Education from Stanford and Yale, work experience from Morgan Stanley and Goldman Sachs, the founder of Farallon Capital Management in 1986, Thomas Steyer, had everything he needed to start a hedge fund. Now, Farallon is the 14th largest hedge fund in the world, managing $21 Billion and operating in eight offices worldwide. Steyer is also a managing director at Hellman & Friedman, a private equity firm based in San Francisco. We admire Steyer. He participated actively in philanthropy. In 2010, Steyer joined Warren Buffett and Bill Gates and agreed to donate half of his wealth to charity.
Below are the top 20 positions in Farallon’s 13F portfolio at the end of September:
Company Name | Ticker | Value | Activity |
MOTOROLA MOB | (MMI) | 399146 | New |
NALCO HOLDING COMPANY | (NLC | 165246 | New |
OWENS ILL INC | (OI) | 153679 | New |
STATE STREET CORP | (STT) | 151393 | 53% |
GOODRICH CORP | (GR) | 147833 | New |
COMCAST CORP NEW | (CMCSA) | 143897 | 64% |
VISA INC | (V) | 142110 | 340% |
TARGET CORP | (TGT) | 135105 | -25% |
ORACLE CORP | (ORCL) | 129043 | 0% |
GOOGLE INC | (GOOG) | 127309 | New |
GENERAL DYNAMICS | (GD) | 119753 | 54% |
HUDSON PACIFIC PROPERTIES | (HPP) | 119020 | 0% |
MICROSOFT CORP | (MSFT) | 112378 | 42% |
NEWS CORP | (NWSA) | 99936 | New |
UNION PACIFIC CORP | (UNP) | 91634 | 69% |
MEDCO HEALTH SOLNS | (MHS) | 84402 | 576% |
VIACOM INC NEW | (VIA-B) | 72483 | -35% |
WELLS FARGO & CO | (WFC) | 72239 | -11% |
VARIAN SEMICONDUCTOR | (VSEA) | 70934 | New |
HOME DEPOT INC | (HD) | 69356 | 59% |
The total value of the Farallon’s 13F portfolio was increased from $3.6 billion at the end of June to $3.9 billion at the end of September. The number of positions was also slightly higher. At the end of June, Farallon had 68 positions in its 13F portfolio, and it owned 71 positions at the end of the third quarter. Steyer sold out a few positions in the third quarter. For instance, his fund had had $90 million invested in BMC Software Inc (BMC) at the end of the second quarter. But according to the latest 13F filing, the fund did not report owning any shares of BMC, which lost 10.01% since the end of September. Steyer successfully minimized his loss by selling out all the BMC stakes. Steyer is also no longer bullish about Liberty Global Inc (LBYTA), Fedex Corp (FDX), and Youku.com Inc (YOKU).
On the other hand, Steyer also opened some new positions in the third quarter. He initiated a brand new $399 million of Motorola Mobility Holdings (MMI), which returned 2.89% so far in the fourth quarter. He also bought $165 million worth of Nalco Holdings Company (NLC) and $154 million of Owens Ill Inc (OI). Until December 1, NLC returned 10.92% since the end of September, versus 10.45% for SPY. And OI returned a stunning 33.66% so far in the fourth quarter, beating the 11.40% for SPY in the same period. Charles Clough’s Clough Capital Partners also had $18 million invested in OI.
Steyer also increased his stakes in State Street Corp (STT) by 53% in the third quarter. At the end of September, Farallon disclosed to own $151 million of STT stocks. STT returned 27.27% since the end of the third quarter, beating the market by nearly 16 percentage points.
Steyer was also bullish about some technology stocks. His fund invested over $100 million each in Oracle Corp (ORCL), Google Inc (GOOG), and Microsoft Corp (MSFT). Since the end of September, these three stocks generated a weighted average return of 12.44%, compared with 11.40% for SPY. Stephen Mandel’s Lone Pine Capital also had $483 million invested in GOOG stocks at the end of the third quarter.
“Farallon places a priority on the preservation of capital. While we value and employ risk management analytics, we primarily manage risk through rigorous research and analysis”, according to Farallon’s website. Three out of its four largest positions outperformed the market so far in the fourth quarter. We like Thomas Steyer and his Farallon Capital. Our research has shown that by focusing on the top stock picks of hedge funds like Farallon Capital, investors are more likely to beat the market in the long term.
Disclosure: I am long MSFT.
