Energy Transfer Equity (ETE) Carries Whetstone Capital to Huge Turnaround

Whetstone Capital Advisors is a value oriented long/short hedge funds, focusing on investing in industries that benefit from secular growth. David Atterbury started the fund in late 2010 with $13 million in seed money. The fund’s strategy is to invest about a third of the value of its long positions into short positions, mainly in companies that are struggling, as opposed to traditional hedging.

According to a recent investor letter, this past year has been a roller coaster for Whetstone in terms of returns. Since August 2015 until February 2016, Whetstone has been severely underperforming and lost on average 14.90% per month. However, since March through July it has managed to turn things around and year-to-date it is up by 2.2%, although still lagging behind the S&P 500. As revealed in the fund’s latest 13F filing, during the second quarter, David Atterbury increased his fund’s exposure to the energy sector, which currently accounts for 70% of the equity portfolio, up from 60% at the end of the first quarter. The remaining 30% comprise technology and consumer discretionary stocks. At the end of June, the portfolio carried an estimated market value of $170 million.

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Keeping An Eye On Envestnet

Opening Whetstone Capital’s top five positions is Envestnet Inc (NYSE:ENV). During the quarter, the fund’s position was unchanged, as it continues to hold 347,616 shares. At the end of June, the position was worth $11.5 million, up from $9.45 million a quarter before. Envestnet Inc (NYSE:ENV) is not popular among the hedge funds followed by Insider Monkey, with only 5 of them having reported a stake in the company at the end of the second quarter, down from 6 registered a quarter before. Gunnar Overstrom, the manager of Three Corner Global Investors, dumped 67% of his fund’s investment in the company, reducing it to 138,568 shares worth $4.62 million. So far this year, the stock has been in a solid uptrend, gaining roughly 36% through Thursday’s closing price of $39.21 per share. The company released second quarter financial results on August 9, posting a loss of $7.9 million. When adjusted for one-time costs, Envestnet Inc (NYSE:ENV) actually earned $0.21 per share, on the back of $141.7 million in revenue. Investors, on the other hand, were looking for $0.20 per share form $139.2 million in revenue. For the current quarter, the company expects earnings to range between $0.25 and $0.26 per share.

Cashing In

Next up is Gray Television, Inc. (NYSE:GTN), a television broadcast company. David Atterbury and his team have continued to unload the stock during the second quarter, reducing their investment by 12% to 1.29 million shares worth a little over $14 million. Hedge fund interest in Gray Television, Inc. (NYSE:GTN) took a nosedive during the quarter, with the number of long hedge fund positions having fallen to 20 by the end of June, from 25 registered three months earlier. Billionaire Ken Griffin‘s Citadel Investment Group held 880,309 shares of Gray Television at the end of June, down 56% from the previous quarter. Gray Television, Inc. (NYSE:GTN) has a market cap of $791 million and the stock is currently trading at a trailing Price to Earnings (P/E) ratio of 16, more than double the industry average of 7.8. Shares are currently trading at $10.99 apiece, down by 31% since the beginning of the year.

Turn the page to have a look at Whetstone’s three largest energy bets.