Tuesday, July 22, 2014

GMO Q2 Letter: Jeremy Grantham Says Bigger M&A Frenzy Coming

Jeremy Grantham is out with GMO's Q2 letter.  In it, Grantham talks about how he sees a frenzy in mergers and acquisitions coming (on top of the already large number we've seen).

He writes,

"If I were a potential deal maker I would be licking my lips at an economy that seems to have enough slack to keep going for a few years.  Also, individuals and institutions did feel chastened by the crash of 2009 and many are just now picking up their courage.  And as they look around they see dismayingly little in the way of attractive investments or yields.  So, the returns promised from deal making are likely to appear, relatively at least, exceptional.  I think it is likely (better than 50/50) that all previous deal records will be broken in the next year or two.  This of course will help push the market up to true bubble levels, where it will once again become very dangerous indeed."

Grantham feels the M&A boom will continue mainly due to low interest rates, but also because the economy has the 'early-cycle look' that could see a few more years of recovery.  Profit margins are higher this time around and there is room for increased capital spending as well.

All of these things combined create the perfect storm for "a veritable explosion, to levels never seen before."

Embedded below is GMO's Q2 letter:



Maverick Capital Starts Countrywide Plc Stake

Lee Ainslie's hedge fund firm Maverick Capital has disclosed a new position in London listed residential estate agent, Countrywide Plc (LON:CWD).  Due to trading on July 14th, Maverick now hold the equivalent of 3.04% of Countrywide's voting rights, all via total return swap.

Countrywide Plc is the UK's largest estate agency group.  In 2007, the company was taken private by Apollo Management.  In March 2013, it was re-listed on the London Stock Exchange.  Currently, the largest shareholder is Howard Marks' Oaktree Capital with 27.59% of the voting rights.

For more on Maverick, check out an in-depth interview with Lee Ainslie here.

Per Google Finance, Countrywide Plc is "an integrated residential estate agency and property services group in the United Kingdom. The Company offers estate agency and lettings services, together with a range of complementary services. The Company operates in five businesses: residential property sales; residential property lettings and property management; arranging mortgages, insurance and related financial products (provided by third parties) for participants in residential property transactions; surveying and valuation services for mortgage lenders and prospective homebuyers, and residential property conveyance services. Countrywide Holdings, Ltd. is the holding company of the Company."


Alpha Hedge West Conference: 10% Discount

Information Management Network (IMN) is proud to announce that the 20th annual Alpha Hedge West Conference will take place September 21-23, 2014 in San Francisco, California.  The event covers a wide variety of investment management topics and is much broader than other events as it includes speakers from top hedge funds, private equity firms, family offices, capital allocators and more.

Market Folly readers can receive 10% off admission by registering via this link and using the discount code: Folly10


Speakers List

John Burbank, Passport Capital
Ronnie Jaber, Carlyle Group
Kurt Billick, Bocage Capital
Gareth Henry, Fortress Investment Group
John Rohal, Man Group
Christopher Cole, Artemis Capital Management
Brian McQuade, CALPERS Investments
Justin Sheperd, Aurora Investment Management
Rajesh Agarwal, Napier Park Global Capital
Christopher Teets, Red Mountain Capital
Matthew Hepler, Relational Investors
Ken Shubin Stein, Spencer Capital
...and a ton of other speakers too (full list here)


Panel Topics

- State of the Hedge Fund Union
- Adding Value as a Fund of Hedge Funds
- Due Diligence and Monitoring of Hedge Fund Service Providers
- How Are Institutions Using 40 Act as Part of Their Portfolio?
- How To Invest in a Rising Interest Rate Environment
- Activist Strategies
- Under the Radar: Incubators and Investing in Emerging Managers
- Examining the Convergence of the Private Equity and Hedge Fund Business
... and many more (full schedule here)


Discount Code

Remember, to receive 10% off, be sure to click here to register and enter the discount code: Folly10

It should be a fantastic event covering a myriad of topics across the capital allocation spectrum.