By Eric Winter
Billionaire hedge fund manager Michael Hintze was pushed into the limelight in 2012 due to his fund's unbelievable gains. Hintze indirectly (or possibly directly) gave JPMorgan (JPM) CEO Jamie Dimon some gray hairs in 2012, as his fund, CQS, was purportedly on the opposite end of the $2bn loss amassed by JPM trader Bruno Iksil. Hintze's ability to identify these opportunities in both existing and new positions has led his fund to be one of the world's top performers in recent years. Our research has shown that the most popular small-cap stocks held by managers like Hintze outperformed the S&P 500 index by 18 percentage points per year (check out the details here). CQS recently filed its 13F filing for Q4 2012, exposing the fund's market bets. We have analyzed the list to determine Hintze's newest initiated positions, giving us insight into his latest calls for 2013. Read on to see the highlights below.
Cruise line Carnival Corporation (CCL) was Hintze's largest initiated position, using up nearly 5% of CQS' assets. Anyone with access to TV or a newspaper has seen the latest calamity cruise-goers have undergone on Carnival's Triumph ship. An engine fire left the vessel stranded in the Gulf of Mexico, forcing 3,143 passengers to sleep in the ship's hallways and go without hot food, air conditioning, proper restroom facilities, etc. We are interested to see if the way Carnival handled the situation will affect the price per share at all, with the possibility of travelers choosing other cruise lines in the coming summer months. John W. Rogers of Ariel Investments recently cut his position in half.
Linear Technology Corporation (LLTC) was the second largest addition of CQS in Q4 2012; Hintze saw fit to use slightly over 2% of his assets under management on the company. The high-performance analog semiconductor manufacturer roughly matched the performance of the broader market in the past twelve months, performing slightly better as indicated by a beta of 1.2. However, the high dividend yield of 2.7% offered by LLTC gives investors a big reason to take notice, which is exactly what billionaire Jim Simons' Renaissance has done, building a $240mm position (check out Renaissance's top picks here).
Next up is YM BioSciences, Inc., a Canada-based pharmaceutical company that was recently purchased by Gilead Sciences, Inc. (GILD) for roughly $510 million. YM was trading around $1.60 before the announcement; assuming Hintze had bought at those levels or lower, he likely made a significant amount on the buyout, as investment bankers calculated an offer price of $2.95 per share for the company. Not bad for a short-term hold, considering that CQS put this position on sometime in the last three months of 2012. Gilead hopes to increase its oncology pipeline with the acquisition. Before the deal, Rob Citrone of Discovery Capital Management was reported to have nearly 12.5mm shares of YM.
Molson Coors Brewing Co. (TAP) grabbed almost 1% of the fund's assets and beats out LLTC as the stock possessing the highest divided yield on our list, at 2.9%. TAP consistently surprised analysts last year, beating their estimates every quarter and continuing to do the same with its last announcement on Valentine's Day. While the beverage maker beat earnings for Q4 2012, revenue lagged and EPS declined over the same quarter a year prior (it should be noted that the prior-year period was a week longer, propping up that quarter's earnings). We join analysts who consider Molson a hold, citing possible economic headwinds but acknowledging the company's growing international presence. Billionaire David Harding is a big investor, with $24mm committed (see what else he holds here).
The last new holding of Hintze's that we'll cover is Nexen Inc. (NXY), an independent global energy company. Despite disappointing analysts quarter after quarter with lower-than-expected earnings in 2012, the stock managed to rack up a gain of 33% on the year, giving NXY a high trailing price-to-earnings ratio of 38. We're looking for a potential cool-down on the stock, as average price expectations a year out are a good 15% lower than current trading levels. Famed energy and commodity investor John Arnold owns 2.1mm shares of NYX.