Should You Follow Ionic Capital Management’s Lead And Cut Exposure To Allergan (AGN) & Three Other Stocks?

Bart Baum started Ionic Capital Management in 2006 together with Dan Stone and Adam Radosti. All three had previously worked at Glenn Russell Dubin‘s Highbridge Capital Management. Ionic Capital invests in public equity, fixed income and alternative investment markets worldwide, and had roughly $5.82 billion in assets under management at the end of August 2016. According to its latest 13F filing, the fund managed a $2.26 billion equity portfolio at the end of the third quarter, with significant exposure to the financial sector, which accounted for 58% of the portfolio’s value.

At Insider Monkey we have developed our own measurement for a fund manager’s ability to pick stocks. We measure the performance of all equity bets on companies with a market cap of $1 billion and up. Under these assumptions, Ionic Capital Management managed a weighted average return of 11.37% in the third quarter, from 107 qualifying positions. With that in mind, we’ll take a look at four major equity bets held by the fund in Tyson Foods, Inc.(NYSE:TSN), Allergan Inc.(NYSE:AGN), Interval Leisure Group, Inc. (NASDAQ:ILG) and Aramark (NYSE:ARMK), and see how they were adjusted heading into the fourth quarter.

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After a major bullish move in the second quarter, Ionic Capital made a U-turn with regard to Tyson Foods, Inc. (NYSE:TSN), having dumped 97% of the fund’s stake in the company. According to regulatory filings, Ionic Capital held 15,314 Tyson Foods shares worth approximately $1.25 million at the end of September. After a solid first six months of the year, Tyson Foods, Inc. (NYSE:TSN) continued to climb higher in the third quarter, registering a positive return of 12% for the period, which may have prompted the fund to move to something it viewed as more undervalued.

At the end of the second quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the first quarter of 2016. Among these funds, Iridian Asset Management held the most valuable stake in Tyson Foods, Inc. (NYSE:TSN), which was worth $479.7 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $460.5 million worth of shares. Moreover, First Eagle Investment Management, D E Shaw, and Arrowstreet Capital were also bullish on Tyson Foods.

Ionic Capital Management’s stake in pharma giant Allergan, Inc. (NYSE:AGN) was cut by approximately 9% during the third quarter. In its latest 13F filing, the fund indicated ownership of 56,120 shares worth $12.9 million at the end of September. The third quarter was a disappointing one for Allergan, Inc. (NYSE:AGN) shareholders, as the stock inched down by 0.3% for the period.

The popularity of the stock among the funds followed by Insider Monkey plummeted during the second quarter, as the number of funds invested in it fell by 23% to 131 at the end of June. The largest stake in Allergan, Inc. (NYSE:AGN) among them was held by Third Point, which reported holding $1.13 billion worth of stock as of the end of June. It was followed by Paulson & Co with a $912.4 million position. Other investors bullish on the company included Icahn Capital LP and Elliott Management.

We’ll check out two more of the fund’s stock picks on the next page.