Larry Robbins' hedge fund firm Glenview Capital has just revealed a new stake in Tenet Healthcare (THC) via a 13G filed with the SEC.
Per the filing, they now own 22,405,900 shares of THC, or a 5.46% ownership stake in the company. The filing was just made due to portfolio activity on March 13th. Glenview did not own a stake at the end of 2011. Shares are up around 2% for the year thus far.
Some of the largest institutional holders of THC shares as of 2011 year-end include Harris Associates, Charter Bridge Capital, Samlyn Capital, and Highland Capital Management,.
Per Google Finance, Tenet Healthcare is "an investor-owned company that operates in one line of business: the provision of health care services through the operation of acute care hospitals and related health care facilities. All of Tenet’s operations are conducted through its subsidiaries and affiliates. Its business includes inpatient care, intensive care, cardiac care, radiology services and emergency medical treatment."
Friday, March 23, 2012
Larry Robbins' hedge fund firm Glenview Capital has just revealed a new stake in Tenet Healthcare (THC) via a 13G filed with the SEC.
Jim Simons is the legendary founder of quantitative hedge fund Renaissance Technologies, commonly referred to as RenTec. The mathematician graduated from the Massachusetts Institute of Technology (MIT), and took what he learned and applied it to financial markets.
At age 38 he founded RenTec and he's been wildly successful (just see his Medallion Fund returns here). Simons retired from RenTec in 2009, but the firm full of scientists lives on.
Simons gave a lecture at MIT in 2010 about mathematics, common sense, good luck, and his various careers. Given that he rarely gives interviews, this lecture is well worth a view.
Embedded below is the full video of Jim Simons' lecture (email readers click to come read). He begins at the 10-minute mark and talks investment management at the 28-minute mark:
You can also view another rare interview with Jim Simons here.
Bridgewater Associates founder Ray Dalio recently put out a research paper entitled, "An In-Depth Look at Deleveragings." Given that Bridgewater is the top hedge fund by net gains since inception and that Dalio doesn't give his views in public that often, this 30+ page paper is surely a must-read.
In summary, the piece basically says that deleveraging in the purest sense of the word equals debt reduction and debt monetization. Dalio writes that "good" deleveraging stimulates economies via monetary stimulation and that "bad" deleveragings cause recessions and in turn, usually deflation.
To compare and contrast the two, he walks through six periods as examples of each: The Great Depression, Japan's lost decade, the UK from 1947-69, the US financial crisis, as well as Weimar Republic's hyperinflation.
Put your macro hat on via the full article below: Ray Dalio on Deleveragings
Those who have followed Dalio's scarce appearances also know that he has a dim view of the economy this year. For more from the legendary manager, head to Dalio's interview with Charlie Rose.
Be sure to also check out Ray Dalio on his principles.
Continuing an experiment with our linkfests, we turn to a set of reads targeted for the MBA students in our audience (though everyone should enjoy them). Rest assured, the normal hedge fund & stock market links will continue every Wednesday.
Billion dollar lessons: learn from business failures of last 25 years [Amazon]
How to land an internship at a hedge fund [Tradestreaming]
Letters to a young analyst [Research Puzzle]
4-step entrepreneur screening test [Inc]
What Ray Dalio taught me about authentic leadership [Raleigh Coaching]
A conversation with tech visionary Peter Thiel [American Interest]
Aswath Damodaran's public course on corporate finance [Coursekit]
Also: his public course on valuation [Coursekit]
Starting a fund 101 [Columbia Business School]
Being wrong and staying wrong [Abnormal Returns]
The limits of multi-tasking [Simoleon Sense]
Learn from mistakes: 7 habits of unsuccessful executives [Forbes]
MIT open course on computer science [MIT]
Khan Academy: the future of education? [CBS News]
The truth about sleep & productivity [Inc]
Self-publishing your own book is the new business card [James Altucher]
Life is a gamble, are you all-in? [IHeartWallSt]
Epic pump up music for the next exam [YouTube]
Wednesday, March 21, 2012
Howard Marks of Oaktree Capital is out with a new memo entitled, "Deja Vu All Over Again." In it, he talks about how history often repeats itself and how investors can learn and take advantage of such situations. Additionally, he focuses on "the herd" and how they're often wrong at extremes.
At the heart of the matter, Marks' latest memo centers on contrarian signals. He references "The Death of Equities," a BusinessWeek magazine article from August, 1979. At the time, the article was supposed to signal a 'tectonic shift' in investing.
The irony, of course, is that the negative article actually signaled the beginning of the greatest bull market in history. Investors who utilize contrarian signals will of course point to that as a prime example of the media highlighting extreme negative sentiment that in actuality represents an opportunity.
"Likewise, in this case, according to the writer, it will take a bull market to attract investor interest and confidence. That sounds reasonable. But isn't investor interest and confidence a prerequisite for a bull market? Without it, how can a bull market get started?
The answer is that when prices are low enough, stocks can begin to rise without help from a full-fledged bull market, just as when they're high enough, stock prices can collapse under their own weight.
The bottom line here is simple, and I'm thoroughly convinced of it: Common sense isn't common. The crowd is invariably wrong at the extremes. In the investing world, everything that's intuitively obvious is questionable and everything that's important is counter-intuitive."
This kind of timeless education is exactly why we highlight Marks' memos. For more insight from the manager, be sure to read his book: The Most Important Thing.
Embedded below is the full letter from the Chairman of Oaktree Capital:
We've also posted up a bevy of hedge fund letters if you missed them: Maverick Capital's letter, Third Point's letter, and Passport Capital's letter.
Value investors love to follow everything that is Warren Buffett. This is the first time we've really seen an in-depth tour of Warren Buffett's office in Omaha, Nebraska at Berkshire Hathaway.
Some notable takeaways from the tour: Above a door, a sign that reads "Invest like a champion today." Also, Warren Buffett's office doesn't have a computer in it. Instead, he utilizes the phone and reads physical copies of annual reports. Old school.
Here's the video interview with Charlie Rose featuring a tour of Warren Buffett's office:
For more resources on the Oracle from Omaha, head to Warren Buffett's recommended reading list, as well as his 2011 annual letter.
13F filings: does the 45-day delay matter? [World Beta]
And then the bulls went berzerk [Reformed Broker]
Best hedge fund performers will race ahead in 2012 [Institutional Investor]
Viking portfolio manager Jim Parsons to depart [AR+Alpha]
Hedge fund herding: the apologists' evidence [Alea]
What are the alpha characteristics of hedge funds? [AI-CIO]
Is this the end of the hedge fund manager? [Mindful Money]
Fund manager survey: conviction in growth [EON]
Value or growth, fund managers love Apple [Forbes]
Cheyne hedge fund eyes golden period for merger arb [Reuters]
Is it worth buying Buffett's picks after they're public? [Tracking WallSt]
The villain: in-depth piece on Ben Bernanke [The Atlantic]
A survey of the online money management space [World Beta]
Funny fake hedge fund letter [Economist]
Tuesday, March 20, 2012
Lee Ainslie's hedge fund firm Maverick Capital finished 2011 with their flagship Maverick Fund down 14.7% for the year. Their Levered Fund was down 30.7% for the year while their Long Fund was down 17.5%.
Today we present excerpts from Maverick's year-end letter where they outline how they've learned from their mistakes and how increased volatility and high correlations have affected them.
On Risk Management
Ainslie said that it was the firm's darkest year. The reason for the underperformance? He writes,
"While the environment for fundamental investing was certainly unfavorable last year, such factors do not fully account for our results. Maverick's poor performance was primarily driven by a handful of individual mistakes and insufficient risk constraints."
In order to address risk management, they've implemented MavRank, a quantitative system driven by fundamental inputs that helps make recommendations for position sizing. While Ainslie stressed that all decisions will still be made by humans, the full implementation of quant tools is interesting.
Ainslie turned then turned his focus to volatility, highlighting some interesting datapoints:
"In late October last year the trailing 60 day volatility of the S&P 500 index exceeded 37% for only the fourth time since 1938. The alarming aspect to me is the increasing frequency with which the equity markets have displayed this level of volatility since 1938:
Years that Volatility Exceeded 37%: 1988, 2002, 2008, 2011
Years Since Prior Occurrence: 50, 14, 6, 3
The fact that recent volatility surpassed anything seen in a fifty year period is staggering - especially when one considers that during that time the world suffered through World War II, the Cuban missile crisis, a Presidential assassination, the dollar going off the gold standard, New York City on the verge of bankruptcy, the OPEC oil embargo, US 10 year treasuries yielding over 15%, and the S&L crisis - just to name a few of the events that today's markets might find a tad unsettling.
So why do the markets appear less resilient to such developments today? There are many factors, but I believe globalization, high levels of debt, uncertain regulatory environments, extreme monetary policies, unsustainable fiscal policies and the resulting currency uncertainties all play major roles. The more important question, in my mind, is 'will it continue?' Given that the aforementioned factors are all likely to persist, and in some cases further deteriorate, it is hard to believe the answer is 'no.'
This leads to our conclusion that volatility spikes are likely to continue to occur more frequently, and, therefore, future levels of equity volatility are likely to be higher than those seen in the past. As a result, going forward we will seek to continue to maintain volatility in the 10-12% range in our core funds, even though we expect this level of volatility is likely to be less than half of the equity market's volatility. To help achieve this objective, we have lowered our long-held gross exposure target to 225% from 250%(our long-term average gross exposure has been 248%), among other steps. (We have also decided to maintain our 1.5:1 long/short ratio, which translates to a slight reduction in our target net exposure from 50% to 45%.)"
On the Investment Environment
Ainslie also touched on a subject that many investors have been fixated on: correlation. He writes,
"Last year intra-stock correlations reached all-time highs, surpassing even the levels seen in 1929 and 2008. In other words, stocks moved in tandem with one another to a degree never before seen and were less responsive to idiosyncratic risks, such as fundamental factors, than ever before.
Such an environment is clearly challenging for long/short investors who rely upon stock prices being responsive to fundamental differences among companies. These challenges were evidenced in the small number of positions that generated significant returns for us last year."
Ainslie goes on to point out that January 2012 marked a break in high correlations. However, he still points out that, "equities have maintained correlation above the long-term average for almost six years now, creating a sustained, unfavorable headwind for fundamental investors."
For more from this hedge fund, we've also posted up Ainslie on the impact of fund size on returns.
To read more hedge fund letters, be sure to check out Dan Loeb & Third Point's year end letter, as well as excerpts from Passport Capital's letter.
Strategist Jeff Saut's latest market commentary is entitled 'Lose Cash.' In it, he talks about how the market is off to its eighth best start of the year as managers have put cash to work. However, he's still not ready to shed his cautious stance. Why?
Well, he highlights the divergence between stock prices and US Economic data trends in April 2011 and thinks a similar situation is occurring now. Saut feels that "all the good news is on the table" and points out other signs of concern such as massive insider selling, as well as falling 10 year Treasury prices (rising rates).
Saut reiterates that he is not getting "too bearish" because he expects stocks to be higher at the end of the year. But it does sound as though he expects a pullback in the intermediate term. Last week we detailed how Saut says to position your portfolio this year.
He also recommended two stocks that have declined recently for "one-off" reasons: Acme Packet (APKT), Nuance (NUAN), and Vocus (VOCS).
Embedded below is Jeff Saut's market commentary:
You can download a .pdf copy here.
For more investment strategy from Saut, also check out dividend stocks he likes.
Steve Cohen's hedge fund firm SAC Capital filed a 13G with the SEC regarding their position in Marriott Vacations Worldwide (VAC). In it, they reveal a 5.6% ownership stake in the company with 1,887,284 shares.
This marks over an 11,000% increase in their position size since the end of 2011 as they only owned 16,779 shares back then. The disclosure was required due to portfolio activity on March 9th.
Other notable institutional owners of VAC as of 2011 year-end include Highside Capital, Corsair Capital, JANA Partners, and Catapult Capital.
Shares of VAC came into existence via a spin-off from Marriott International (MAR) on November 21st, 2011.
Per Google Finance, Marriott Vacations Worldwide "along with its subsidiaries, is the worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club and Grand Residences by Marriott brands. The Company is also the global developer, marketer and seller of vacation ownership and related products under the Ritz-Carlton Destination Club brand, and it has the right to develop, market and sell whole ownership residential products under the Ritz-Carlton Residences brand."
Philippe Laffont's hedge fund Coatue Management has initiated a brand new position in Equinix (EQIX). The fund filed a 13G with the SEC revealing that they now own 6.7% of the company.
Coatue owns 3,127,341 shares and filed the disclosure due to portfolio activity on March 8th. Shares of Equinix have rocketed higher in 2012, starting the year at around $100 per share and now trading around $140 per share.
Other large institutional owners of EQIX as of year-end 2011 include Lone Pine Capital, Eminence Capital, Highland Capital Management, and Millennium Management.
Per Google Finance, Equinix is "connects businesses with partners and customers globally through a global platform of data centers, containing dynamic ecosystems and a range of networks."
To see more of Coatue's investments, head to the new issue of our Hedge Fund Wisdom newsletter.
Continuing the stock of the week series, this time around the focus is on why Lee Ainslie's hedge fund Maverick Capital owns Amdocs (DOX). If you missed last week's, be sure to also check out why George Soros owns Comverse Technology.
The following is written by Tsachy Mishal, portfolio manager of TAM Capital Management:
It often happens that when owning a company, I stumble across one of their competitors or another company in their industry and end up owning them as well. I came across Amdocs (DOX) when researching last week's stock of the week, Comverse Technology (CMVT) as they are competitors. Amdocs is a large position for tiger cub Lee Ainslie's Maverick Capital.
Amdocs makes billing and customer relationship software for telecom companies. They are the leader in their industry with 28% market share, three times the share of their closest competitor. Amdocs generally signs 5 to 8 year contracts with their customers so revenue visibility is high. These long term contracts account for 75%-80% of their business.
DOX trades at less than 10 times this year's expected free cash flow and less than nine times next year's (EV/FCF). Profit growth is expected to be in the mid single digits but with share repurchases EPS growth is expected in the mid teens.
What I Like:
- The valuation is very attractive for a company with such high earnings visibility.
- Amdocs repurchased approximately 10% of their shares outstanding last year and is set to do the same again this year.
- No major contracts are set to renew until 2014, making visibility especially good for the next 2 years.
- There are high switching costs to move to a competitor.
- Amdocs is by far the leader in the industry.
What I Don't Like:
- A single customer, AT&T, accounts for 29% of revenue.
- The business is tied to a single industry, albeit a good one.
I originally looked at Amdocs in order to get a comp for Comverse Technology (previous analysis here) but after studying the company I had little choice but to buy a position in it. A market leading company, with high visibility, that is returning cash to shareholders should not be trading at a single digit multiple (EV/FCF).
For past stock of the week entries, check out why Carl Icahn owns WebMD and why George Soros owns Comverse Technology.