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Jeffrey Altman founded Owl Creek Asset Management in June 2001. Prior to this, Altman was a portfolio manager at Franklin Mutual Advisers, LLC, specializing in distressed securities. Altman has used this experience to form the basis for Owl Creek’s investment strategy, which BusinessWeek describes as “a distressed equity strategy along with a capital structure arbitrage strategy as a hedging technique.” In other words, Owl Creek’s portfolio is filled with big name performers (like Apple (AAPL) or Google (GOOG)) and troubled companies (like JC Penney (JCP) and Prudential Financial (PRU)) that will likely be sold/acquired at some point.

Excluding SPY Puts, Owl Creek’s top picks in its 13F portfolio lost 11.3% since June. However, its huge SPY puts position was very timely and hedged most of the downside in Altman's portfolio.

Company

Ticker

Value (x1000)

Activity

Return Since June

SPDR S & P 500 ETF Puts

SPY

1658863

9948%

8%

C I G N A CORP

CI

431811

-19%

-10%

NAVISTAR INTL

NAV

387785

70%

-25%

APPLE INC

AAPL

356966

6%

16%

WELLPOINT INC

WLP

312709

-30%

-21%

BLACKROCK INC

BLK

261505

0%

-12%

AMERICAN TOWER CORP

AMT

247430

New

0%

TEVA PHARMA

TEVA

235555

-41%

-15%

METLIFE INC

MET

205880

-34%

-24%

PRUDENTIAL FINANCIAL

PRU

203330

New

-21%

MEDCO HEALTH SOLN

MHS

199708

-20%

-3%

GOOGLE INC

GOOG

156554

New

6%

VERISIGN INC

VRSN

150476

-2%

-7%

DANA HOLDING CORP

DAN

144851

New

-30%

MARATHON OIL CORP

MRO

143247

-33%

-17%

TEVA PHARMA Calls

TEVA

120550

0%

-15%

GENON ENERGY INC

GEN

112792

-16%

-23%

YAHOO INC

YHOO

97319

-65%

-9%

MCKESSON H B O C INC

MCK

94705

-65%

-7%

PENNEY J C CO INC

JCP

61312

New

-20%

Apple and Google were Altman’s strongest performers, returning 16% and 6%, respectively. However, other than Altman’s large SPY Puts position, these were the only positions to generate a positive return for Owl Creek. Both of these stocks are favorite of television’s Jim Cramer (see more here) and the infamous D. E. Shaw (check out Shaw’s top picks).

Among Altman’s largest losses were in Dana Holding Corp (DAN), he lost 30%, and Navistar Intl (NAV), in which he lost 25%. Dana Holding Corp. is a favorite of James Dinan (York Capital Management). Dinan increased his position in the company by 15 fold last quarter. Several major hedge funds have large bond positions in Navistar, including Highbridge Capital Management, Q Investments (Specter Holdings), D.E. Shaw, and Jabre Capital Partners.

Altman also lost big in financial companies, losing 24% on MetLife Inc (MET) and 21% on Prudential Financial (PRU). He lost big on JC Penney as well, generating a negative return of 20%. Of these positions, all except MetLife were new positions, bought last quarter.

Altman’s healthcare stock picks also performed worse than the market. Cigna lost 10%, WellPoint lost 21% and Teva lost 15%. Medco and McKesson performed slightly better than the market, losing 3% and 7%, respectively.

We like Altman. While his long stock picks have been underperforming the market since June, he is a smart and strategic investor with a reputation for being able to successfully exploit market inefficiencies. Further, many of Altman’s moves are long positions, made with an eye toward the future, so there is time for the average investor to capitalize on the opportunities Altman identifies.

Source: Jeffrey Altman's Top Stock Picks