Owl Creek Asset Management’s Stock Holdings & Investment Strategy

Updated on October 2nd, 2020 by Nikos Sismanis

Owl Creek Asset Management was founded in 2001 by Jeffrey Altman, who still owns substantially all of the firm, and is responsible for its day-to-day operations and investment choices. The firm is run primarily out of its office in New York City, and a satellite office in Miami.

The fund managed a total of $2.8 billion at the end of 2019, and had just 17 clients on its books as of that time. Owl Creek is a Registered Investment Adviser with the SEC.

Owl Creek counts high net worth individuals, banks and thrifts, investment companies, pension plans, profit sharing plans, trusts, estates, charitable organizations, corporations and private investment funds among its clients.

New investors are generally required to make minimum initial investments of at least $5 million, and incremental investments by existing clients generally have to exceed $100,00. Investors in Owl Creek are accredited investors as defined by the SEC.

Investors following the company’s 13F filings over the last 3 years (from mid-August 2017 through mid-August 2020) would have generated annual total returns of 2.2%. This compares to the S&P 500’s annualized returns of 11.9% over the same time period.
 

Note: 13F filing performance is different than fund performance.  See how we calculate 13F filing performance here.

Keep reading to learn more about Owl Creek Asset Management.

Table Of Contents

Owl Creek’s Investing Strategy

Owl Creek’s overarching investment objective is to seek above average returns through an opportunistic, event-driven value strategy. The firm uses event-driven investing, such as a merger, fundamental or value-driven investing in equities, both long and short, as well as long and short credit investments.

The firm analyzes each potential investment using a bottom-up analysis, the results of which it uses to determine whether to buy or sell short a variety of financial instruments to achieve its objectives. These instruments can include common stocks, preferred stocks, convertible securities, depository receipts, public and private debt issues, rights, warrants, put and call options, swaps, forward contracts, credit default swaps, and other derivatives.

Owl Creek’s Top 10 Equity Holdings

As of the August 2020 13F filing, Owl Creek had massively expanded its public equities portfolio, which now counts as many as 46 individual stocks. Total assets were near $4.3 billion at the end of the quarter, while public equities accounted for around 40% of that.

Anterix (ATEX):         

The firm’s largest equity position, by a wide margin, is in small-cap telecommunications company Anterix, which comprises $266 million, or 25% of the firm’s total US equity portfolio. Not only is this a very large proportion of the firm’s equity portfolio, but it is also 38% of Anterix’s total market capitalization, so Owl Creek has an enormous amount of conviction in this company’s future. Keep in mind that the company has still to commercialize its product, with its revenues still in the low single-digit range.

The position in Anterix is a relatively new one, making its first appearance in the firm’s 13F filing in February of 2020. Owl Creek owned 4.553 million shares of Anterix in the February filing and now owns 5.251 million.

PG&E Corp. (PCG): 

PG&E can’t seem to get any rest this year. The company has been on the brink of bankruptcy for months now, while the recent California fires have put further pressure on its operations and liabilities. Convinced of a potential turnaround towards financial sustainability, Owl Creek increased its stake by around 11% during the quarter, bringing its total exposure to around 13% of its U.S. equity holdings. While the stock remains highly risky, if Owl Creek’s hopes do materialize, the fund could be looking at significant gains.             

T –Mobile (TMUS):

Since its merger with Sprint, the company has grown into a $144 billion telecommunication giant. The company should now be able to leverage its increased network and client base to compete against AT&T, as well as Verizon actively. Owl Creek increased its position by a hefty 29%, bringing its total exposure up at around 8.5%, to capitalize on the company’s growth plans.

Cigna Corporation (CI): 

Owl Creek’s buying spree during the quarter, including a substantial 89% stake increase in Cigna. Currently, just over 5% of its total holdings, Cigna Corporation is one of the fund’s biggest value plays. At around 11 times its underlying earnings, the company is trading at a discount compared to its historical average multiples. The financial sector has lagged as a whole over the past few months, compared to the overall market. Amid an eventual rebound to its attractive value equities, Owl Creek’s stake should appreciate significantly.

CVS Health Corp. (CVS):

CVS’s shares have had a tough ride over the past 5 years, having considerable outrun their financials in the past. However, the company remains a cash-cow. Its essential business model was hardly affected during the pandemic, adding more than $5 billion in profits over the past 2 quarters alone. At a P/E ratio of just 9, and a well-covered 3.24% yield, one can see why Owl Creek increased its stake by a whopping 58%, now valued at over $62 million.

Alibaba Group Holdings (BABA):

Owl Creek’s position in Baba has been entirely new as of its latest 13F filing, quickly climbing the ranks to around 5% of its total holdings. The fund’s recent purchase has turned already fruitful, as its shares have rallied continuously over the past few months. While the Chinese giant has been taking the Chinese market by storm, capturing market share in anything tech-related, investors must be aware of the scrutiny surrounding Chinese equities. As a reminder, Luckin’ Coffee recently got delisted from the NASDAQ due to fraudulent practices.

Louisiana-Pacific Corp. (LPX):

Louisiana-Pacific is Owl Creek’s only significant holding with exposure in the basic materials sector. The company manufactures building products primarily for use in new home construction, repair, and remodeling. Considering that COVID-19’s staying-at-home economy has increased the demand for home renovations, Owl Creek may have found a better play than investing in a traditional stock like Home Depot. Louisiana-Pacific is currently trading at only 9 times its under-normal-conditions earnings. With the company buying back stock aggressively, retiring multiple shares at such an attractive valuation could end up very beneficial for Owl Creek’s stake.

Capital One Financial Corporation (COF):

Owl Creek’s position in Capital One is entirely new, with the fund likely scooping up shares in the low 60s. The company’s credit services took a severe hit during COVID-19’s peak months. However, Owl Creek’s position seems to have paid off greatly in such a short period of time. Shares have rallied beyond $70, as hopes for improving credit conditions have encouraged investors to get back into the stock.

MGM Growth Properties (MGP):

Casinos were one of the hardest-hit industries due to the pandemic. However, the REITs accommodating the businesses were more fortunate. Because their rental collections are secured under long-term contracts, the company’s financials have remained robust. Further, management increased the dividend in the midst of the pandemic, further boosting investors’ confidence. Currently, yielding around 6.9%, MGP is a solid income play by Owl Creek.

Marathon Petroleum (MPC):

Oil is not an attractive investment space at the moment; that’s for sure. But when a company manages to sustain its current 7.8% yield while also reporting a profitable Q2, it may be the right time to jump into the stock. Owl Creek initiated a position for the first time, ideally capturing Marathon’s massive yield, which the company also recently increased again. Still, this is rather a risky position. Considering that the fund does not have significant exposure in the sector, though, a potential failure shouldn’t cause too much in damages.

Taylor Morrison Home Corporation (TMHC): 

As we mentioned, the demand for residential properties remains strong. Taylor Morrison is a homebuilder, operating in several states. Amid panic surrounding COVID-19 and fears that residential real estate would collapse, the company’s shares dived from $28 to just $6.8 during a single month. Thankfully, the fund held strong to its position and didn’t sell, as shares have now fully recovered.

Vistra Corp. (VST):

Last but not least, Owl Creek sold around half its stake in Vistra, now left with just over 1 million shares, occupying around 2% of its public equity portfolio. The company retails electricity and natural gas to residential, commercial, and industrial customers across 20 states in the United States. Considering that utilities and telecommunications amount for around 50% of Owl Creek’s total holdings, trimming Vistra is quite likely for diversification purposes.

Final Thoughts

Owl Creek Asset Management seeks to produce returns over time using a variety of highly complex strategies, including using derivatives and credit investments, in addition to traditional equity investments. The firm’s performance over time, particularly during the financial crisis, and indeed in recent years, means that its 13F moves bear watching from investors.

The firm has a huge bet on Anterix, a company with very little revenue and negative earnings, as well as the quite risky utility PG&E. These positions aren’t traditional value investor stocks.

For investors seeking exposure to companies with high risk, high reward situations, Owl Creek’s 13F shows a select few stocks the firm believes will outperform over time as evidenced by high equity concentration ‘bets’ in these stocks.