Hedge Fund Manager Chris Shumway to Hang It Up: Here Are His Top Holdings

by: The Keating Letter

Chris Shumway of Shumway Capital Partners has announced that he’ll be returning money to outside investors by the end of the first quarter. Going forward, his team will only manage for himself and his employees. This is the culmination of a somewhat awkward exit for Shumway. In November he announced that he was stepping down as the primary portfolio manager of the $8 billion fund, but assured his investors that they’d be in good hands with Tom Wilcox at the helm. Unfortunately his investors weren’t as comfortable about the decision as Shumway was and the fund saw $3 billion in redemption requests.

With these requests coming in, and with the possibility of more to follow, the remaining investors would have been at a disadvantage in the forced selling environment. Shumway decided the best thing to do was to return money to the limited partners by the end of the first quarter. Let me give you some brief background on Shumway and then I want to get into his most recent holdings. It likely will be the last time in a while that we’ll be able to examine Shumway’s positions and thinking.

Shumway Capital was founded in 2002 with $70 million. As I mentioned, it’s grown to $8 billion today and returned 17% annually since inception. Shumway is one of many Tiger Cubs. For those not familiar with the term, Tiger Cubs had worked under Julian Robertson of Tiger Capital Management and left to start their own shops. Here are just a few of them: Lee Ainslie, Robert Karr, Steve Mandel, John Griffin and Chase Coleman. Shumway was one of the largest when measured by assets under management.

As of last quarter, Shumway’s 17 largest holdings and the percentage of his portfolio were as follows:

Apple (NASDAQ:AAPL), 11.5%
Citigroup (NYSE:C), 8.8%
Priceline.com (NASDAQ:PCLN), 8%
Pfizer (NYSE:PFE), 8%
Las Vegas Sands (NYSE:LVS), 7.7%
Baidu (NASDAQ:BIDU), 7.7%
SPDR Gold Trust ETF (NYSEARCA:GLD), 5.9%
Target (NYSE:TGT), 3%
Air Products & Chemicals (NYSE:APD), 2.6%
Union Pacific (NYSE:UNP), 2.6%
BP (NYSE:BP), 2.6%
Illumina (NASDAQ:ILMN), 2.6%
Hewlett Packard (NYSE:HPQ), 2%
NII Holdings (NASDAQ:NIHD), 2%
El Paso Corp. (EP), 2%
PNC Financial (NYSE:PNC), 1.9%
CVS Caremark (NYSE:CVS), 1.9%

We can gather a few helpful things from analyzing Shumway’s portfolio. One, it’s focused. He doesn’t own a lot of stocks, and when he is committed to a stock he likes, he bets big. By my count he owned 44 stocks (or had sold puts) at his last reportable quarter. The top ten stocks made up 65.8% of his portfolio.

Two, it appears he is optimistic about the economy. His positions in Union Pacific (UNP), Citigroup (C), Target (TGT), and Priceline (PCLN) are economic expansion positions. Like Whitney Tilson and some other value investors, Shumway bought into BP after the Gulf oil spill. That fallen angel position has worked out very well for him.

Finally, he seems to be protecting himself should inflation come. The large GLD position is designed as an inflation hedge. The El Paso position could be considered the same. El Paso is a natural gas producer.

I for one am sad to see Shumway go, but I have a feeling this isn’t the last we’ll hear from him. He’ll continue managing his money, as well as the money of his employees. Unfortunately for us, it may be more difficult to learn about his positions in the future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.