%
• Cisco (CSCO): Increased position by 35%
• Microsoft (MSFT): Increased position by 24%
• Google (GOOG): Increased position by 23%
• International Game Technology (IGT): Increased position by 16%
• Oracle (ORCL): Increased position by 15%
• Applied Materials (AMAT): Increased position by 12%

Some Reduced Positions (Some positions it sold some shares of - note not all sales listed):

• Koninklijke Philips Electronics (PHG): Reduced position by 43%
• Laboratory Corp of America (LH): Reduced position by 42%
• Quest Diagnostics (DGX): Reduced position by 38%
• American Express (AXP): Reduced position by 34%
• Ross Stores (ROST): Reduced position by 20%
• Fiserv (FISV): Reduced position by 15%
• America Movil (AMX): Reduced position by 12%
• Grupo Televisa (TV): Reduced position by 9%

Removed Positions (Positions it sold out of completely):

• Napster (inactive)
• Herbalife (HLF)
• SRA International (SRX)
• Arbitron (ARB)
• Staples (SPLS)
• Western Union (WU)
• Viacom (VIA.B)

Top 20 Holdings (by % of portfolio):

1. Oracle (ORCL): 5.7% of portfolio
2. Microsoft (MSFT): 4.8% of portfolio
3. Cisco (CSCO): 4.5% of portfolio
4. Sunpower (SPWRB): 4% of portfolio
5. Fiserv (FISV): 3.9% of portfolio
6. SAIC (SAI): 3.7% of portfolio
7. Eaton (ETN): 3.7% of portfolio
8. Abbott Labs (ABT): 3.5% of portfolio
9. United Technologies (UTX): 3.5% of portfolio
10. American Express (AXP): 3.3% of portfolio
11. 3M (MMM): 3.2% of portfolio
12. Qualcomm (QCOM): 3.1% of portfolio
13. International Game Technology (IGT): 2.9% of portfolio
14. Quest Diagnostics (DGX): 2.7% of portfolio
15. Cintas (CTAS): 2.6% of portfolio
16. Monster (MWW): 2.5% of portfolio
17. Nike (NKE): 2.5% of portfolio
18. Bed Bath & Beyond (BBBY): 2.5% of portfolio
19. Zebra Technologies (ZBRA): 2.5% of portfolio
20. Google (GOOG): 2.4% of portfolio

Assets from the collective long U.S. equity, options, and note holdings were $4.45 billion last quarter and were $4 billion this quarter. As you can see, Eminence is heavily weighted in technology as a percentage of assets, based on its top three holdings - Oracle, Microsoft, and Cisco, which together account for around 15% of Eminence's portfolio.

Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect their cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, etc).

Overall, it's been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.