John Murphy once worked at Mt. Everest Fund under Lawrence Greenberg, a former fund manager at Fidelity. After Mt. Everest’s liquidation in 2002, Murphy opened his own long-short hedge fund, Alydar Capital in 2003 in Boston. Greenberg holds the second largest ownership of the fund, next to Murphy. Alydar Capital is a small fund. It employs a staff of approximately 8. Is it worth following? Let’s take a look at its recent performance.
Top 20 positions in Alydar as of September 30, 2011:
Company Name | Ticker | Value | Activity |
ISHARES TRUST | 216692 | 115% | |
APPLE INC | 146808 | -6% | |
ACME PACKET INC | 63672 | 256% | |
GREEN MOUNTAIN COFFEE | 58199 | -40% | |
QUALCOMM INC | 54466 | 273% | |
PORTFOLIO RECOVERY ASSOCIATES IN | 44176 | 31% | |
HERBALIFE LTD | 42612 | -17% | |
TERADATA CORP DE | 42289 | 216% | |
SHUTTERFLY INC | 39359 | 37% | |
MICROSTRATEGY INC | 38749 | -3% | |
VMWARE INC | 38582 | 23% | |
ASPEN TECHNOLOGY INC | 38540 | -11% | |
ENCORE CAPITAL GROUP | 38238 | 40% | |
KNOLOGY INC | 31152 | 3% | |
LEAR CORP | 30888 | -35% | |
ORACLE CORP | 30177 | New | |
UNITEDHEALTH GROUP INC | 29978 | -35% | |
ASBURY AUTOMOTIVE | 29021 | 738% | |
PRICELINE COM INC | 22473 | New | |
ACME PACKET INC Put | 21295 | New |
During the third quarter, Alydar reduced its portfolio value from the previous $2.5 billion at the end of June to only $1.6 billion at the end of September. It also largely reduced its number of positions. At the end of June, Alydar had 109 different positions in its portfolio, while it only had 87 different positions at the end of the third quarter. The fund sold out 58 positions over the third quarter. The biggest position it sold out was Cummins Inc (CMI). The fund reported to own $107 million worth of CMI at the end of June and it did not disclose owning any shares of the stock at the end of the third quarter. CMI returned 5.79% since the end of September, versus 2.82% for SPY. Alydar also sold out its position in Green Mountain Coffee Roasters Call (GMCR). The fund had $94 million invested in GMCR call options at the end of June. Luckily, it sold out all the stakes in this position as GMCR lost 46.57% so far since the end of September. Alydar also sold out Dollar Financial Corp (DLLR), Molycorp Inc (MCP), SPX Corp (SPW), Red Hat Inc (RHT), Weight Watchers International Inc (WTW), Savvis Inc (SVVS), etc.
On the other hand, Alydar also opened a few new positions in the third quarter. For example, it bought new stakes in Oracle Corp (ORCL). According to Alydar’s latest 13F, the fund initiated a brand new $30.2 million ORCL over the third quarter. ORCL gained 0.21% since the end of the third quarter. Ken Fisher also had nearly $600 million invested in ORCL shares. Alydar also opened a new position in Priceline Com Inc (PCLN). It reported to own $22.5 million worth of PCLN at the end of September. PCLN was up 2.16% so far since September 30.
Alydar was also bullish about iShares Trust (IWM). IWM was the biggest position in Alydar’s portfolio and Alydar increased its stakes in this position by 115% to $217 million. IWM returned 3.61% since the end of September, beating the 2.82% for SPY. Alydar also largely increased its stakes in Acme Packet Inc (APKT). It disclosed to own $64 million of the stock at the end of September, up 256% from the end of June. Unfortunately, APKT lost 21.70% since the end of the third quarter. Qualcomm Inc (QCOM) and Teradata Corp (TDC) were two other big positions that were significantly increased by Alydar over the third quarter. Alydar tripled its stakes in these two positions. QCOM was up 7.06% while TDC was down 7.57% so far since the end of the third quarter. Stephen Mandel, Lee Ainslie, and Ken Fisher were all bullish about QCOM. They each had over $270 million invested in the stock.
To conclude, Alydar did a few right things in the third quarter, but it also made some decisions that work out poorly so far in the fourth quarter. Three out of five of its largest positions generated negative returns since the end of September, during which the market was almost up 3%. Therefore, we think investors should be careful when following Alydar’s stock picks.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
