While second quarter returns were still low, performance at Balyasny Asset Management L.P. (BAM) started to pick up again in June, according to its second quarter investor’s letter, a copy of which was reviewed by ValueWalk. The Atlas Global Strategy fund (AGI) is up 4.65% through July 25 including a 1.05% gain in June and a 0.53% gain for the second quarter as a whole, compared to its 12.96% return in 2013. The Atlas Enhanced Strategy fund (AEF) followed a similar pattern, up 8.33% through July 25 including a 1.65% gain in June and a 0.83% for Q2 compared to 20.86% returns in 2013. The letter also said that returns were 93% attributable to alpha, as opposed to beta or market timing. The fund, is having a good year overall, although its ‘rival’ Point72 is up an even more impressive 9%.

Balyasny
Balyasny

Balyasny Asset Management: Total exposure approaches 500% for AEF

Net exposure average 6% for AGI over the second quarter, ranging from 0% to 17%, while gross equity exposure ranged from 210% to 274% with an average of 234%. Total gross exposure ranged from 225% to 297% with an average of 253% for Q2.

Net exposure for AEF ranged from -1% to 26% with an average of 8.4%, while gross equity exposure ranged from 373% to 463% with an average of 406% and total gross exposure ranged from 397% to 484% with an average of 429% for the quarter.

Balyasny Asset Management: New long positions on BWP, GLNG, and AAPL

The Balyasny Asset Management letter highlighted three new long equity positions that have already added a lot to the funds’ earnings. Boardwalk Pipeline Partners, LP (NYSE:BWP), an MLP that operates natural gas pipelines in the US, fell 50% after announcing that it would have to cut distributions, but the situations that led to that decision have reversed and BAM expects BWP to be in the top quartile of MLP growth over the coming years.

Golar LNG Limited (NASDAQ:GLNG) is a liquefied natural gas shipping company that is shifting its focus to the liquefaction process with a new technology called floating liquefaction that BAM thinks will be 40% cheaper than Cheniere’s brownfield project. They expect GLNG to appreciate as investors become more aware of and familiar with this technology.

The hedge fund noted that the energy sector was the best performer for the portfolio.

Balyasny Asset Management also likes Apple Inc. (NASDAQ:AAPL)’s CEO Tim Cook’s focus on becoming a high end consumer products company, including the acquisition of Beats that surprised many analysts. Balyasny Asset Management argues that Apple has a lot of ways to potentially win as it releases new iPhone models, other innovative products, and continues to develop services that are capital light and have strong recurring revenues.

While not specified in the letter, Balysany recently spoke to investors recently and re-iterated its bullish thoughts on CBI. The stock was down after the renowned short firm, Prescience Point Research put out a lengthy short case for the company. The managers at BAM believe that the short thesis is not valid and note that Warren Buffett owns a 10% stake in the firm.

Operational

Balsany is continuing to hire. The hedge fund states:

Our performance continues to place us in a very good position to hire leading specialists. During the quarter we added four PMs globally across L/S and Macro strategies – London (Event), Greenwich (Macro), San Francisco (TMT and Macro). To highlight a couple, we are pleased to welcome Pradeep Kumar who joined us this month from Woodbine Capital where he was a Partner focusing on Emerging Markets Macro. Pradeep has been in the markets for a long time and has a very constant long-term track record. We now have at least one macro PM in each of our major offices helping to facilitate the collaboration and dialogue across strategies. We are also excited to welcome Sebastian Iannariello who joins us in our San Francisco office from Weiss Capital focusing on utilities and other related sectors.

Our recruiting has been quite additive – about 1/3 of our P/L this year has come from portfolio managers who joined us in  2012 and 2013. Given it usually takes managers about a year to ramp up and contribute meaningfully to the total P/L, we are  pleased with these results. We are continuing to opportunistically add talented teams particularly in different subsectors  within consumer, healthcare, financials, and TMT as well as building out our European coverage in London. We anticipate a  robust year end hiring period.