Wednesday, January 17, 2018

Greenlight Capital Q4 Letter: New Stakes in Brighthouse Financial, Twitter, Time Warner, Ensco

David Einhorn's Greenlight Capital has released its fourth quarter 2017 letter.  They finished the year up 1.6%.

Greenlight Takes New Stakes in Brighthouse Financial, Twitter, Ensco, Time Warner

The hedge fund firm initiated numerous new positions recently.

The hedge fund's new stake in Brighthouse Financial (BHF) is all about valuation.  The company was spun out of MetLife and they feel analysts have been too negative on BHF's prospects.  They feel shares are trading at a 40-50% discount to peers and note management is incentivized if shares appreciate.

Einhorn's firm also jumped back into Time Warner shares (TWX), a previous holding.  They utilized volatility in the name to re-establish a stake as the US government has opposed their sale to AT&T (T).  Greenlight feels the government has a weak anti-trust case but even if they somehow win, shares are still cheap and the company has strategic options.

Greenlight also entered Twitter (TWTR) shares with their thesis being that the user experience has improved yielding growth in new users and time spent on the platform.  They feel the company now has a better pitch to advertisers, yielding revenue growth.  The company has around a 25% margin gap to other social media peers and Greenlight feels they can close the gap.  (Note: David Einhorn is on Twitter, though he doesn't post about the market, usually just poker.)

Embedded below is Greenlight Capital's Q4 2017 letter:



For more from this manager, be sure to also check out David Einhorn's recent investment talk at  Oxford Union.


Thursday, January 11, 2018

Warren Buffett Full Interview: On Succession, Stock Market, Bitcoin & More

Berkshire Hathaway's Warren Buffett was just interviewed by CNBC and here's a summary as well as the full video of the interview.

On succession:  He says Berkshire will eventually be in a period of transition and Ajit Jain and Greg Abel have been named vice chairmen.  While Buffett isn't ready to hang up his hat yet, eventually he will.  He says he's in good health and if that changes he'd let shareholders know.

On stocks right now: "They're not richly valued relative to interest rates."  He says that the tax act is also a huge factor in valuation.  He didn't think that a 21% corporate tax rate was baked into the markets and he highlighted how such a huge change (from the previous 35% rate) is a huge change.  On if he's buying stocks now:  "Net, we're buying ... we're basically buyers over time."  He has a unique position as the cash keeps rolling in for him to invest.

On the economy:  The tax cut will be interesting to see how it affects things as the mix is changing.  He said they've never tried to make money by predicting economic changes.  They've never bought a company or a stock based on macroeconomics.

On interest rates:  The low rates have buoyed the stock market significantly.  It's a strange situation to have the Fed say their goal is 2% inflation and then people buy Treasuries at 1.5% so the government has basically said it doesn't pay to save.

On bitcoin/cryptocurrency:  "In terms of cryptocurrencies generally I can say almost with certainty that they will come to a bad ending.  When it happens or how or anything else I don't know.  If I could buy long-term puts, a 5 year put on everyone one of the cryptocurrencies I'd be glad to do it."  Though it sounds like he wouldn't be outright short given the volatility and potential for uncapped losses (hence using puts would outline exact capital at risk).

On Apple (AAPL):  "The market is not yet saturated for iPhones."  When Buffett himself finally buys an iPhone he joked it will finally be the end of the run.

On Berkshire's cash level:  A little over $100 billion, almost all in Treasury bills.  He normally likes to hold $20 billion so he's got a lot of excess.  He said he wants to put it to work but obviously he hasn't yet.

"If you're buying something because it went up yesterday or last week, that's not a good reason for buying anything."


Charlie Munger then joined the conversation towards the end.  He called both bitcoin and venture capital bubbles.  On the latter, he said there's simply too much capital chasing too many deals.  On the tax cuts, he thinks there's a chance they may work quite well.  He also notes that stocks aren't as cheap as they were (20x vs 15x) but they're probably better than bonds.



Embedded below is the video of Warren Buffett's full hour-long interview with CNBC as well as Munger at the end:

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For more from the Oracle of Omaha, be sure to also check out a rare 1985 interview with Warren Buffett.   And for more from Munger, check out last year's Q&A session he did.