Hedge Funds Are Making How Much Money? 🤔

Top hedge funds killed it again… are we even surprised? January 25, 2024 | Peel #633 Silver Banana goes to... [CapLinked. ]() In this issue of the Peel: - 🏭 Manufacturing PMI has started to expand again—is that good? - ⌨ Selling semicon equipment is just as good as selling semis?! - 🏦 Top hedge funds killed it again… are we even surprised? Market Snapshot 📸 = Banana Bits 🍌 - It’s so bad that the FAA has basically told Boeing to [simply just stop](=) - IBM posted solid earnings at the close yesterday, a [new strategy for the firm]( - Not that this is possible with their cars, but Tesla is planning to [slow down in 2024]( - Speaking of Tesla, the earnings miss is already [hitting shares hard](=) - Time to riot in the streets—they’re trying to [take our Zyns away]() Your VDR Doesn’t Have to Suck A shitty VDR is an excellent way to make a bad workday worse. That is, unless you actually enjoy being a file monkey (which is a weird flex, but OK). Or are hazing your team by making them suffer though the same outdated tech you used as a junior analyst (we see you, sadist). For the rest of us, [CapLinked’s VDR is paradise](=). Their data room is designed to make your work day easier with features like… - Cutting-edge activity tracking that allows you to craft personalized, hyper-efficient follow-ups with targets. - Advanced Q&A functionality that puts the Q&A stage of due diligence on autopilot. - Simple permissioning tools that shave hours off of data room setup. Want to see why the Wall Street Journal calls Caplinked "the go-to place for setting up and closing deals?" [Request a quote today.]() Macro Monkey Says 🐒 Fired Up I guess this is what all those toddlers in the coal mines back in the day worked, hoped, and (probably) died for—an expanding manufacturing sector. The kids clearly miss the coal mines. We know this, but for a long time now, the U.S. economy has missed an expanding manufacturing sector. At least we’ve got one of those back on track now. U.S. flash PMI rose in January from a 50.9 reading to close out 2023 to a big 52.3 to kickstart the new year. But the real news was focused on just one section of that composite reading—the manufacturing side—which grew from a reading of 47.9 in December to 50.3 today. Keep in mind—anything above 50 represents “expansion” of the sector, and below signals “contraction.” [Source](=) To paraphrase the most meme-d farmer in the history of the world, “It ain’t much, but it’s honest expansion.” The bad news is that expansion territory was reached primarily on the back of still-rising prices, not necessarily due to a jump in underlying production. Under the Hood Pre-production goods, which include products purchased by manufacturers to then be turned into something people want to buy, continued to contract this month. That’s because purchasing managers went stupid with the overstocking during the last few years amid supply chain issues that make solving differential equations look like the 3rd-grade math questions those coal mining children should’ve been focused on. But post-production goods, meaning those sold by manufacturers to wholesalers, retailers, and others, saw their steepest increase in January since November 2022. The signal here is that wholesalers and retailers finally appear to be starting to increase their new orders for the first time in a long, long time. A great, underused economic indicator is the spread between inventory depletion and net new orders at these manufacturers. When net new orders rise faster, it can suggest that purchasing managers are planning to sell more sh*t in the future than they are now. And that implies an outlook of higher demand, which is generally good for the economy, outside times of higher inflation. Stepping Back Out… We can see that most of the expansion in the composite PMI came from the other side of the equation—the non-manufacturing stuff under the umbrella of “services.” Americans love getting serviced any way they can, and this month has been no difference as the country’s services PMI jumped further into expansion territory from 51.4 in December to 52.9 today. [Source](=) The Takeaway? The U.S. economy may have entered full Chad mode this month as both services and manufacturing PMIs stepped into expansion territory for the first time in years. Whether or not that lasts beyond this very second, we can’t say, but it’s a further sign that Fed Chair JPow is the new Sully and may have actually landed this plane softly. A week from yesterday, we’ll once again get to see our favorite silver fox spitting macro game as JPow and the FOMC gang have their next meeting on rates, the balance sheet, and all the other BS at the Fed. Everyone expects rates to be held steady, with the [CME Group](=) showing a ~2% chance of a 25bp cut. But an expanding manufacturing sector driven by higher demand is precisely the kind of inflationary boogeyman that keeps JPow up at night, so be on the lookout for any commentary on that from the man, myth, and legend next Wednesday. We’ll see you there. What's Ripe 🤩 Netflix (NFLX) 📈10.7% - The King of streaming kept its crown last quarter as Netflix blew past expectations on subscriber numbers, reporting 260mn in total. - Turns out that adding everyone’s two least favorite things in the world—ads and strict passwords—has worked out, just not for the bottom line. - EPS clocked in at $2.11/sh in Q4, below the $2.22/sh expected despite revenue of $8.83bn beating expectations by ~$110mn. ASML Holding (ASML) 📈8.9% - Those bums in California selling shovels to gold miners in the 1840s couldn’t care less if their customers found gold or not—they were just there to make a bag off of their hope. - ASML and others saw that business model and said, “Hold my beer,” selling semiconductor equipment during this gold rush of AI and chip demand. - And that came to fruition on Wednesday. ASML saw a 30% jump in revenue, reporting €7.2bn vs a nice €6.9bn expected. EPS beat, too. What's Rotten 🤮 DuPont de Nemours (DD) 📉14.0% - This company is older than the damn Louisiana Purchase, having been founded in 1802, and we’re fairly sure most of the stock’s shareholders are too. - Chemical maker DuPont clearly loves the pain, announcing weak-*ss preliminary earnings, expecting revenue of $2.9bn to come just short of the $3bn expected. - EPS is still on track, but weak demand in China and the fact that customers overstocked in the past few years has officially come back to bite them. AT&T (T) 📉3.0% - Younger siblings always want to be like their older counterparts, but unfortunately for AT&T, yesterday was a tough reminder of what it’s like to be the little guy. - A day after Verizon dropped a fat W of an earnings report, AT&T went the opposite route, with EPS of $0.54/sh both declining and missing expectations. - Subscribers still managed to grow faster than anticipated. However, AT&T still slapped investors in the face by guiding for a miss on full FY’23 EPS, too. = Thought Banana 🤔 The Richest of the Rich If you ever need to speed up the whole “losing faith in humanity process,” always remember to just go check out what the top hedge funds are up to. But I guess, if you can’t beat them, join them… unless you’re from a non-target school, obviously. And last year, nobody could beat hedge funds. This group of people that pronounce words like “white” as “hwite” had their most profitable year on record in 2023. What Happened? According to [Forbes](, there are over 30k hedge funds globally. And sure, probably around 29k of those are run by lobotomized frat bros pretending to have a job, so mom and dad keep sending them a “temporary” allowance, but the top 20 are looking hot. $67bn in profits were raked in by those top 20 hedge funds around the world in 2023, beating out their previous record set in 2021 at $65bn. At least we now have an answer to the question of “War, what is it good for?” Hedge fund returns, that’s it… apparently. How’d They Do It? Back in 2021, anything with a ticker symbol was ripping higher. But in 2023, beyond the 7 stocks that carried our portfolios out of the graveyard of 2022, it felt like a true “stock picker’s market.” 10.5% was the average return for the top 20 in 2023, according to Bloomberg, beating out the broader average of 6.4% for the entire industry group. Some of the top performers included: - TCI—$12.9bn in profits - Citadel—8.1bn - Viking Global—$6bn - Millennium Management—$5.7bn - Elliott Investment Management—$5.5bn - Pershing Square—$3.5bn Not to brag, but… keep in mind the [WSO Alpha](=) portfolio ripped 32.23% last year. And you don’t need an Ivy League degree to get in on the fun with us. Anyway, shameless plug over. I wish I could come up with an investable asset that’s more depressing than this as one of the key drivers of those record-setting profits, but also, according to Bloomberg, “catastrophe bonds” were one of the industry’s top-performing assets. What The Hell Is That? Catastrophe bonds are one of those financial instruments, like viatical investments that at first can only make a morally-conscious person think, “Why tf is that a thing?” But it turns out they’re not as bad as they sound. These bonds—a.k.a. “cat bonds”—are issued by insurance companies and sold to investors that put up collateral which the insurance company will take if a catastrophe does happen. Investors accrue interest when putting this collateral up as a payment for losing that collateral if a catastrophe does happen. If a catastrophe doesn’t happen, the investors (in this case, hedge funds) get their collateral back at the bond’s maturity, which tends to be short for these assets. So, these hedge funds that snatched up a bunch of catastrophe bonds in 2023 and every year since the pandemic began are actually betting against these catastrophes occurring—what a nice group of people! I guess the old saying, “If you can think of it, hedge funds will find a way to make money off of it,” really is true, and it certainly helped out in 2023. 💭 The Big Question 💭: Can hedge funds continue their streak of insane performance next year? Which hedge funds will come out on top? What investments will drive these returns? Banana Brain Teaser 💡 Yesterday 🗓 Half of a large pizza is cut into 4 equal-sized pieces, and the other half is cut into 6 equal-sized pieces. If a person were to eat 1 of the larger pieces and 2 of the smaller pieces, what fraction of the pizza would remain uneaten? Answer: 17/24 would remain uneaten Today 🕐 What is the sum of odd integers from 35 to 85, inclusive? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “We think that excellence in investing comes from focus.” — Ken Griffin How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh]() 😩[Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA](=) // [ACADEMY]( // [COURSES]( // [LEGAL]() [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353