Slate Path Capital: Returns, Ethan Binder, Stephen Cook, Jamie McNab

When billionaire Julian Robertson started Tiger Management in 1980, he probably didn’t envision creating a whole dynasty of hedge funds that would be renowned and closely followed by the investing community. But that’s exactly what happened. As Robertson himself groomed a number of hedge fund managers, including Chase Coleman, Lee Ainslie, Andreas Halvorsen, and Stephen Mandel, and helped to launch over 30 other hedge funds (known as “Tiger Seeds”), his former protégés, commonly known as “Tiger Cubs” helped launch the new generation of hedge fund managers. One of these new managers, who have been named “Tiger Grand Cubs”, is David Greenspan, the manager of Slate Path Capital.

David Greenspan got his undegraduate degree in business administration from George Mason University in 1993 and went to work as a CPA and consultant for Price Waterhouse (which later became PricewaterhouseCoopers). In 2000 he obtained an MBA from Columbia Business School and the same year joined Blue Ridge Capital, a hedge fund led by John Griffin, the former president of Robertson’s Tiger Management, where he became a partner and managing director. In April 2012, Greenspan launched his own hedge fund together with fellow Blue Ridge alumni, analysts Stephen Cook and Ethan Binder, and junior analyst Jamie McNab. The team was also joined by John Metzner, former president of Plural Investments.

David Greenspan is currently the President and Chief Executive Officer of Slate Path Capital. His two members of his founding team, Stephen Cook and Ethan Binder are partners, while Jamie McNab is an analyst at the fund. John Metzner, who joined Slate Path at its inception in April 2012, is the fund’s Chief Operating Officer. Later in 2012, Slate Path also hired Thomas Hansen, the former COO of Plural Investments, as the Chief Financial Officer, while in December 2013, the team was joined by James Feeney, the former Chief Compliance Officer of Polygon Global Partners, who became the CCO of Slate Path.

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With support from their former boss, John Griffin, Greenspan and his new partners reportedly obtained $1.0 billion in seed capital. According to a recent ADV form, Slate Path Capital has around $5.03 billion in regulatory assets under management. Slate Path consists of two main funds, the Flagship Master Fund and the SPF Master Fund. Each fund employs a long/short approach and focus on equities, but also have non-equity positions.

Suggested Read: Do Julian Robertson’s Tiger Cubs Have Alpha?

The long/short approach that Slate Path Capital employs has generated losses in the hedge fund industry over the last several years and some pundits even suggested that the days of the most popular investing strategy are over, as it no longer allows hedge funds to safely beat the market. However, Slate Path’s stock picking skills have allowed it to beat the market, at least according to our calculations. We measure a fund’s performance by calculating the weighted average returns of its long positions in companies worth over $1.0 billion, as disclosed in the quarterly 13F filings. According to our estimates, Slate Path’s picks returned 10.8% in the first six months of 2017, beating the S&P 500 by more than two percentage points. Over the 12-month period ended June 30, Slate Path’s picks have gained 40.4%, boosted by a 16.1% return generated during the third quarter of 2016.

In its latest 13F filing, Slate Path revealed an equity portfolio worth $2.63 billion as of the end of June. The two largest positions are in ‘Call’ options underlying shares of the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), which seeks to replicate the NASDAQ 100 Index, and the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).

On the following pages, we are going to take a closer look at Slate Path Capital’s top five stock picks.

1. Twitter Inc (NYSE:TWTR)

In Twitter Inc (NYSE:TWTR), Slate Path Capital increased its stake by 2.0 million shares during the second quarter and held 15.14 million shares worth $270.55 million at the end of June. The fund added Twitter Inc (NYSE:TWTR) to its equity portfolio during the fourth quarter of 2016 and has seen the stock gain nearly 8% so far this year. The social networking company managed to post better-than-expected results for the last two quarters, but it also showed two consecutive annual revenue declines. Investors are still worried that Twitter Inc (NYSE:TWTR) is not able to generate enough advertising revenue and its user growth figures are also lacking strength. Twitter Inc (NYSE:TWTR)’s management is still experimenting with ways to improve monetization and they have been doing a good job at cutting costs, which is partly what helped it achieve better than expected bottom line in the last two quarters. Among the funds in our database, Twitter Inc (NYSE:TWTR) is far from being very popular, as just 37 funds held long positions in the company at the end of June, up from 33 funds a quarter earlier.

2. Ally Financial Inc (NYSE:ALLY)

Slate Path Capital also increased its position in Ally Financial Inc (NYSE:ALLY) by 1% over the quarter to 10.58 million shares worth $221.12 million held at the end of June. The rally registered across the majority of the financial sector didn’t not bypass Ally Financial Inc (NYSE:ALLY), whose stock has surged by more than 20% since the beginning of the year. For the second quarter, Ally Financial Inc (NYSE:ALLY) posted EPS of $0.58 and revenue of $1.46 billion, which topped the consensus estimates by $0.06 and $50 million, respectively. In August, Ally Financial Inc (NYSE:ALLY)’s bank, Ally Bank, won the release from extra-tight capital, liquidity and business plan commitments made as part of its application to become a member of the Federal Reserve System. The loosening of requirements allows Ally Bank to pay Ally Financial Inc (NYSE:ALLY) a dividend of $2.9 billion. During the second quarter, the number of funds tracked by us long Ally Financial Inc (NYSE:ALLY) declined by six to 44.

3. Charter Communications, Inc. (NASDAQ:CHTR)

On the other hand, Slate Path Capital cut its stake in Charter Communications, Inc. (NASDAQ:CHTR) by 19% to 605,000 shares worth $203.79 million during the second quarter. Including Slate Path, there were 100 investors in our database long Charter Communications, Inc. (NASDAQ:CHTR) at the end of June, down from 114 funds a quarter earlier. The stock of the $95 billion telecom company has rallied by 28% since the beginning of the year. Charter Communications, Inc. (NASDAQ:CHTR), which last year completed the acquisition of Time Warner Cable, might itself be the target of an acquisition, as the European telecom Altice was exploring a bid for Charter last month, according to reports. Previously, Japan’s SoftBank considered making an offer. Charter Communications, Inc. (NASDAQ:CHTR) itself is also exploring potential acquisitions, including the Atlanta-based Cox Communications.

4. Insulet Corporation (NASDAQ:PODD)

Slate Path Capital also disposed of 55,000 shares of Insulet Corporation (NASDAQ:PODD) between April and June, and disclosed a $143.41 million stake containing 2.80 million shares in its latest 13F filing. In this way, Insulet Corporation (NASDAQ:PODD), an insulin delivery system manufacturer, is Slate Path’s largest healthcare holding. Insulet Corporation (NASDAQ:PODD)’s shares have gained nearly 56% since the beginning of the year, amid strong revenue growth, management changes and other developments. In July, the company announced plants to take over the distribution of its Omnipod System in Europe next year after its current distribution contract with a third party expires. Earlier this month, Barclays initiated coverage on Insulet Corporation (NASDAQ:PODD) with an ‘Overweight’ rating and a price target of $65 per share. Despite the strong stock performance, Insulet Corporation (NASDAQ:PODD) has been overlooked by the majority of investors in our database, most likely due to its small size. At the end of June, just 16 funds held shares of the company, up by two over the quarter.

5. Tiffany & Co. (NYSE:TIF)

Last, but not least, Slate Path Capital trimmed its exposure to Tiffany & Co. (NYSE:TIF) by 8% over the quarter and held 1.52 million shares valued at $142.21 million at the end of June. The company was added to Slate Path’s equity portfolio during the first three months of 2017 and its shares have gained over 15.5% since the beginning of the year. Tiffany & Co. (NYSE:TIF)’s stock took a hit at the end of May, when the company posted better-than-expected EPS for the first quarter, but missed the revenue estimates. Its second-quarter results included EPS of $0.92 and revenue of $959.70 million, which topped the consensus estimates by $0.06 and $29.40 million respectively. However, the stock inched down following the earnings report, which could either be attributed to a 2% decline in comparative store sales, or to the fact that the stock could’ve been overvalued. At 24.5 times current earnings and a forward earnings multiple of 23.3, Tiffany & Co. (NYSE:TIF)’s stock looks overvalued compared to its industry average. Tiffany & Co. (NYSE:TIF)’s stock growth has significantly outperformed the two of its closest peers: Carter’s, Inc. (NYSE:CRI) and Signet Jewelers Ltd. (NYSE:SIG), both of which also trade at much lower multiples. In any case, Tiffany & Co. (NYSE:TIF) is facing the same issues as other brick-and-mortar retailers, which is showing in declining comps. Nevertheless, the number of investors from our database bullish on Tiffany & Co. (NYSE:TIF) increased by seven to 33 during the second quarter.

Disclosure: none