Eric Mindich’s Eton Park Capital enjoyed a strong first quarter of 2015 according to our returns metric. That metric estimates a fund’s quarterly returns based on the positions held at the beginning of the quarter in companies with a market cap of at least $1 billion. In Eton Park’s case, it shows the weighted average returns of the fund’s 36 qualifying long positions was a strong 5.7% during the first quarter. Let’s take a look at some of Eton Park’s notable positions and their performance during the quarter.
First up is Covidien plc (NYSE:COV), the most valuable long position in the fund’s portfolio at the beginning of the year. The position was increased by 42% in the fourth quarter, which contributed to it vaulting to the top of the list. That followed a third quarter in which the stake was upped by more than 750%, shortly after the announcement that Covidien plc (NYSE:COV) would be purchased by Medtronic for $42.9 billion. Shares of Covidien plc (NYSE:COV) appreciated by more than 20% after the initial takeover announcement stock spike, making it a profitable merger arbitrage play. The takeover was completed on January 26 and Covidien delisted from the New York Stock Exchange, with it returning a solid 4.33% in 2015 to that point. Covidien was a top merger pick of billionaire John Paulson, who was the largest shareholder at the end of 2014 among the funds in our database.
Spirit AeroSystems Holdings, Inc. (NYSE:SPR) was a major performer for Eton Park in the first quarter,bulking up its stock price by a hefty 21.31%. Despite nearly quadrupling in value over the past two-and-a-half years, Spirit AeroSystems Holdings, Inc. (NYSE:SPR) shows no signs of slowing down. The aircraft parts manufacturer has crushed earnings estimates for three straight quarters, most recently posting earnings of $0.87 for the fourth quarter of 2014, with analysts expecting just $0.76. Eton Park has not completely capitalized on the continued strong performance however, selling off chunks of its holding during each of the past three quarters. Most recently, 24% of the position was sold off in the fourth quarter, leaving it with 3.26 million shares.Matt Sirovich and Jeremy Mindich’s Scopia Capital was the 39th best performing hedge fund in our database during the past quarter with returns of 13%, thanks in part to a 22.0 million share position in Spirit AeroSystems Holdings, Inc. (NYSE:SPR) which accounted for 17.67% of its total portfolio.
CDK Global Inc (NASDAQ:CDK) was up an even 15% during the first quarter, another of Eton Park’s top performing picks. It’s position was a new one, unsurprising, given that CDK Global Inc (NASDAQ:CDK) only went public towards the end of the third quarter. Shares of CDK, which provides integrated technology solutions for automotive, boat, RV, and heavy equipment makers, have jumped nearly 50% since its IPO. Scott Ferguson’s Sachem Head Capital has huge exposure to CDK Global Inc (NASDAQ:CDK) with 28.73% of its portfolio invested in the company, while billionaires Daniel S. Och and Stephen Mandel also have large stakes.
Williams Companies Inc (NYSE:WMB), one of the most stable dividend stocks, had a lot more going for it than just its dividend payments in the first quarter. Shares of Williams Companies Inc (NYSE:WMB), which has operations in Canada and the U.S which span the natural gas value chain, were up by just under 14% during the first quarter. Williams Companies Inc (NYSE:WMB) is another company Eton Park may have cut loose too soon, as it shed 47% of its shares during the fourth quarter. Activist Keith Meister remains the largest Williams shareholder among funds we track through his fund Corvex Capital, while Eric W. Mandelblatt’s Soroban Capital Partners has the second-largest position. The two funds signed an agreement in late 2013 to work together on issues concerning Williams, which eventually led to Mandelblatt being elected to the company’s board.
Lastly is CBS Corporation (NYSE:CBS), which was one of Eton Park’s most successful positions in its top ten holdings. Shares of the media and entertainment company, which was Eton Park’s fifth-largest long position with 3.65 million shares, rose by nearly 10% during the quarter. Despite a competitive media environment, CBS Corporation (NYSE:CBS) is in the midst of a steady three-year run during which shares have appreciated by over 50%. Mandelblatt, Och, and billionaire Larry Robbins are just a few of the 77 fund managers which had positions in CBS Corporation (NYSE:CBS) heading into the new year.
The average investor doesn’t have the time or acumen to perform the kind of in-depth analyses on stocks which professional investors like Eeic Mindich can. Those money managers spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the collective returns of hedge funds have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. A portfolio of the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012. The exceptional results of this strategy got even better in forward testing after the strategy went live at the end of August 2012. The 15 most popular small-cap stock picks among the funds we track in our database have beaten the market by more than 82 percentage points since then (see the details).
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