Four at Four: Taking Shears to the Hedges

(Wall Street Journal-MarketBeat Blog) The recent market turmoil has been marked by substantial selling in a handful of concentrated areas, particularly resource-related stocks such as coal and oil-and-gas producers. This week’s declines have come at the expense of hedge fund managers, many of whom had bet on integrated oil-and-gas companies and other power producers. What’s happened, however, is that as this selling has accelerated, other investors, smelling blood, have piled on, and popular positions among hedge funds are being preyed on by other investors. “Macro people are shorting the market, thinking more hedge-fund liquidation is to come and they’re just playing the disarray in the hedge-fund community,” says Doug Kass, president of Seabreeze Partners Management in Palm Beach, Fla. Examples of this include the likes of Alpha Natural Resources, a coal company down 20% this week, and Petrohawk Energy, which is off by 19% this week. Both companies are part of a group of 50 stocks identified by Goldman Sachs that “matter most” to hedge funds, because they’re the top holding in a number of funds, and in many cases hedge funds hold a good lot of the equity capitalization of those funds. That group is down 6.7% this week, compared with the 3.6% decline in the S&P 500.

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