Ricky Sandler's hedge fund firm Eminence Capital is having a great year, up 6.7% net in the third quarter and up 22.3% net for the year through September with AUM north of $3 billion. Their third quarter letter to investors details a new trade they recently put on:

Long Vodafone / Short Verizon Pairs Trade

For those unfamiliar, a pairs trade is a bet made where an investor goes long one security and shorts another. Some investors utilize this to make a market neutral bet, while others use it to bet on mean-reversion.

Some hedgies will undoubtedly be familiar with this specific pairs trade as various funds have had it on in the past. The trade here is essentially an arbitrage on the valuation of an asset both companies share: stakes in Verizon Wireless ("VZW"). Vodafone (VOD) owns 45% of Verizon Wireless and Verizon (VZ) owns 55% of Verizon Wireless.

Eminence put on this pairs trade (long VOD, short VZ) in recent months and here's why according to Sandler:

"VOD trades at a significant discount to VZ for a number of reasons and thereby creates a unique opportunity where the same asset is being valued by two sets of investors very differently.