This Hedge Fund Just Made A Massive Bet Against the SPY

KAR Auction Services Inc (NYSE:KAR)

– Shares Owned by Fort Warren Capital Management (as of September 30):117,596

– Value of the Holding (as of September 30): $5.07 Million

KAR Auction Services Inc (NYSE:KAR) was a new entrant into Fort Warren’s equity portfolio during the third quarter. Shares of the wholesale car auction services provider were on a consistent uptrend between February and October of this year. However, they took a major beating recently when the company reported its third quarter numbers on November 3. While analysts were expecting KAR Auction Services Inc (NYSE:KAR) to report EPS of $0.53 on revenue of $770.84 million for the quarter, the company declared EPS of $0.50 on revenue of $773.80 million. Nevertheless, this recent decline in the stock has helped push its forward yield to above the 3.0% mark, as it currently stands at 3.27%. On October 26, analysts at Susquehanna initiated coverage on the stock with a ‘Positive’ rating and $50 price target, which suggests potential upside of over 20%.

Related Reading: 10 Most Expensive Cars Ever Sold At Auction

Berry Plastics Group Inc (NYSE:BERY)

– Shares Owned by Fort Warren Capital Management (as of September 30): 442,479

– Value of the Holding (as of September 30): $19.40 Million

Berry Plastics Group Inc (NYSE:BERY) was the only stock in Fort Warren’s equity portfolio in which the fund reduced its stake during the third quarter, albeit by only 3%. Berry Plastics Group Inc (NYSE:BERY) has also been one of the best performing stocks in the fund’s portfolio this year considering that Fort Warren initiated its stake in the company during the last quarter of 2015 and the stock has moved up by 22.75% year-to-date. Most analysts who track the stock expect it to continue its upward march in the coming months. The stock currently sports an average rating of ‘Buy’ and an average price target of $52.04 from 13 leading analysts and research firms on the Street. At the end of September, Berry Plastics revealed that its Board has elected E. (Tom) Salmon as the President and Chief Operating Officer of the company, effective October 3, and that its current Chairman and Chief Executive Officer, Jonathan D. (Jon) Rich will be stepping down as CEO in February 2017, but will continue to serve as the Executive Chairman of the Board.

SPDR S&P 500 ETF Trust (NYSEARCA:SPY)

– Shares Owned by Fort Warren Capital Management (as of September 30): 2.55 Million

– Value of the Holding (as of September 30): $550.72

Finally, let’s address the massive bearish bet that Fort Warren Capital made during the third quarter, by buying a massive set of put options on the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). As most people know, the SPDR S&P 500 ETF Trust is the most widely-traded ETF, tracking the S&P 500 Index, so it is quite evident that Fort Warren has quite a pessimistic view on US equities entering the fourth quarter of 2016. If the fund still held this position prior to the Presidential elections a few days ago, one could have argued that it would be sitting on massive profits. However, now that the storm has passed and the S&P 500 Index is trading flat for the quarter, we think that the fund’s conviction on its ‘big short’ could have gone down by a few notches, despite possibly getting the outcome it was a betting on; a Trump victory.

Disclosure: None