Friday, October 17, 2008

John Griffin's Blue Ridge Capital Files 13G on Millipore (MIL)

According to a 13G filing made with the SEC on October 16th, Blue Ridge Capital ran by John Griffin has disclosed a 5.47% ownership stake in Millipore (MIL). Blue Ridge disclosed that they now own 3,020,000 shares of MIL as of October 6th. This is an increase from their position that they disclosed in their most recent 13F, which had revealed their positions as of June 30th. Back then, they owned 2,700,000 shares. Since then, they have accumulated 320,000 more shares to bring them to their current holding of a 5.47% ownership stake in MIL. You can see the rest of Blue Ridge's portfolio holdings here. Blue Ridge seeks absolute returns by investing in companies who dominate their industries and shorting the companies who have fundamental problems.

Taken from Google Finance, Millipore (MIL) is "a life science company that provides products, services and solutions. The Company’s academic, biotechnology, and pharmaceutical customers use its consumable products and services in laboratory applications and in biopharmaceutical manufacturing."

You can view the 13G as filed with the SEC here.


Goldman Sachs Conviction Buy List: Adds KMB, Removes HLF

Goldman Sachs yesterday made some changes to its Conviction Buy List. They added Kimberly Clark (KMB) to the buy list and removed Herbalife (HLF) from the list.

Taken from Google Finance, KMB is "a global health and hygiene company. The Company is engaged in the manufacturing and marketing of a range of health and hygiene products around the world."

And, HLF is "a global network marketing company that sells weight management, nutritional supplement, energy and fitness products, and personal care products."


Thursday, October 16, 2008

Free Quicken Online

I know this has nothing to do with the markets, but I'm always up for sharing some cool freebies. Just wanted to pass along the fact that Quicken Online is now free. In the past, they were charging something like $35/year. But, now that it's free, I figured I'd check it out since I have heard good things. I guess deep down I'm just lazy and didn't want to fork over the money to use it haha. You can use it as a one-stop-shop for all your finances... brokerage accounts, bank accounts, credit cards, all that good stuff. You can check out Quicken Online for free here.


Coal Going Forward

Notable energy analyst Gregor Macdonald has an excellent post up which highlights my exact thoughts on coal as an energy play. Except, he of course has summed it up more succinctly than I ever could. Gregor entitles his post 'A Dismal World of Coal,' and here is an excerpt:

"As we can see in today’s price of oil, even the fear of a collapse of the global economy has not done much to move oil down. Oil is stubborn at 90.00. Though a bit below that today. This opens up the prospect that in a world of slower growth, with oil prices high and natural gas prices still high, that OECD demand for coal may start to rise again. After all, the BTUs in coal are still cheap. Industrial use of oil in the OECD has been falling for years, replaced by natural gas. But the OECD can always add back coal, in a time of economic stress. Recessions are a time when more idealistic goals, say, with regard to climate change, are shelved. The need for electrical power at cheaper rates will trump the global warming issue.

Meanwhile, a world of slower global growth and still elevated oil prices will do nothing to dampen coal demand in emerging Asia. In fact, it could further aggravate Asia’s unmet demand for coal. Do you see where I am going, with this? A global recession could drop incomes down to levels where 90.00 dollar oil is still way too high. In that context, the demand for coal could broaden. The decade-long reach for coal among poorer nations, trying to cope with higher oil prices, may be a reaction that widens out to include developed nations. While this would put renewables back on the table, in economic terms, it could also make for a much dirtier world in the meantime. A dismal world of coal, indeed."


The main reason I want to highlight this is because I'm always thinking in macro terms and I can't help but believe that electricity and energy demand in general will continue to rise, outpacing supply. And, this bear market we're in will be presenting some excellent opportunities for long-term investors looking to gain exposure to this impending shift. Energy equities are vastly undervalued due to forced selling because of redemptions/liquidations by hedge funds as I've detailed before here and here.

While I don't doubt the alternative energy movement has legs, it will take many years to fully implement and bring to scale. Until then, coal is still in play and will continue to be. I've written a detailed post of how to play energy in the intermediate (3-5 years) here.

Additionally, Commodity News & Mining Stocks has a post on coal outlook and fundamentals here.

I highly suggest checking out Gregor's thoughts on all things energy.


Wednesday, October 15, 2008

Destruction of Wealth

Simply put, the destruction of wealth/income will have greater implications for this economy than many are anticipating. It is a ripple effect of this crisis that is barely even being accounted for.

Yes, we all already were paying attention to the fact that the unemployment rate is rising and that tons of jobs have been lost on Wall Street. But, what about those retail investors who invested in those financials and saw their shareholder equity wiped out? What about 401k investors who have seen their retirement savings and net worth decrease significantly?

This is a ripple effect of the pain coming to roost on Main Street. I'm not trying to be a harbinger of doom, but I don't think enough people are talking about it. The consumer is going to be in a much much deeper hole than many anticipate. Everyone has already factored in the job loss and tough economic times. But, in addition to the tough times stripping people of their jobs, you're now seeing Wall Street's woes put substantial pressure on people's savings (what little they may have). After all, we know that the savings rate in America is pitiful. The thin get stretched even thinner.

This Wall Street Journal article is the perfect example of that. Although this article deals with a woman who is already retired, the same principles apply. (The woman relies on dividends as a source of income). And, she is just one of millions who have been undoubtedly affected by the destruction of income and wealth.

People have lost their jobs; there goes their streaming income. 401k investors have lost 20% or more of their retirement savings; their retirement is now pushed back. Congress' budget analyst has estimated that as much as $2 trillion in retirement plans has been wiped out in the past 15 months. Retail investors with separate accounts have most likely also suffered notable losses; there goes some of their savings. So, where will they turn now? Certainly not to the home equity loans that were once so popular. The house ATM is all out of cash due to depreciating home prices. Need a loan? Oh I'm sorry you're already heavily in debt and we're tightening credit standards. Any and all of these situations in whatever degree of severity lead to a pinched consumer. And, a consumer recession is much stronger than any recession already being forecast.

People don't like to lose money. Period. Not only does this destruction of wealth put people in a bind, but it affects them psychologically as well. Consumer sentiment is already low, and it's about to get even lower.

But don't worry, we here at Market Folly believe eeeeeeverything will be just hunky-dory!!!
/sarcasm


Consumer Credit in Trouble

Jake at EconomPicData has assembled the latest Federal Reserve Consumer Credit data for August and it's not such a pretty sight:

(click to enlarge)



Tuesday, October 14, 2008

Richard Rainwater Bets on Oil

Taken from Fortune,

"Back in May, when oil was at $129 per barrel and rising, billionaire investor Richard Rainwater did something as prescient as it was shocking: He sold off all the energy stocks he owned.

Now he's making another bold move: He's betting on oil again.

A few weeks ago, when the price of oil tested a low near $90 per barrel for the first time in many months, Rainwater decided that he had found the right reentry point. "I reinvested back in the oil business, and it's worked out really well for me," he told me the other day. "I bought Exxon (XOM) stock under $75. I bought ConocoPhillips (COP) under $68. I bought Pioneer Natural Resources (PXD) under $50. I bought BP (BP). I bought Statoil. I made a big bet on the sector. I bought a lot of stocks back."

Considering Rainwater's incredible track record investing in the oil patch, that's big news.

Rainwater first made his reputation by greatly multiplying the Texas oil fortune of the Bass brothers of Fort Worth, with big bets on everything from the resurrection of Disney to the boom in cell phones. After going out on his own in 1986, he made bundles for himself in hospitals (by putting together HCA) and real estate (by forming Crescent Real Estate Equities). Then, in 1997, when crude was priced below $20 per barrel, he decided to make a huge bet on oil. He put $100 million into stocks and $200 million into oil futures. The wager netted him billions in profits.

As Time's Justin Fox reported in early June, Rainwater made the decision to close out his oil bet when the average price of gasoline passed $4 a gallon in the U.S. (and after he saw a reader poll on the Motley Fool Web site in which 77% of respondents said they were cutting down on gasoline consumption).

"I missed the very top by a lot," Rainwater told me. "That's okay. I'm always early. I sold after I got my first inclination that we had a problem with the demand side in America. I saw that we had a problem with the demand side and I sold out. But the stocks kept going up. And the price of oil kept going up. It went from $129 to $147 [on July 11]. But then it went from $147 back down to under $100, and that's when I bought back in."

Betting on increasing demand

Indeed, Rainwater is just as convinced as ever that oil prices are going higher in the long term. As he made clear in a Fortune story three years ago ("The Rainwater Prophecy") he believes that the world is facing a future shaped by scarce natural resources. His decision to sell out in May was based on a belief that oil prices had gone too far too fast, not that the bull market for oil - or for that matter, commodities of all kinds - has ended.

"I think we'll have a run on raw materials of all kinds because we've taught people all around the world how to play capitalism," he says, "and all those people want to live like Americans. But when you look at us being [4.5%] of the population and using 25% of the resource base, that can't go on. You can't extrapolate that out around the globe without there being price pressures on the upside. So there are price pressures in food. There are price pressures on raw materials of all kinds, including oil."

So with crude at around $100 and most of the stock market in chaos, he says oil companies look like a pretty good place for your money: "It's much more positive than the rest of the environment."

Given the volatility of the market right now, though, Rainwater is monitoring his new stock holdings closely. "I've already sold some of them," he told me. "Not all of them, but I sold some because they went way back up. I'm just playing cycles here, and the cycles are really powerful and fast moving. I bought ConocoPhillips for $68 and sold it two days later for $78. I don't think you can make that money in that short of a time unless you get lucky. And if I make that much money because I'm lucky, then I want out."

Rainwater may be lucky. But when it comes to oil, his instincts are more than good."


Source: Fortune


Monday, October 13, 2008

Julian Robertson Reveals Some Buys

Monday (10/13) on CNBC, Julian Robertson, legendary investor and founder of notable hedge fund Tiger Management revealed some purchases he made in the market carnage last week. His buys included:

  • Apple (AAPL)
  • Microsoft (MSFT)
  • Baidu (BIDU)
  • Mastercard (MA)
  • Visa (V)
  • Ryan Air Holdings (RYAAY)

His argument, being a notable value player, was that these equities were trading at very favorable prices. Yet, at the same time, he curiously noted that he thought the US was just now entering into a period of prolonged recession (possibly 10-15 years). He thinks that this time around, consumers are broke and will be forced to cut their spending. Interesting thoughts when you compare them to the purchases he just made.

And, it seems that Robertson is fond of some of his progeny's favorite stocks as well. Robertson is well known for the 'descendants' that left Tiger Management to start their own firms. Many of Julian's "offspring" (referred to as Tiger Cubs) whom we track here at Market Folly, have had large positions in AAPL, BIDU, MA, and V as disclosed in various 13F quarterly filings. Notable Tiger Cubs include Lee Ainslie at Maverick Capital, Stephen Mandel at Lone Pine Capital, and John Griffin at Blue Ridge Capital. As of the last disclosures, AAPL was Maverick's top portfolio holding. Blue Ridge also held AAPL as their 4th largest portfolio holding. We track all these funds (and more) through the most recent 13F filings with the SEC and you can view Maverick's portfolio here, Lone Pine's portfolio here, and Blue Ridge's portfolio here.


Atticus Capital Letter to Investors (European Fund)

As we've noted in our most recent hedge fund performance update, Atticus European was -15.8% in September and is -42.5% year-to-date. You can view Atticus' most recent portfolio holdings here (as last updated with the SEC).

***EDIT: Removed per request of representatives from Atticus


Warren Buffett Sells Puts on Burlington Northern (BNI)

Boy, has Mr. Buffett been busy lately. His most recent escapade includes selling puts on Burlington Northern (BNI). Buffett already has a massive position in BNI (owns 18% of the company) and apparently he likes it enough and wants to add more. A Berkshire Hathaway filing on October 8th showed that Buffett had sold puts on BNI for $7.02 an option with a strike of $80. He sold 1,309,524 shares of put options that are exercisable before 12/08/08. With BNI shares making a round-trip from where he bought them last year, Buffett seems keen to pick some up. He has essentially drawn lines in the sand at $80 and $73 for BNI.

Buffett clearly has deemed BNI a solid value at $80 a share and is keen to load up whenever it hits that pricepoint. He has essentially bet that the odds of BNI trading significantly below $73 a share are pretty slim. So, he sits back and collects the premium from the options and then happily buys the shares where he wants if he is exercised upon.

Main point here is that Buffett = still bullish on BNI. And, he loves it at $80 or less. Looks like Warren is starting to warm up to derivatives after all.

UPDATE: Buffett was doing it again.


Sunday, October 12, 2008

SAC Capital Going to Cash?

Dealbreaker was recently out saying they've heard Steven Cohen's SAC Capital has gone to cash.

"We have it on very good authority that on Wednesday in Stamford, Steve Cohen told his trading floor, 'You're all idiots. We're going to cash. I'll see you in January.' They are not closing down; just sitting out the bull shit. No follow-up joke. Because it's apparently true."


Take it for what it's worth.


10 Bullish Charts & Signals

Barry Ritholtz has an excellent collection of 10 bullish charts & signals for you here.