February 14, 2018 / 9:54 PM / a year ago

UPDATE 3-Hedge funds wager on rising wages and inflation with consumer, materials shares

(Adds details on Pershing Square, Brahman Capital, Soros)

By David Randall and Svea Herbst-Bayliss

NEW YORK, Feb 14 (Reuters) - In late 2017, several well-known hedge funds made bets on companies selling goods considered non-essential by consumers and on companies processing raw materials, according to filings with the U.S. Securities and Exchange commission published on Wednesday.

Companies in the "consumer discretionary" sector can take advantage of rising wages and prices, meaning the hedge funds may be well placed even as inflation fears have sent U.S. stocks into retreat for much of the past two weeks.

Tiger Management, run by billionaire investor Julian Robertson Jr., made broad bets on consumer discretionary stocks, with new positions in Papa John's International Inc, Penske Automotive Group Inc, and Domino's Pizza Inc .

Greenlight Capital's David Einhorn added 13 new positions in consumer discretionary companies, including stakes in amusement park company SeaWorld Entertainment Inc, photo printing service Shutterly Inc and department store Nordstrom Inc.

Pershing Square's William Ackman made a new bet on sportswear maker Nike Inc, buying 5.8 million shares, late last year. He also increased his bet on snackfood maker Mondelez by 66 percent to own 23.3 million shares.

And George Soros' eponymous Soros Fund Management LLC took new stakes in retailers Overstock.com Inc and Target Corp as well as Netflix Inc, filings showed, becoming the third largest Overstock shareholder.

U.S. wages in January logged their biggest annual increase since the end of the 2007-2009 financial crisis, meaning consumers may have more to spend, even though Labor Department figures on Wednesday showed consumer prices rose more than expected last month.

In the past two weeks concerns that rising inflation will push the Federal Reserve to accelerate its forecast interest rate rises this year have erased the S&P 500 stock index's gains for the year, after a 5.6 per cent rise in January, the strongest performance for that month since 1997.

The quarterly disclosures of hedge fund managers' stock holdings, in the so-called 13F filings with the U.S. Securities and Exchange Commision, are one of the few public ways of tracking what managers buy and sell.

Relying on the filings to develop an investment strategy carries some risk because the disclosures come 45 days after the end of each quarter and may not reflect current positions.

Farallon Capital Management LLC, a $25.4 billion San Francisco-based fund founded by Tom Steyer, added new positions in materials companies Monsanto Co and Tronox Ltd , according to regulatory filings released on Tuesday.

Third Point, run by billionaire investor Daniel Loeb, also added a position in Monsanto in the quarter ended Dec. 31, according to filings. Shares of the agricultural company are up nearly 3.0 percent for the year to date, about two percentage points more than the benchmark S&P 500 stock index.

Overall, hedge funds have their highest exposure to commodities since 2012, according to a report by Credit Suisse.


Hedge funds posted an estimated 4.1 percent gain in January, the Credit Suisse report said, with the largest gains coming in positions in consumer discretionary and healthcare stocks.

"January's record performance provided a buffer to February's vol-inspired risk-off move," said Mark Connors, an analyst at Credit Suisse, said in the note. "Managers appear to be weathering the storm well."

The 13F filings also showed that managers expected healthcare stocks to trade higher during the last three months of 2017.

A number added fresh positions before the sector came under pressure from the recent stock market volatility and from the move by Amazon.com Inc to team with Berkshire Hathaway Inc <BRKa.N > and JPMorgan Chase & Co to reduce employee healthcare costs.

Leon Cooperman's Omega Advisors listed a new position in Humana Inc, which is working with private equity firms to buy Kindred Healthcare Inc. The stock has gained 8.0 percent this year, likely benefiting Jason Karp's Tourbillion which bought in with 90,000 shares in the fourth quarter.

Brahman Capital bought nearly 10 million shares of Teva Pharmaceuticals not long after Kare Schultz was tapped to head the world's biggest seller of generic drugs.

Among notable activist investors, Carl Icahn increased his position in Xerox Corp by 56 percent.

Greenlight's Einhorn, meanwhile, reduced his stake in General Motors Co by 25 percent. Einhorn unsuccessfully lobbied the carmaker to split its stock in 2017. Shares of the company are up 2.0 percent for the year to date. (Reporting by David Randall and Svea Herbst-Bayliss; Additional reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Clive McKeef)

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