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The legendary Julian Robertson seeded many managers who opened their own successful hedge funds after working for the hedge fund guru. The two co-founders of Axial Capital Management, Eliav Assouline and Marc Andersen, are among these tiger cubs. Both of them are still young: the 38-year-old Assouline has an MBA from Harvard and an economics degree from Wharton, and the 37-year-old Andersen has a BS in mechanical engineering from Princeton. They worked as investment bankers at Bear Stearns in the late 1990s. In 2002, they launched Axial-- a fund known as a “short-seller”. It included a certain number of put positions in the portfolio.

Top 20 positions in Axial’s 13F portfolio as of September 30, 2011 are as follows:

Company Name

Ticker

Value

Activity

SPDR S & P 500 ETF TRUST

SPY

501125

53%

ISHARES TRUST

IWM

150012

101%

QLT INC

QLTI

64803

29%

COVANTA HOLDING CORP

CVA

63679

1%

COMCAST CORP NEW

CMCSK

62278

0%

LAS VEGAS SANDS CORP Put

LVS

44402

New

POWERSHARES DB US DOLLAR

UUP

40026

17%

MACQUARIE INFRASTRUCTURE

MIC

34168

0%

L K Q CORP

LKQX

30196

69%

GRAINGER W W INC Put

GWW

27575

New

APOLLO GROUP INC Put

APOL

26198

193%

SPDR SERIES TRUST Put

XRT

25883

36%

JOY GLOBAL INC Put

JOYG

22089

17%

HEALTH CARE REIT INC Put

HCN

21472

New

CUMMINS INC Put

CMI

20203

New

ISHARES INC JAPAN

EWJ

19990

New

SECTOR SPDR TRUST Put

XLI

18961

New

H C P INC Put

HCP

17867

New

I T T EDUCATIONAL SVS Put

ESI

16773

65%

CATERPILLAR INC Put

CAT

16178

New

The total value of Axial’s 13F portfolio was increased from $1.1 billion at the end of June to $1.5 billion at the end of September. The number of positions in the portfolio was also increased from 32 to 60. But there are still a few positions sold out by the fund in the third quarter. For instance, Axial sold out its stakes in Mens Wearhouse Inc (NYSE:MW), in which the fund had $22 million invested at the end of the second quarter. Axial also sold out all $18 million of SPDR Gold Trust (NYSEARCA:GLD). MW returned 24.65% while GLD returned 7.17% since the end of September, versus 12.00% for SPY. Other positions sold out by the fund include Cninsure Inc puts (NASDAQ:CISG) and Suntech Power Holdings Co Ltd (NYSE:STP).

Axial Capital is doing the opposite of what other long / short hedge funds do. It hedges short bets by being long the major indices. Usually hedge funds short major indices to hedge their long positions. The largest two positions in its portfolio are SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and iShares Russell 2000 Index (NYSEARCA:IWM). These two stocks were the top two positions in the fund at the end of the second quarter as well. During the third quarter, Axial increased its stakes in SPY by 53% to $501 million and doubled its stakes in IWM to $150 million. Since the end of September, SPY was up 12% and IWM returned 16.14%. Jeffrey Vinik also used IWM to make bullish bets about the small cap stocks. His Vinik Asset Management initiated a brand new $411 million of IWM shares over the third quarter.

During the third quarter, Axial Capital bought new stakes in a few put positions. For example, it initiated a brand new $44 million put position in Las Vegas Sands (NYSE:LVS). Unfortunately, the $32 billion market cap LVS outperformed the market by nearly 7% so far. Axial also opened new put positions in Grainger W W Inc (NYSE:GWW). It bought $27.6 million worth of the put options of GWW. GWW returned 24.4% since the end of the third quarter, which means the fund probably lost the premium it paid. Axial Capital also bought new stakes in the put options of Healthcare REIT Inc (NYSE:HCN) and Cummins Inc (NYSE:CMI).

Other stocks Axial is bullish about include QLT Inc (NASDAQ:QLTI), Covanta Holdings Corp (NYSE:CVA), Comcast Corp (NASDAQ:CMCSK), Powershares DB US Dollar Index Bullish (NYSEARCA:UUP), Macquarie Infrastructure Co Llc (NYSE:MIC), and LKQ Corp (LKQX). Axial suffered some losses from the two new and largest put positions in its portfolio, but these positions were hedged with long positions in SPY and IWM, which performed quite well so far in the fourth quarter. We encourage investors to perform an in-depth analysis of their put holdings as these stocks are likely to suffer large losses in case the economy slows down because of a Lehman like event in Europe.

Disclosure: I am long SPY.

Source: Short Ideas From Hedge Fund Axial Capital