Friday, November 5, 2010

George Soros Raises InterOil (IOC) Stake

Soros Fund Management just filed an amended 13G with the SEC regarding their position in InterOil (IOC). Per activity on October 25th, George Soros' hedge fund now shows an 11.9% ownership stake in IOC with 5,257,422 shares. This comes after we just disclosed that Soros boosted stakes in two other positions.

Of this total, 1,200,000 shares are represented by call options. Since the second quarter ended, Soros has increased their position size by 53.5%. Interestingly enough, InterOil just yesterday afternoon announced that they would offer convertible senior notes due 2015 and common shares to raise proceeds of up to $280 million.

InterOil has been somewhat of a controversial stock in the hedge fund world. While Soros has amassed a hefty long position, Whitney Tilson's hedge fund T2 Partners has been an ardent detractor of the company as they are short IOC. Soros has clearly been the winner on this play thus far and we'll have to see what happens in the future.

Taken from Google Finance, InterOil is "an integrated energy company operating in Papua New Guinea and its surrounding Southwest Pacific region. The Company operates in four business segments: upstream, midstream, downstream and corporate."

For a complete update on Soros' entire equities portfolio, subscribe to our Hedge Fund Wisdom newsletter as the new issue will be released in two weeks detailing his latest holdings.

Chase Coleman's Tiger Global Reveals TAL Education (XRS) Stake

Chase Coleman's hedge fund Tiger Global has filed a 13D with the SEC regarding TAL Education (XRS). Per activity on October 25th, Tiger has disclosed a 51.2% ownership stake in TAL Education with 23,475,000 collective shares.

Their activist ownership stake is slightly complex as the majority of these shares are actually represented by Class B common shares which may be converted into Class A shares within 60 days of the filing date. They also own the new American Depositary Shares (ADR's) recently acquired in the initial public offering of ADR shares.

This is not a new position for the hedge fund, but it is the first time they've disclosed it and we'll get into that below. Tiger purchased shares of XRS (the ADR shares) in the IPO. TAL Education just IPO'd this month and shares have surged 50% to $15 after being priced at $10 each, at the higher end of its $8-10 per share range. Twelve million shares were offered, raising the company $120 million.

Tiger's ownership of TAL Education shares actually goes back to August 2009 as they purchased various Class B shares. They have not had to disclose a position in the company because it was traded in foreign markets and not in the United States. Now that the company has IPO'd its ADR shares in the US, Tiger has revealed the full extent of their stake and you can read all the fine print of their filing here.

In terms of other portfolio activity out of Coleman's hedge fund, we've detailed how Tiger Global has purchased a portfolio of web companies. Taken from Yahoo Finance, TAL Education "together with its subsidiaries, provides K-12 after-school tutoring services in the People's Republic of China."

What We're Reading ~ 11/5/10

What we do and don't know about Berkshire's succession planning [Rational Walk]

Financial blog wars [Reformed Broker]

Notes from the ground in China [Eric Jackson]

Sell in May & go away or the seasonal switching strategy [World Beta]

An interview with Alice Schroeder, author of The Snowball, re: Warren Buffett [Simoleon Sense]

Hedge fund FrontPoint alleged to have gotten illegal tips [Reuters]

Checking in on William von Mueffling's new-look Cantillon Capital [WSJ]

On advocating separate accounts and the death of the hedge fund structure [Leigh Drogen]

A look at how different sized hedge funds have fared [AllAboutAlpha]

13D filings: Big investors appear out of thin air [NYTimes]

Swiss money manager Felix Zulauf says gold could reach $2,500 [Big Picture]

Fortune Brands (FO) is planning a meeting with Bill Ackman [Bloomberg]

We previously detailed Ackman's activist position in Fortune Brands [MF]

A recent talk with Warren Buffett [CNNMoney]

Al Pacino to play hedge fund manager in movie Arbitrage [Variety]

Wednesday, November 3, 2010

Marc Andersen & Eliav Assouline's Axial Capital Buys More QLT Inc (QLTI)

Eliav Assouline and Marc Andersen's hedge fund Axial Capital have just filed a Form 4 with the SEC regarding transactions in shares of QLT Inc (QLTI). They purchased shares on October 29th, November 1st, and November 2nd. Cumulatively, they bought 171,000 shares with the bulk bought at $5.62 and $5.70. After their recent transactions, Axial now owns 6,786,036 QLTI shares.

Market Folly has cited Axial's previous QLTI purchases as the hedge fund seems happy to buy shares around the $5.60-5.75 level. Some investors have categorized QLT Inc as a 'cigarette butt' type of value investment as it's mainly a play on the company's royalty stream. Detractors argue that this stream is likely to decline. Assouline and Andersen see some value here though as evidenced by their continual buying.

Their hedge fund, Axial Capital, was seeded by Julian Robertson in 2005 and they share the same address as Tiger Management. Robertson has seeded/spawned a network of hedge fund managers which you can view at the Tiger family tree.

Taken from Google Finance, QLT is "biotechnology company. The Company is engaged in the development and commercialization of therapies for the eye. The Company focuses on its commercial product, Visudyne, for the treatment of wet age-related macular degeneration (wet AMD), and developing its ophthalmic product candidates."

Carlson Capital Goes Activist on Phoenix Technologies (PTEC) Amidst Takeover Bids

Hedge fund Carlson Capital has filed a 13D with the SEC regarding shares of Phoenix Technologies (PTEC). Due to portfolio activity on October 21st, Carlson disclosed 5.3% ownership stake in PTEC with 2,153,800 shares and paid $8,861,372 for the stake. This is a brand new position for Carlson as they previously did not own any shares. In terms of other recent portfolio activity out of the hedge fund, they recently sold Cano Petroleum shares (CFW).

The activist 13D on PTEC is intriguing due to the multiple bidders pursuing an acquisition of Phoenix Technologies. Per the SEC filing, "On August 17, 2010, the Issuer issued a press release announcing entry into a definitive merger agreement with affiliates of Marlin Equity Partners (“Marlin”) pursuant to which Marlin will acquire all outstanding shares of the Issuer's stock for $3.85 per share in cash. In addition, on October 28, 2010, affiliates of Gores Capital Partners III, L.P. (“Gores”) submitted a definitive offer and proposal to acquire all of the securities of the Issuer for cash consideration of $4.05 per share."

And just yesterday, Phoenix received another definitive offer from Goes Group to acquire all shares outstanding at $4.20 per share. So it will be interesting to see if Carlson has already achieved their end-game with a higher bid, or if they have other plans here.

Taken from Google Finance, Phoenix Technologies "designs, develops and supports core system software, operating system software and application software for personal computers and other computing devices."

For more of our coverage of this hedge fund, head to our posts on Carlson Capital.

Larry Robbins' Glenview Capital Increases Position in Punch Taverns (PUB)

Larry Robbins' hedge fund Glenview Capital has disclosed an updated stake in Punch Taverns (LON: PUB) due to trading on October 28th. Per UK regulatory filings, the hedge fund now owns 16.77% of PUB shares outstanding and this is an increase from their previous ownership of 13.01%. We'll be updating the rest of the latest changes in Glenview's portfolio in our Hedge Fund Wisdom newsletter when our new issue comes out in two weeks.

This is the second time we've seen Glenview raise its stake in Punch. We originally highlighted their additional purchase of shares in July. In fact, Robbins seems to like the UK pubs theme in general, as he's also invested in Enterprise Inns (LON: ETI) last we checked.

Taken from Google Finance, Punch Taverns is "engaged in the operation of public houses under either the leased model or as directly managed by the Company. The Company operates in two business segments: punch partnerships, a leased estate and punch pub company, a managed estate. Punch Partnerships is the Company’s leased division, comprising 6,841 pubs nationwide. Punch Pub Company is its managed division, comprising 835 pubs nationwide."

To see Glenview's other investments in the second quarter (and soon to be updated with the third quarter), head to our newsletter.

Tuesday, November 2, 2010

Collection of Benjamin Graham's Papers: Common Sense Investing

Valuehuntr just posted up an excellent compilation of papers by Benjamin Graham from 1930 to 1974. Graham, the author of pioneer value investing books such as Security Analysis and The Intelligent Investor, also penned numerous papers that were not included in his books.

The piece starts with a brilliant comparison of investment versus speculation. Graham writes that, "It is indeed ironical (though not surprising) that common-stock purchases of all kinds were quite generally regarded as highly speculative or risky at a time when they were selling on a most attractive basis, and due soon to begin their greatest advance in history; conversely the very fact they had advanced to what were undoubtedly dangerous levels as judged by past experience later transformed them into 'investments' and the entire stock-buying public into 'investors'."

It's fascinating how early on Graham was able to pick up on a trend that still entangles investors today. The general investing public seems most prone to buy when they're comfortable with the markets, buying 'high' when instead they should be examining their complacency and doing the exact opposite.

Equally disappointing, Graham observes, was the inability for many investors to purchase stocks when they were trading at the largest discounts. This comes down to human emotion interfering as greed and fear get in the way of rational decision making. The most intriguing thing about all this is that behavior Graham identified decades ago still holds true today.

Embedded below courtesy of Valuehuntr is Common Sense Investing: The Papers of Benjamin Graham:

You can download a .pdf copy here.

If you enjoyed Valuehuntr's compilation, keep in mind that Market Folly readers receive an exclusive 15% discount to their Value Edge newsletter, a monthly publication where they generate investment ideas based on various stock screens for both long and short ideas. Some of the screens include: contrarian, cheap franchises, potential activist targets, overvalued companies with poor business prospects and more. We've posted up a sample issue of their newsletter for you to check out as well. Click here to receive the discount.

George Soros Boosts Platinum Group Metals, Female Health Company Stakes

Soros Fund Management, George Soros' hedge fund firm, recently filed two 13G's with the SEC. Due to portfolio activity on October 21st, we see that Soros has disclosed a 5.11% ownership stake in The Female Health Company (FHCO) with 1,404,931 shares. This is only a marginal increase in their position at best because they held 1,319,422 back on June 30th of this year. So in the past four months, their position size has only increased 6.4%.

Secondly, George Soros' hedge fund also has disclosed a 9.73% ownership stake in Platinum Group Metals (PLG) with 15,500,000 shares. The above was due to portfolio activity on October 22nd and marks a massive 933% increase in their equity position size since the second quarter.

In other related portfolio activity, we saw that Soros also increased his Plains Exploration & Production position (PXP). Additionally, we highlighted that in early October, Soros Fund Management also bought more Exar (EXAR).

Taken from Google Finance, Platinum Group Metals is "an exploration and development company conducting work primarily on mineral properties it has staked or acquired by way of option agreement in the Republic of South Africa and Ontario, Canada."

The Female Health Company "manufactures, markets and sells the FC2 female condom. FC2 provides dual protection against unintended pregnancy and sexually transmitted infections (STIs), including human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS)."

David Einhorn & Greenlight Capital's Q3 Investor Letter

Dealbreaker has posted up the latest investor letter from David Einhorn's Greenlight Capital and in it we see that Greenlight is 98% long, 63% short and their largest disclosed long positions in alphabetical order are:

1. Arkema (AKE on foreign exchange, ARKAY on the pink sheets)
2. CIT Group (CIT)
3. Ensco (ESV)
4. Gold (physical)
5. Pfizer (PFE)
6. Vodafone (VOD)

Overall, Einhorn's top positions are largely unchanged and we've detailed the respective thesis on each investment in the past. In particular, we highlighted the case for Ensco (ESV) in our newsletter Hedge Fund Wisdom. Additionally, we've outlined Einhorn's Vodafone thesis as well.

Possibly the most notable change in Greenlight's portfolio in the third quarter was the sale of their Ford debt position as it had been a top holding in the past. They also sold longs in ATP Oil & Gas (ATPG), EMC (EMC), Lockheed Martin (LMT), and Nestle (NSRGY).

On the short side of the portfolio, we see that Greenlight had been short Corinthian Colleges (COCO) in the for-profit education space. Many hedge funds have been short this sector and Einhorn admits they covered this position too early (but still saw a 91% return). The hedge fund also covered shorts in Office Depot (ODP) and Royal Caribbean (RCL). Einhorn also recently detailed the short thesis on St. Joe (JOE) at the Value Investing Congress, a position he defends with his latest commentary.

Embedded below is David Einhorn & Greenlight Capital's third quarter investor letter:

You can download a .pdf copy here.

Last, but certainly not least, Einhorn makes a point to focus on the shift in the Federal Reserve's policy and that they've been expecting the Fed would be forced to monetize the debt. He highlights this as one of the main reasons he owns physical gold. To see Greenlight's upcoming Q3 portfolio changes detailed in full, be sure to subscribe to Hedge Fund Wisdom as our next issue will be released sometime next week.