Sir John Templeton's 16 rules for investment success [Big Picture]
Hedge funds correlation with S&P 500 extremely high [ValueWalk]
The greatest risk of all [Above the Market]
10 lessons from the 1987 stock market crash [Marketwatch]
Black Monday 25 years later [HFI]
A write-up on Chimera [Capital Observer]
Moore Capital's Coffey bows out [BusinessWeek]
Hedge funds reach record size thanks to recent strong returns [Reuters]
Lifting ad ban a boon for hedge funds, less so for advertisers [WSJ]
PDT Partners launches with 3% management & 35% performance fee [HFI]
Caxton Associates to lower fees on macro fund [WSJ]
SEC charges hedge fund with exaggerating returns [MarketWatch]
China's sovereign fund favors big hedge fund managers [BusinessWeek]
Emerging market hedge funds stand out in mediocre year [Reuters]
Some hedge funds seem like pirates, this one actually stole a ship [TheAtlantic]
Good writing is good for business [Investment Writing]
Friday, October 19, 2012
Sir John Templeton's 16 rules for investment success [Big Picture]
Larry Robbins' hedge fund Glenview Capital has filed a Form 4 with the SEC regarding their position in Tenet Healthcare (THC). Per the filing, they've disclosed ownership of 13,639,339 shares. This share total also reflects the 1:4 reverse stock split the company completed on October 10th.
Glenview purchased 34,649 shares on October 15th at a weighted average price of $23.91 and 398,734 shares on October 16th at a weighted average price of $23.99. We've previously highlighted why Glenview likes Tenet.
In addition to the company's reverse split, Tenet also this month confirmed they would buy back up to $500 million in stock, issue $800 million in new debt, as well as use $400 million toward potential acquisitions.
Robbins' firm has also been long other hospital/healthcare plays such as HCA (HCA), Health Management (HMA), and Lifepoint (LPNT). Of the basket, THC seems to be their largest bet.
Per Google Finance, Tenet Healthcare is "an investor-owned health care services company whose subsidiaries and affiliates own and operate acute care hospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities. Its core business is focused on providing acute care treatment, including inpatient care, intensive care, cardiac care, radiology services and emergency medical treatment, as well as outpatient services."
For more on this hedge fund, click here for Glenview's activity.
Steve Mandel's hedge fund firm Lone Pine Capital recently filed an amended 13G with the SEC on shares of Kinder Morgan (KMI). Per the filing, Lone Pine has disclosed a 9.1% ownership stake in KMI with 71,780,836 shares.
Their ownership stake is actually comprised of just over 17.6 million shares of common stock and over 54.1 million Kinder Morgan warrants (explained below). This means that their actual position size remains unchanged since the end of the second quarter when they filed their 13F with these same totals.
It's worth noting that their stake in Kinder Morgan came by way of the El Paso merger. Lone Pine originally had a large stake in EP and when the company completed its deal, Mandel's firm received KMI shares, cash and KMI warrants (KMI-WS or KMIIV depending on broker).
Due to the deal, KMI now expects its dividend per share to grow at an average annual rate of 12.5% through 2015, according to their recent announcement.
Kinder Morgan Warrants
Lone Pine owns just over 54.1 million warrants as of this most recent disclosure and this is the same amount of warrants they've owned since the second quarter.
Since completion of the merger between EP and KMI, the warrants have doubled in value to $3.86 while KMI shares are up around 7%. A warrant gives the owner the right to buy 1 share of KMI at $40 and they expire in May 2017 (KMI currently trades just over $35).
Kinder Morgan in the past announced they were buying back $250 million in warrants. In their Q3 conference call, they mentioned they have bought back $138 million worth of warrants and will continue to buy up until the $250 million mark.
At the end of Q2, Lone Pine was the largest institutional holder of these warrants. Other large owners at the time include Brookside Capital, Soroban Capital, Hound Partners, Hutchin Hill Capital, Tiger Management, King Street Capital, Eton Park Capital, and Farallon Capital among many more.
Lone Pine is also the sixth largest institutional holder of KMI common stock as well. So, it will be interesting to see what Lone Pine does with their various KMI positions in the future and whether or not other major hedge funds continued to hold in Q3.
About Kinder Morgan
Per Google Finance, Kinder Morgan "owns and manages a diversified portfolio of energy transportation and storage assets. The Company operates in five business segments: Products Pipelines-KPM, Natural Gas Pipelines-KMP, CO2-KMP, Terminals-KMP and Kinder Morgan Canada-KMP."
For more from this hedge fund, we've detailed Lone Pine's portfolio activity here.
Carlo Cannell's investment firm Cannell Capital has just filed a 13G with the SEC on Valuevision Media (VVTV). Per the filing, Cannell has revealed a 5.05% ownership stake in VVTV with shares.
This marks an increase in their position by 121,994 shares. Cannell owned just over 2.3 million shares at the end of the second quarter.
The filing indicates the date of trading activity that triggered this disclosure is listed as August 29th, 2012. The fine print of the SEC filing also points out that Cannell Capital's ownership stake comes as a result of owning shares for various entities it is the investment adviser or general partner of.
Per Google Finance, Valuevision Media is "a multichannel electronic retailer that markets, sells and distributes products to consumers through television, telephones, online, mobile and social media. The Company's primary form of product exposure is its round-the-clock television shopping network, ShopNBC, which is distributed primarily through cable and satellite affiliation agreements, and markets brand name and private label products in the categories of Jewelry and watches; home and electronics; beauty, health and fitness, and fashion and accessories."
You can view past portfolio activity from Cannell Capital here.
Warren Buffett's Berkshire Hathaway has continued to buy shares of DaVita (DVA), according to two separate Form 4's filed with the SEC in recent days. We've previously highlighted how Berkshire was buying DVA late last month.
The most recent batch of SEC filings show that Buffett's conglomerate now owns 10,547,040 shares. These trades took place on October 10-12th as well as the 16th and 17th.
Berkshire was buying in the $108.28 to $111.2125 range (using weighted average prices). The bulk of Berkshire's purchase comes around $109. In total from the two filings, Berkshire has purchased 281,525 additional shares of DaVita.
While this position size has become much larger over time, it seems likely that new portfolio manager Ted Weschler is responsible for the idea as it was one of his big holdings at his previous hedge fund. And if you're a reader of our premium newsletter, you would have known that DVA was a consensus buy among hedge funds back in Q2.
Given that Berkshire nowadays focuses on buying great companies at a good price, it's interesting to see them continuing to buy shares even while DVA approaches 52-week highs. If they assume that DVA will grow 20% annually, perhaps they're less concerned about valuation at current levels. On the other hand, some investors have pointed to DVA's dependence on government payments as a potential negative.
Per Google Finance, DaVita is "a provider of dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD)."
For more on Berkshire's leading man, head to notes from Buffett's meeting with MBA students.
Thursday, October 18, 2012
Investment conference season is in full swing and up next on the circuit is the Great Investors' Best Ideas Investment Symposium in Dallas, Texas.
The sixth annual event will take place on Tuesday, October 30th, at the Winspear Opera House. All proceeds will be donated to the Michael J. Fox Foundation for Parkinson's Research and the Vickery Meadow Youth Development Foundation. You can register for the event by clicking here.
Since inception, the event has raised more than $6 million. Founded by Shad Rowe (Greenbrier Partners) and John Neill (Telesis Company), the event's goal is to "enlighten, inspire and inform attendees while raising much-needed funds for two worthy causes."
The panel of speakers at this symposium features prominent hedge fund managers, all of whom have been featured on Market Folly at one point or another. Here's your chance to hear all of them speak at one event:
David Einhorn (Greenlight Capital)
Bill Ackman (Pershing Square Capital)
Kyle Bass (Hayman Capital)
Jim Chanos (Kynikos Associates)
Lee Cooperman (Omega Advisors)
Boone Pickens (BP Capital Management)
Michael Price (MFP Investors)
Clint Carlson (Carlson Capital)
Rusty Rose (Cardinal Investment Company)
Moderator: Gretchen Morgenson of The New York Times
Date & Time: October 30th, 2012 from 2:00 p.m. to 6:00 p.m. with a cocktail reception afterwards
Location: Dallas, TX at the Winspear Opera House
Registration Form: Click here to download the .pdf
The GIBI registration form is also embedded below:
This should be a fantastic event both for investment ideas and networking. Market Folly will be attending so we encourage everyone to come say hi and to support some great causes. You can learn more and register for the event by clicking here.
Tuesday, October 16, 2012
Market strategist Jeff Saut's latest weekly commentary is entitled "Losses?!" where he focuses on, you guessed it, the importance of managing the red side of your portfolio. Saut says,
"What determines your stock market performance is not how you manage your winners, but how you manage your losers."
He then cites legendary hedge fund manager Paul Tudor Jones of Tudor Investment Corp, who said that: "I'm always thinking about losing money as opposed to making money; focus on protecting what you have."
Warren Buffett's rules of investing echo these same sentiments and are succinctly summarized as follows:
"Rule number one: never lose money. Rule number two: never forget rule number one."
What's interesting is that these three investors/traders all have very different approaches, yet they're still preaching the same message. Saut is more of an active investor, Tudor Jones is a trader, and Buffett is more of a 'buy and hold' investor. Yet, despite their differences, they all follow this same discipline.
So many times, investors are focused on their winners and the potential upside in an investment. Great investors, on the other hand, focus on the downside and managing their losers.
Embedded below is Saut's latest market commentary:
You can download a .pdf copy here.
For more from this strategist, we recently posted up Saut's presentation on current economic takeaways.
Bruce Berkowitz of Fairholme Capital recently appeared on Consuelo Mack's WealthTrack to talk about his approach and his investments.
Berkowitz on Portfolio Concentration
Berkowitz said that, "The history of success, those who have succeeded well... they are focused on few activities. He also went on to ask: "Why would you possibly want to buy your 10th best idea, if you can buy more of your best idea?" He believes it makes sense to diversify more if you have less confidence in your picks though.
The Fairholme man doesn't think you need more than 10 stocks in a portfolio. He said that you only need "a few good ideas" in a lifetime to do extremely well. He likes to invest over the long-term and typically looks at investments with a five-year horizon.
"Ignore the crowd" is Berkowitz's investing mantra. At the time he made his AIG investment, he was definitely following that saying. Nowadays, AIG is perhaps becoming more crowded as investors come around to the name and the government sells down its stake. We've talked about how various hedge funds have been buying AIG this year.
We've posted up Berkowitz's AIG thesis as well as Glenn Tongue's presentation on AIG from the recent Value Investing Congress for more in-depth color on the name.
Berkowitz also has a large holding in Bank of America (BAC) as well, noting that many investors aren't touching it until "uncertainty" lifts. Speaking about his financial purchases, he says he bought "systemically important companies at a fraction of their liquidating values."
Here's a look at Fairholme Fund's top three holdings as of the end of September:
1. AIG (AIG): 36.2% of fund
2. Sears Holdings (SHLD): 10.8%
3. Bank of America (BAC): 9.9%
Embedded below is the video of Berkowitz's interview:
For more on this investor, check out the following resources from Berkowitz himself:
- Berkowitz's MBIA investment thesis
- Berkowitz's Sears thesis
- Fairholme's presentation on Bank of America
FPA Crescent Fund's Steve Romick recently appeared on CNBC's Squawk Box to talk about his approach and his top two stock picks. FPA has returned 19.7% over the past year and has seen 9% annual returns over the past decade.
The fund manager likes Renault (RNO), since it's out of favor in Europe at the time. He cites the company's stakes in Nissan, Volvo, and Daimler as being worth more than the value of Renault. They're long RNO and short Volvo & Nissan, saying that "the market is paying us to own Renault."
OmniCare (OCR) was his other pick as he argued the business will benefit from the aging of America and new management. Sticking with the healthcare space, we've also posted up on potentially why Romick owns WellPoint (WLP) as well.
He also likes farmland is his thesis there is that it will benefit in an inflationary environment (and decline in the US dollar). He likens it to gold, but unlike the metal, he says it has a positive return and no cost of carry. They couldn't own as much of it as they want due to liquidity.
We've detailed in the past how Michael Burry has advocated owning farmland in the past. Burry, if you're not familiar, was one of the investors that profited from the subprime bubble.
FPA's Investment Approach
He mentioned that his goal is to "provide equity rates of return with less risk than the market." They invest across asset classes. While equities are the largest portion of their portfolio, they also do high yield bonds, mortgage home loans, farmland, etc. They currently hold around 30% in cash as well.
Romick argues against owning bonds at the moment, save for some corporate bonds. Past posts on this site have highlighted how Omega Advisors' Leon Cooperman has been outspoken against bonds.
Embedded below is the video of Romick's interview with CNBC:
Romick will be presenting new investment ideas at the Value Investing Congress in Las Vegas next May and our readers receive a discount to the event here.