Coffee buzz lets Thaler's fund reach top in 1st qtr

Fri Apr 8, 2011 4:46pm EDT

* Thaler's JAT ranks as top performing hedge fund

* Green Mountain Coffee bet helps firm move ahead

* Other hedge funds also piled into coffee company

By Svea Herbst-Bayliss and Matthew Goldstein

BOSTON/NEW YORK, April 8 (Reuters) - The daily cup of coffee has worked wonders for hedge fund manager John Thaler's returns this year.

Thaler, who runs the roughly $1 billion JAT Capital Management, pulled off a dramatic coup when his New York-based firm outperformed much bigger and better known stock pickers to rank as the industry's best performer in the first quarter.

Armed with a sterling pedigree and taste mainly for media and technology companies, Thaler ranked as the the world's best performing hedge fund manager during the first three months of 2011, recent statistics from HSBC Private Bank show.

A spokesman for his fund declined to comment.

Since hedge funds are not required to report their performance figures it impossible to know whether Thaler was the absolute top performer. But for most investors and industry analysts the HSBC list carries tremendous weight, especially since many industry super stars are among the hundreds of managers whose performance is tracked monthly.

And the investment that fueled Thaler's rise to the top this year? The world's unquenchable thirst for one, two or three cups of joe a day. Thaler gulped down 4.1 million shares of Green Mountain Coffee Roasters Inc (GMCR.O) starting late last year, regulatory filings show. Thaler's next largest position is Chinese search engine Baidu Inc (BIDU.O) followed by Netflix (NFLX.O), the on demand movie company.

Now valued at $268 million, Green Mountain Coffee has paid off like no other for the little-known firm as the company's stock price surged 97.81 percent since January. Speculation that industry titan Starbucks (SBUX.O) might buy Green Mountain and a deal where the company will offer Dunkin' Donuts Coffee in single cups helped push the stock price up.

Thaler's achievement is all the more remarkable since 2011 has been tough for the $2 trillion industry with the average fund gaining only 2 percent while the broader Standard & Poor's 500 stock index climbed 5.4 percent during the quarter.

The thirtysomething manager beat out better known managers including Dan Loeb, David Tepper and John Paulson for the HSBC honors with Loeb's Third Point Ultra fund gaining 11.78 percent, Tepper's Palomino Fund rising 9.6 percent and Paulson's Enhanced fund gaining 6.62 percent. Each manager is also ranked as one of the 20 best managers so far this year.

Thaler is one of a new generation of managers who honed their skills at prominent funds and then set off on their own. The University of Chicago graduate trained with industry legend Julian Robertson's protege Chris Shumway and left Shumway Capital after five years to launch JAT in 2007.

JAT's average annual return since inception is 11.29 percent; the fund rose 7.1 percent in March.

Indeed Thaler's JAT Capital is not the only hedge fund getting a caffeine high from Green Mountain shares these days.

The list of hedge funds gulping down shares of Green Mountain Coffee Roaster surged in late 2010 and early this year, amid talk of a Starbucks takeover. Last month, the companies announced a strategic partnership -- something far less than a merger.

But shares of Green Mountain have been a strong performer nonetheless -- nearly doubling in price to $64.50.

Other hedge funds that piled into Green Mountain over the past several months include Coatue Management, founded by Robertson protege Philippe Laffont, Alydar Capital, Steve Cohen's SAC Capital, Tiger Consumer Management and Karsch Capital Management. For several of those hedge funds Green Mountain now counts as one of their largest stock holdings. (Editing by Phil Berlowitz)