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Big Tech Drives Adage Capital's June Quarter Gains as Boston Fund Cut Midwest Bank Positions
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Tucked away in the heart of Boston’s financial district, Adage Capital Management recently unveiled its trading report for the June quarter. The fund informed the Securities and Exchange Commission that its value stood at $46.03 billion at the close of June, marking a 3.23% increase during the second quarter of 2023, up from $44.59 billion in March.
Adage has grown over the years to become one of the most respected names in the world of asset management.
The story of Adage is inseparable from the narratives of its co-founders, Phillip Gross and Robert George Atchinson. Their journey began at Harvard Management Company, where they deftly managed the Ivy League institution’s endowment. Their combined expertise, fusing Gross’s meticulous analytical acumen with Atchinson’s strategic vision, saw the endowment grow significantly during their tenure.
In 2001 the pair left to create their own hedge fund, known as Adage Capital Management. The firm followed a long/short equity strategy, and it committed to the value investment philosophy, seeking out undervalued securities that offered the potential for substantial returns.
Success, as they say, leaves clues. Under the watchful eyes of Gross and Atchinson, Adage’s assets under management swelled. Not only did the firm navigate the choppy waters of the 2008 financial crisis, but it emerged even stronger, with its reputation enhanced.
A significant part of Adage’s success can be attributed to its founders’ ethos. They believed in the principles of transparency, accountability and shared success.
Holdings Reduced
During the recent quarter, the number of holdings managed by the fund saw a dip of 5.4%, going from 913 at the quarter’s start to 864 disclosed positions by June 30.
The fund’s reported market value is currently trending higher after recovering from broader market-led weakness over the course of 2022.
The fund’s top five positions by portfolio weight are: Apple (US:AAPL) at 6.0%; Microsoft (US:MSFT) at 5.5%; Amazon (US:AMZN) at 2.7%; NVIDIA (US:NVDA) at 2.3%; and, Alphabet (US:GOOGL) at 1.5%. The fund is heavily skewed to the FAANG conglomerates that have driven most of the market momentum in 2023.
Fintel’s heat map of the fund’s holdings gives a snapshot of the total portfolio and the relative weight of each position.
Top Portfolio Increases
Chipmaker NVIDIA (US:NVDA) continued its ascendancy in Adage’s portfolio, with its position rocketing above $1 billion by the close of the quarter, all driven by strong share price momentum. NVDA’s allocation swelled to 2.32% of the fund’s total, marking growth of 0.73% over the period. The fund actually reduced the number of shares held by 1.1%.
The Microsoft (US:MSFT) position reached a remarkable $2.53 billion in value by the quarter’s close. The growing share price reflected in a 0.68% allocation boost to 5.50% of the portfolio. The number of shares held declined marginally.
The fund’s position in Apple (US:AAPL), another tech behemoth, soared to an astounding $2.76 billion. AAPL was 6.0% of the portfolio, marking allocation growth of 0.65% over the three-month period, driven by share price gains.
Holdings of Amazon (US:AMZN), a cornerstone of the e-commerce and cloud industry, ended the quarter at a notable $1.24 billion position value. Representing 2.69% of the fund, AMZN’s allocation saw an uptick of 0.52% aided by share price growth and a top up in shares.
RB Global Inc (US:RBA) emerged as a fresh entrant in Adage’s strategy. By the quarter’s conclusion, the position in RBA stock stood at $190.74 million, translating to a 0.41% portfolio weight, indicating a newly initiated position in the Illinois commercial assets marketplace operator, formerly known as Ritchie Bros. Auctioneers. The company made headlines earlier this week as the departure of CEO Ann Fandozzi stoked investors’ ire.
Dominos Pizza (US:DPZ) cooked up a storm in the fund’s holdings, with its position surging to $193.95 million. The pizza titan accounted for 0.42% of the portfolio, marking an increase of 0.395% in DPZ stock during the quarter as the hedge fund manager backed more capital into the conviction call.
Aerospace juggernaut Boeing (US:BA) closed the quarter at a position value of $438.6 million. This translated to 0.95% of the portfolio, signaling an allocation expansion of 0.38%. The fund almost doubled its number of shares held in the plane maker.
Despite the whirlwinds of the tech landscape, Meta Platforms (US:META) carved out a position valued at $632.97 million. The social media colossus represented 1.38% of the fund’s total, with a positive allocation delta of 0.32%. While the fund has not invested more capital the stock has mounted strong share price growth over 2023.
Reata Pharmaceuticals (US:RETA) marked its therapeutic stance with its position rounding off to $180.07 million. RETA’s weight in the fund was 0.39%, observing an allocation surge of 0.29% during the quarter as the fund tipped more capital into the position.
Lockheed Martin (US:LMT), a defense and aerospace titan, secured its position at $277.25 million by the quarter’s close. Representing 0.60% of Adage’s holdings, LMT’s allocation witnessed a growth of 0.28% in the period.
Collectively, Boston’s Adage Capital Partners’ moves this quarter underscored its belief in tech giants while diversifying into other promising sectors including defense and healthcare.
Top Portfolio Sales
The fund also made both strategic plays and reductions in several stocks.
Chipotle Mexican Grill (US:CMG) saw a noticeable reduction in the fund’s portfolio. By the quarter’s end, the position in CMG stood at a market value of $21.12 million. This translated to 0.05% of the portfolio, marking a significant decrease of 0.39% during the quarter.
Exxon Mobil (US:XOM), a prominent player in the energy sector, faced a reduction in the fund’s holdings. Its position was valued at a notable $472.03 million, accounting for 1.03% of the portfolio. However, this marked a decline in allocation of 0.37% during the quarter.
Midwest regional bank Keycorp (US:KEY) faced a downward move, with its position valued at $61.01 million by the quarter’s end. It made up 0.13% of the portfolio, indicating a decrease of 0.33%.
Dover Corp. (US:DOV) saw its allocation reduced to $81.09 million or 0.18% of the portfolio. This change marked a decrease of 0.33% from the fund’s earlier allocation.
Another Midwest regional bank, Comerica (US:CMA) experienced a reduction in the portfolio. By the quarter’s end, its position was valued at $42.41 million, or 0.09% of the portfolio, showing a decline of 0.20%.
The fund completely exited positions with corresponding allocations in Shaw Communications (US:SJRWF), Crane Co (US:CR), Travere Therapeutics (US:TVTX) and Prevention Bio (US:PRVB).
This article originally appeared on Fintel
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