By Eric Winter
Daniel S. Och heads up OZ Management, which is a subsidiary of well-known Och-Ziff Capital Management. Och-Ziff is a publicly traded asset management firm with an AUM of roughly $34bn in assets as of this month. OZ Management is one of many hedge funds that disclose its positions each quarter in an SEC filing known as a 13F. We sift through over 400 13Fs each quarter to find smart moves made by institutional money managers. Our research has led us to find a small-cap strategy that has returned over 29% since its inception in September 2012 (read more here). With that in mind, read on to see our analysis of OZ's top stock holdings.
American International Group (AIG) has unseated Apple, Inc. (AAPL) as the most popular stock amongst the 400+ hedge funds that we track, with interest from money managers rising by 17% from Q3 2012 to Q4 2012. Altogether, 142 of the funds we track hold the insurer. Despite a loss of $945mm in its property & casualty division due to Hurricane Sandy, AIG's latest earnings announcement for the last quarter of 2012 showed a $290mm operating profit. Bernstein has high hopes for the future of AIG, as the firm maintained the stock at a Buy in the beginning of March, citing a reinstated dividend and $5bn stock repurchase program by the middle of 2013. Fellow billionaire Bruce Kovner has $358mm worth of AIG.
Canadian Pacific Railway Limited (CP) is Och's fifth-largest position overall (preceded by AIG above and a number of option positions). As 1.5% of the fund's portfolio, CP has received an allotment of nearly $400mm by OZ. As the name implies, CP connects much of Canada and the northern U.S. in a 14,700-mile network. Both TD Securities and Canaccord Genuity have become bearish on CP since the start of this year, encouraging investors to reduce or sell their positions. Hedge fund Pershing Square announced a 14% stake in CP in 2011; Bill Ackman continues to keep the railway operator as 27% of his total assets under management, even after doubling his $1.4bn investment in less than a year (check out his top five stocks here).
Equinix, Inc. (EQIX) stands near the top of OZ's portfolio as well with an investment of roughly $350mm. The data connectivity and solutions company gave a stand out performance in the last year, garnering investors with a 56% gain. EQIX recently issued $1.5bn in debt after receiving an upgrade to BB by S&P. The company has intentions to convert to a REIT by 2015, although analyst Michael Rollins from Citi sees the timeline to be too aggressive and recently downgraded the company to neutral. Billionaire Dan Loeb of Third Point owns over half a million shares.
Mondelez International (MDLZ) operates the global snack business of the company that used to be known as Kraft Foods, Inc. Kraft Foods Group was spun off from MDLZ in October of 2012 to handle the North American grocery operations under the new ticker KRFT, traded on the NASDAQ. Despite (or possibly in spite of) the stock's poor performance in the recent past, Wall Street remains bullish on MDLZ as its opportunities for growth exceed that of KRFT's saturated market. MDLZ's strong brand portfolio that includes products such as Oreo and Trident should continue to keep revenues far into the billions for the snack maker. Famed investor Jim Simons of Renaissance Technologies has a $100mm investment in MDLZ.
Aetna Inc. (AET) rounds out our list of top equity positions in OZ's portfolio; the healthcare benefits company occupies a little less than a percent of the fund's assets, totaling around $234mm. AET saw a slight drop in popularity with hedge funds moving into the last quarter of 2012, with 45 funds invested in Q4 versus 53 in Q3. Along with fellow competitors Humana, Cigna, and UnitedHealth, AET is facing a prospective reduction in reimbursement rates for Medicare Advantage plans next year. Billionaire David Harding of Winton Capital Management reduced his position by almost 40% going from Q3 2012 to Q4.