Thursday, March 24, 2011

Apple and the Wild Hedge Funds

By Eric Jackson
RealMoney Contributor

3/24/2011 12:15 PM EDT
Click here for more stories by Eric Jackson

One of the funniest semi-regular segments on Jim Cramer's "Mad Money" show is the one he calls "Hedge Funds Gone Wild." He brings it out every time there has been an indiscriminate market selloff, and he's trying to preach to the longer-horizon investor to ignore the volatile movements of certain stocks caused by these short-term hedge funds.

In our 24-7 world where we judge our CEOs on a quarter-by-quarter basis, it's not surprising that we give our money managers an even harder time. Hedge funds have to report their monthly numbers to their investors, and in recent years, many of the larger funds have to provide more regular updates than that. It's quite common to hear about funds providing weekly updates, and I've even heard of some funds providing some of their bigger investors with daily updates.

This type of scrutiny means that fund managers are even more under the gun to perform and simply cannot have even a couple of bad days. Otherwise, they risk getting a bunch of angry phone calls or, worse, redemption notices.

Therefore, many hedge-fund managers have an especially itchy trigger finger these days. If the broader macro environment hits a rough patch, due to Libyan bombings, protests in Bahrain or uncertainty in Japan, it's "sell now and ask questions later."

That said, certain stocks are among the bigger hedge funds' more popular holdings. Goldman Sachs updates a regular list of the top holdings of hedge funds. They include MasterCard (MA - commentary -Trade Now), Visa (V - commentary - Trade Now), Qualcomm (QCOM - commentary - Trade Now) and Wal-Mart (WMT - commentary - Trade Now).

But perhaps no other stock is as loved these days by hedge funds (and other investors) as Apple (AAPL -commentary - Trade Now). More and more, you hear new hedge fund managers throwing their weight behind the name. A few months ago, David Einhorn of Greenlight Capital made the case for it. Value investor Lee Cooperman owns it in his Omega Advisors fund. John Burbank of Passport Capital owns it


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