OZ Management Does Complete 180 On Halliburton Co (HAL), Makes Several Other Major Moves in Q4

OZ Management is one of the largest hedge funds in the world with more than $61 billion in assets under management (for further hedge fund reading, don’t miss the 140 Biggest and Most Famous Activist Hedge Funds). The fund was founded in 1994 by Daniel S.  Och and uses multiple investment strategies such as merger arbitrage, equity restructuring, and more. Its major funds generated strong returns in the 2016 fourth quarter, as the OZ Master Fund was up by 2.7%, while the OZ Credit Opportunities Master Fund was up by 5.9%. These funds were also up by 2.2% and 1.5% respectively in January 2017. In its fourth quarter results, Daniel Och stated that the fund is well positioned to generate returns even in the uncertain environment of the day.

OZ Management reported holding a 13F portfolio valued at $14.3 billion as of December 31 per its latest 13F filing. The filing also showed that the top 10 positions in that portfolio accounted for 25.6% of its value, and that the consumer discretionary and tech sectors were the fund’s favorite, accounting for just over 50% of its 13F portfolio’s value. In this article we’ll examine some of the major purchases and sales made by the fund during the year-ending quarter.

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OZ Management sold 1.7 million shares of E I Du Pont De Nemours And Co (NYSE:DD) during the December quarter, reducing its holding to 5.4 million shares worth $400 million. However, it still remained the fund’s second-largest position, amounting to 2.78% of its 13F portfolio’s value. The chemicals giant has seen its stock rise by 33% over the last year and currently has a market value of $68 billion. E I Du Pont De Nemours And Co (NYSE:DD) reported fourth quarter revenue of $5.21 billion and adjusted earnings per share of $0.51, a mixed results when compared to analyst estimates of $0.41 in EPS and revenue of $5.3 billion. E I Du Pont De Nemours And Co (NYSE:DD) announced last year that it would merge with American chemical conglomerate Dow Chemical Co (NYSE:DOW) to create a company with a market value in excess of $135 billion. Larry Robbins’ Glenview Capital sold its entire position in the stock during the fourth quarter, which had consisted of 1.82 million shares on September 30.

OZ Management opened a large new position in Home Depot Inc. (NYSE:HD) call options during the fourth quarter, valued at $390 million, with options underlying 2.9 million shares. The fund also initiated a long position in Home Depot Inc.(NYSE:HD), buying more than a million shares valued at $141 million at the end of 2016, so needless to say, the fund is extremely bullish on the company. Home Depot Inc.(NYSE:HD) has performed well, returning more than 21% to investors over the last year and currently has a market value of $172 billion. 23 analysts out of the 32 covering the stock have Home Depot Inc. (NYSE:HD) rated as a ‘Buy’, while none have it rated as a ‘Sell’. While most brick and mortar retail stocks have been battered in recent times due to Amazon.com, Inc. (NASDAQ:AMZN) gobbling up market share, home improvement retailers have been somewhat insulated from the e-commerce threat. Aaron Cowen’s Suvretta Capital Management also bought a new stake in Home Depot Inc.(NYSE:HD) during the fourth quarter, consisting of 596,700 shares.

We’ll analyze three more of OZ Management’s biggest Q4 moves on the next page.

OZ Management sold 4.5 million shares of Microsoft Corporation (NASDAQ:MSFT) during the fourth quarter, reducing its holding to 5.2 million shares worth $355 million at the end of December. Despite the large sale of shares, Microsoft still remained the fund’s largest tech position. Jim Simons‘ Renaissance Technologies also sold off 3.7 million shares in Microsoft Corporation (NASDAQ:MSFT) during the fourth quarter, reducing its holding to 2.36 million shares. Microsoft Corporation (NASDAQ:MSFT) is doing extremely well in new IT growth areas such as cloud computing and its market capitalization has crossed the $500 billion mark. The stock currently trades near its all-time high of $64 and also gives a handsome dividend yield of 2.42%. The company reported fiscal year 2017 second quarter adjusted earnings of $0.83 per share on revenue of $26.07 billion. The results outperformed analyst estimates of $0.79 and $25.28 billion respectively. Microsoft Corporation (NASDAQ:MSFT) recently sold $17 billion in bonds, its second debt offering in six months. The company had about $25 billion in debt as of the end of 2016. Microsoft expects to use the funds from the latest sale for repayment of short-term debt and for acquisition purposes.

NXP Semiconductors NV (NASDAQ:NXPI) was one of the biggest stock purchases of OZ Management during the final quarter of 2016, with the fund buying 2.54 million shares to increase its holding to 2.71 million shares worth $266 million. NXP Semiconductors NV (NASDAQ:NXPI) is the largest European semiconductor company, with a dominant presence in the area of analog chips. The stock has been on a roll, climbing by 51% over the last year, after Qualcomm, Inc. (NASDAQ:QCOM) agreed to pay $39 billion to buy the company. NXP Semiconductors NV (NASDAQ:NXPI) is the largest maker of chips for the automobile industry, which made it a very attractive target. The automobile chip sector is set to see explosive growth in the coming years, with the further development of autonomous vehicle technology. D.E. Shaw & Co. bought 2.72 million shares of NXP Semiconductors NV (NASDAQ:NXPI) in Q4, increasing its holding to 2.77 million shares as of the end of December.

Lastly, OZ Management sold off its entire holding of Halliburton Company (NYSE:HAL) in Q4, which had consisted of 4.73 million shares at the end of September. The sale was a quick turnaround for the fund, which had opened the position just a quarter earlier. Furthermore, OZ Management also opened a position of put options underlying 4.57 million shares, worth $247 million, so it appears the fund’s bullish thesis quickly turned into a bearish one. Halliburton Company (NYSE:HAL) has seen its stock price double over the last year thanks to the recovery in crude oil prices. For the December quarter, Halliburton Company (NYSE:HAL) reported $4 billion in revenue and adjusted earnings per share of $0.04, beating analysts’ bottom-line estimate of a loss of $0.02 per share, while being in-line with estimates for revenue. The company is expected to do well under the new Trump administration, which will enact favorable policies for the development of the oil and gas sector in North America. The upstream exploration sector recently saw a major merger, with General Electric Company (NYSE:GE) announcing its intention to merge its oil and gas business with Baker Hughes Incorporated (NYSE:BHI) to create a $32 billion company. Robert Rodriguez and Steven Romick’s First Pacific Advisors also sold off its entire long position of 3.73 million shares in Halliburton Company (NYSE:HAL) during the fourth quarter.

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