13F Filings… A Day Late & A Dollar Short?

This article was originally published on on February 18th at 4:00pm EDT

Now that hedge funds and large investors are publicly reporting their quarter-end holdings in SEC Form 13F filings, we are hearing a great deal of conjecture about the importance of said reports. Of course, investors want to see what they can learn from the best and biggest. What did they buy? What did they sell? Where do they think the market is going?

But how helpful is this information, really?

The topic du jour seems to be Berkshire Hathaway’s “exit” from the energy sectorhaving sold its entire investment (~$3.8 billion) in long-time Buffett favorite ExxonMobil (XOM) and also its small (~$33 million) stake in ConocoPhillips (COP).

Berkshire wasn’t alone. In addition to Uncle Warren supposedly “giving up on Exxon,” we have heard about many other large, well known funds reducing or eliminating their exposure to the energy sector as of December 31st:

David Tepper’s Appaloosa Management
Halliburton (HAL) – Eliminated
Schlumberger (SLB) – Eliminated

Bruce Berkowitz’s Fairholme Fund
Chesapeake Energy (CHK) – Eliminated
BP p.l.c. (BP) – Eliminated

David Einhorn’s Greenlight Capital
Anadarko Petroleum (APC) – Eliminated
BP p.l.c. (BP) – Eliminated

Steven Cohen’s Point72 Family Office
Southwestern Energy (SWN) – Eliminated
Occidental Petroleum (OXY) – Eliminated

While 13F filings are notoriously imperfect as they arrive a full 45 days after the fact, is there any other disadvantage to the binary interpretation of this information?

How about another possible incentive large pools of investment capital have for selling positions towards the end of the year: Tax losses. We all know that the entire energy sector took a beating last year, especially during the fourth quarter, as oil prices were more than cut in half. But perhaps these funds saw this as an opportunity to take losses against gains in other parts of their portfolios and took it. I think it is lazy to try and infer too much from a list of buys and sells. We don’t even know at what price these buys and sells were executed.

In theory, there is a chance that the funds above took losses on energy shares late last year with the intention of waiting out the 31-day “wash sale” period to elapse, and then buying back the exact same positions with fresh cost basis.

Is it necessarily a foregone conclusion that the smart money—as represented by the aforementioned large investors—has given up on their energy investments? And that you should do the same? I can’t say, but I don’t think the answer is definitively ‘yes,’ as you may be hearing in the financial media this week.

As usual there is likely more to the story, and we may learn more still in next quarter’s 13F filings…

If you have questions or would like to engage in a dialogue, please don’t hesitate to give us a call.

Adam B. Scott
Argyle Capital Partners, LLC
10100 Santa Monica Blvd, #300
Los Angeles, CA 90067
(310) 772-2201 – Main

Adam Scott’s profile on RealMoney can be found here.

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