New York-based global macro hedge fund manager Moore Capital Management (MCM) was founded in 1989 by Guru Louis Bacon, and manages $12 billion via his flagship Moore Global Investment Fund with $7.4 billion, and the $4.6 billion Moore Macro Managers Fund. The firm has over 400 employees, and is headquartered in NY with satellite offices in London, Zurich, Hong Kong and Washington D.C. MCM utilizes macroeconomic themes, cash, futures and derivatives in deploying its strategies, basing its moves on an evaluation of the future trends of inflation, economic growth, central bank policy and national politics.
MCM holds a diversified portfolio of over 450 positions, but it is relatively concentrated as the top three positions accounts for over 26% of its portfolio, and the top eleven together account for over half of its portfolio. Based on MCM's most recent Q3 filing, we determined that almost half of its portfolio is in large-caps, another 30% is in mid-caps and the remaining 20% is in small-cap equities. The following summarizes the MCM's best ideas as reported in its latest reported 13-F filing for the September 2011 quarter, and updated based on any 13-G filings since the end of the quarter:
Energy sector: MCM cut $31 million in Q3 from its $125 million prior quarter position in the energy sector. Within the energy sector, they doubled their prior quarter $16 million (to $32 million in Q3) in the oil & gas integrated group, with major moves in Petroleo Brasileiro SA (PBR), a Brazilian company engaged in the exploration, production, supply and distribution of oil and gas in Brazil and abroad, in which it added a new $7 million position; and in Marathon Oil Corp. (MRO), a U.S. integrated oil & gas company engaged in worldwide exploration, production, refining, transportation and marketing of crude oil and natural gas, in which it added $8 million to its $11 million prior quarter position. PBR trades at a discount 7-8 forward P/E and 0.9 P/B compared to averages of 16.5 and 1.3 for its peers in the international integrated oil & gas group, while earnings are projected to drop from $4.17 in 2010 to $3.34 in 2012; and MRO trades at 8 forward P/E and 1.2 P/B, at par with averages of 8.0 and 1.2 respectively for its peers in the U.S. oil & gas integrated group.
In the oil and gas operations group, MCM made its biggest move in Plains Exploration & Production (PXP), a U.S. oil & gas exploration & production company with operations primarily in CA, TX, CO & WY, adding a new $22 million position in Q3. Also, in the coal group, MCM cut $23 million in Q3 from its prior $24 million position in Arch Coal Inc. (ACI) that is engaged in the production of steam and metallurgical coal from surface and underground mines. PXP trades at a discount 10-11 forward P/E compared to 33.5 average for its peers in the U.S. oil & gas exploration and production group, and ACI is also undervalued, trading at a discount 5-6 forward P/E, compared to the average of 10.0 for its peers in the coal mining group.
Consumer sector: MCM added $95 million in Q3 to its $45 million position in the consumer sector. The biggest moves it made in the sector included buying a new $32 million position in Altria Group Inc. (MO), the parent company of Philip Morris USA, a manufacturer of cigarettes, smokeless products and wine in the U.S. and internationally. MO trades at 13-14 forward P/E compared to the averages of 12.6 for the tobacco group. Also, in Q3, MCM added $30 million to its $1 million prior quarter position in Procter & Gamble (PG), a global manufacturer of a diverse variety of consumer products with sales operations in almost every country in the world; and it added a new $32 million position in packaged foods manufacturer Kraft Foods Inc. (KFT).
Utility sector: MCM added $183 million in Q3 to its $39 million prior quarter position in the utility sector, adding new positions $42 million, $35 million and $22 million positions in electrical utilities PPL Corp. (PPL), Westar Energy Inc. (WR), and Southern Co. (SO) respectively.
Services sector: MCM added $71 million in Q3 to its $292 million prior quarter position in the services sector, with the major moves including the addition of $66 million to its $2 million prior quarter position in integrated telecom services company Verizon Communications (VZ); adding $32 million to its $7 million prior quarter position in integrated telecom services company Centurylink Inc. (CTL); and adding $15 million to its $53 million prior quarter position in discount retail chain operator Ninety-nine Cents Only Store (NDN).
Healthcare sector: MCM added $3 million in Q3 to its $165 million prior quarter position in the healthcare sector, with the major moves including the addition of $41 million to its $18 million prior quarter position in prescription drugs provider Pfizer Inc. (PFE); and adding $32 million to its $2 million prior quarter position in prescription drugs provider Merck & Co. (MRK).
Note to Table: The companies selected to be included in both the Top Buys and Sells and Top Holdings categories in the Table were picked on both an absolute basis, i.e. the highest dollar amounts of buys and/or sells, as well as those amounts relative to their market-cap. That way, the list is not biased towards the largest companies in the group.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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