Jim Chanos: His Latest Moves

Includes: C, DE, KKR, UNG, WDC
by: Insider Monkey

By Alex Oleinic

In the latest round of 13F filings, Kynikos, managed by Jim Chanos, is one of the hedge funds that have disclosed its first-quarter equity holdings. While Chanos is known for taking substantial short positions in many different publicly traded companies, it's still worth taking a look at the moves he's made lately, to see the companies he has on his radar-bullish or bearish. This strategy isn't nearly the same as our market-beating strategy, but it's important to monitor nonetheless (discover the secrets of our strategy).

First, second up

In the latest 13F, Kynikos disclosed an ownership of 313,650 shares of SanDisk (SNDK), worth $17.2 million; the previous filing reported 357,800 SNDK shares. On the long side, over 40 of the 500 elite hedge funds we track held SanDisk heading into 2013, likely betting on the company's booming potential in the NAND flash memory market. Generally speaking, memory is bullish when smartphone, tablet and laptop growth is booming, and in an era of shrinking product cycles and ever-increasing competition, SanDisk is a great play. Despite having a good 2013, shares still trade at a bargain bin 12.2 times forward earnings and a PEG near 1.0.

Kynikos also reported a $16.8 million stake in United States Natural Gas Fund (NYSEARCA:UNG), reducing its holding to 768,400 shares from 1,063,500 shares at the end of 2012. UNG shares have had a decent 2013, returning 19.6%, and despite their generally bullish sentiment in energy circles, they still trade at a P/E below 4.0x.

The rest

KKR & Co (NYSE:KKR) is the next on the list, with the fund holding 829,000 shares worth $16 million. In the previous filing, the fund held of 893,500 shares worth $13.6 million. Out of the hedge funds we track, 19 held shares of KKR at the end of December. The company has a market cap of $4.30 billion and a forward P/E of 8.5x, indicating that this mid-sized investment player is adequately valued. Still, with earnings expected to fall by 7% a year over the next half-decade, KKR also represents a decent short opportunity as a value trap. Chanos may be betting on the latter scenario, but there's no way to be certain.

According to the 13F filing, the hedge fund also owned 332,200 shares of Citigroup (NYSE:C) at the end of March. At the end of last year, Kynikos held 307,900 shares of the bank, and in comparison to its peers, Citi's global focus gives it a bit more growth potential than the rest of the so-called "Big Four." Citigroup is one of the hedge fund industry's favourite stocks on a quarter-in-quarter-out basis, and a forward P/E below 10.0x (and a book multiple below parity) indicate there's still value here. For those betting on a broader decline in banking, Citi could be a short, though, as its exposure to China is something that Chanos is almost certainly bearish on (see Chanos' revealing slideshow here).

Last but not least is Deere & Company (NYSE:DE). The hedge fund reported a $14.1 million stake of 163,650 shares. This holding declined from 174,450 shares, worth $15.1 million, from the previous quarter. Deere's shares sport a P/E of 11.2x-ninth highest among farm and construction machinery companies, and although returns have been middling year-to-date, Wall Street's average price target indicates an 11% upside is possible from current levels.The value of the reported holdings of Kynikos amounts to $260.3 million, up from $255.6 million. The hedge fund disclosed a total of 20 positions in its most recent 13F filing, down from 21 reported as at the end of December. (Continue preparing for 13F-filing season here).

Disclosure: I am long C.

Business relationship disclosure: This article is written by Insider Monkey's writer, Alex Oleinic, and edited by Jake Mann. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.

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