David Gerstenhaber of Argonaut Capital on Risk Management (Interview)

David Gerstenhaber, founder of global macro hedge fund Argonaut Capital, recently sat down with Opalesque TV to discuss risk management, how global macro investing has changed over the years, as well as how he got his start in the business.

Gerstenhaber was interested in markets at an early age and pursued economics as a result of it. He was working at Morgan Stanley in London when he started helping Julian Robertson's Tiger Management with some macro-oriented trades. Robertson then offered him a job and he accepted. After working for three years at Tiger Management, Gerstenhaber went on to found Argonaut Capital.

Risk Management

At Argonaut, he argues that one of their key advantages is their internal psychology about using options. He says, "We love to have asymmetric risk/reward in our favor, but not against us. And so, when we see themes that we have determined are likely to prevail for an extended period of time, we will do our best to structure our investments through options so that we have significant upside but limited downside ... We have a longstanding history of using options to reflect our positions rather than just buy directional risk."

On How Global Macro Investing Has Changed

In the interview, he emphasizes how making "big bets" was almost encouraged back in the day as investors were more tolerant of volatility in search of high returns. He also notes that risk management was not very developed and many investors didn't place a large emphasis on it. After shock events in 1998, the internet bubble, and housing bubble, it's very clear that risk management is very prevalent in global macro investing these days. Louis Bacon of Moore Capital has been known to place emphasis on risk first.

Practicing global macro investing now, Gerstenhaber identifies it as a four-asset class business: foreign exchange, fixed income, commodities, and equity indicies. Ideally, Argonaut wants to have positions in each asset class and offsetting value at risk (VaR) in each one of the asset classes so they aren't exposed to systemic risk. And interestingly enough, Argonaut's typical timeframe for holding an investment is identified as around "half a business cycle."

What is the future for global macro investing?

Gerstenhaber believes the global macro universe is expanding, rather than contracting like other strategies. For instance, he argues that the long/short US equity opportunity set is declining, yet there are more and more managers investing in that strategy each year.

One interesting quote from the interview is when Gerstenhaber said he sees a potential for a "muted rate of return for the long-only investor" in stocks or fixed income. While he's obviously biased since he is in the hedge fund industry and doesn't run long-only money, it's an interesting notion that investors shouldn't expect the same annual returns as they have seen in the past.

Embedded below is a video interview with David Gerstenhaber of hedge fund Argonaut Capital (RSS & Email readers may need to come to the site to watch it):



It's clear that Argonaut places a lot of emphasis on primary research and traveling the globe to craft and refine their investment theses. To see some of the hedge fund's thoughts from this year, check out Argonaut's thoughts on what went wrong in the markets. And for further global macro insight, we posted up Paolo Pellegrini's PSQR Capital last letter to investors before closing.

David Einhorn Talks Gold, Apple (AAPL), Pfizer (PFE), CareFusion (CFN), St. Joe (JOE) & Moody's (MCO)

David Einhorn, manager of hedge fund Greenlight Capital, recently sat down for a rare interview with Consuelo Mack on WealthTrack. The interview encompasses topics ranging from quantitative easing 2, his worries about the financial system, as well as many of his current positions including gold, Pfizer (PFE), Apple (AAPL), CareFusion (CFN) and his shorts of St. Joe (JOE) and Moody's (MCO). Einhorn has returned 22% annualized so it's always worth paying attention to what he has to say.

CareFusion (CFN)

We'll first start with a position that Einhorn hasn't talked much about previously: CareFusion (CFN). This medical device maker was spun-off from Cardinal Health (CAH) and is essentially a mix of various high multiple, high growth, high margin businesses. CFN has an infusion business which Einhorn thinks will benefit due to a competitor (Baxter ~ BAX) having to recall equipment. The Greenlight manager likes that CFN has an opportunity to take market share and a year later receive recurring revenue.

Einhorn says that, "so we think there's an opportunity here for them to expand their revenues, to expand their margins, obviously expand their earnings, and we don't believe that this has been fully adopted by Wall Street, which is very focused on medical devices and health care reform, and all the problems that go within that sector." Interestingly enough, we published an in-depth research report on CareFusion in our new issue of Hedge Fund Wisdom for those of you interested in the full investment thesis.

Apple (AAPL)

Another new position for Einhorn is Apple and we wanted to highlight his comments since he's only briefly mentioned it in a past investor letter. He's admired the company for a while, but has always had a hard time grasping the valuation. Over the summer when shares dipped (he purchased around $248 per share), he was comfortable with the value and pulled the trigger. Overall, he likes the company's growth profile as it has a multiple in the low teens and is unlevered.

Of his AAPL position Einhorn says, "Looking at Apple today, the stock is about $310, or $320 a share. There's about $45 a share in cash. So you're paying about $265 for the business. I think they're going to earn well over $20 a share in the next year, so you're looking at a PE net of the cash in the low teens, which is below a market multiple."

Pfizer (PFE)

This has been a longstanding position for Greenlight Capital so it's always intriguing to re-visit his thesis on this name. He highlights that everyone knows PFE's main issue is that its biggest drug, Lipitor, is coming off of patent. Einhorn feels that after this event the company will still see a lot of earnings. He feels that the company will be able to "sort of cost cut themselves to maintain the profitability that they're promising people, and then when people see that there's still more than two dollars a share of earnings, even without patented Lipitor driving the results, I think there'll be an opportunity for the multiple to improve on those earnings."

St. Joe (JOE)

And lastly, Einhorn revisits his short of St. Joe (JOE). Readers will recall that Einhorn laid out the bear case for JOE at the Value Investing Congress that sent shares spiraling downward. This has been an interesting saga mainly because another guru we track on the site, Bruce Berkowitz of Fairholme Capital, has taken the other side of the trade and is long JOE in size. Einhorn feels that the company trades well above the value of its land.

Embedded below is the video of David Einhorn's entire WealthTrack interview with Consuelo Mack (RSS & email readers will need to come to the site to watch it):



Interesting thoughts from Einhorn all around and it's good to hear elaborations on the theses of some of his investments. You can see what else Einhorn is investing in via our Hedge Fund Wisdom newsletter (new issue just released!) And for more thoughts from this talented hedge fund manager, check out his book: Fooling Some of the People All of the Time.

Soros Fund Management Updates Position in Verigy (VRGY)

George Soros' hedge fund firm has just filed a 13G with the SEC regarding shares of Verigy (VRGY). Per portfolio activity on November 18th, Soros Fund Management has disclosed a 7.24% ownership stake in VRGY with 4,681,790 shares. This is not necessarily a new position for Soros if you drill down the specifics.

The hedge fund disclosed ownership of Verigy 5.25% senior convertible notes due 2014 at the end of the third quarter in their 13F filing. This most recent SEC disclosure notes that Soros owns 6,100 common shares of VRGY and that the other 4,675,690 shares they 'own' are represented should Soros convert their senior notes. So, the hedge fund purchased new common shares recently but still owns convertible notes as well.

Interestingly enough, David Einhorn's Greenlight Capital disclosed a new position in Verigy (VRGY) in the most recent quarter as we already noted in the new issue of our newsletter that was released early last week. You can view the rest of Soros' portfolio in our new issue as well.

Lastly, keep in mind that while Soros Fund Management bears his name, George Soros has recently confirmed that he has no involvement in the day-to-day activity at the fund as those responsibilities fall to Chief Investment Officer Keith Anderson. Soros' sons, as well as other managers, are also responsible for the portfolio activity you see disclosed. For thoughts from George himself, we recommend reading one of his books: The Alchemy of Finance or his other title, The New Paradigm for Financial Markets.

According to Google Finance, Verigy "designs, develops, manufactures and sells advanced test systems and solutions for the semiconductor industry. The Company offers a single platform for each of the general categories of devices being tested: its V93000 Series platform, designed to test System-on-a-Chip (SOC), System-in-a-Package (SIP) and high-speed memory devices; its V6000 Series platform, which is the successor to the V5000 platform, designed to test both flash memory and dynamic random access memory (DRAM) devices, and its V101 platform, designed to test devices, such as 4, 8 and 16-bit micro-controller units (MCUs)."

Other recent portfolio activity from Soros includes boosting its stake in InterOil (IOC) and buying other positions as well.

Hedge Funds Pile Into QR National IPO (ASX: QRN)

A recent Australian initial public offering (IPO) has caught the eye of many prominent hedge funds. QR National (ASX: QRN), Queensland Rail's primarily coal network in Australia, recently became public with the backing of various new hedge fund owners. Shares IPO'd at AUD $2.55 and are now trading around AUD $2.77. It priced at the low end of the range and the Queensland government is left with a 40% ownership stake after the IPO raised $4.5 billion.

Adam Weiss and James Crichton's Scout Capital has disclosed a 5.1% ownership stake in QRN with 124 million shares (around a $316 million stake). We also recently detailed how Scout boosted its stake in Coca-Cola Enterprises (CCE). The Children's Investment Fund has also disclosed a 6.1% ownership stake in QRN with a $316 million position. Overall, 46% of QRN's recently IPO'd shares went to overseas investors with the buzz being that numerous other hedge funds have smaller positions.

Interestingly enough, a lot of domestic Australian long-only fund managers avoided the IPO as many argued it was overpriced. Hedge funds have clearly disagreed. Although we haven't been able to verify it yet, it's been rumored that Richard Perry's hedge fund Perry Capital had also taken a stake in the IPO. QRN is Australia's largest IPO since Telstra (Australia's monopoly phone carrier).

The propensity for hedge funds and investment managers in general to gravitate toward railroad plays is interesting. Some see these companies as attractive due to the oligopolistic nature of the business. Others fancy rails as plays on commodities, energy, or an economic recovery. Hell, Warren Buffett's Berkshire Hathaway even acquired rail company Burlington Northern Santa Fe in its entirety. And in the just released new issue of our Hedge Fund Wisdom newsletter, we see that many managers own shares of rival rail Union Pacific (UNP). And in Australia, this theme continues as QR National seems to be a play on coal.

Taken from the company's website, QR National is "QR National is the largest rail freight haulage operator in Australia by tonnes hauled, operating in key freight sectors and supply chains across the country. We are focused primarily on large, heavy haul rail tasks such as the transportation of coal, iron ore, other minerals, agricultural products and general freight as well as containerised freight."

John Paulson Reduces Cheniere Energy (LNG) Stake

John Paulson's hedge fund firm Paulson & Co has filed an amended 13D with the SEC regarding Cheniere Energy (LNG). Due to portfolio activity on November 22nd through 24th, Paulson has disclosed a 7.3% ownership stake in LNG with 4,209,985 shares. This is a reduction in their stake as they owned 7,461,191 shares back on September 30th at the end of the third quarter.

In the past two months, Paulson has sold 43.5% of its position. The hedge fund firm sold the bulk of the shares at prices of $6.4809 and $6.3208 per share. So while the famed manager has axed his position almost in half, he does still own shares. Keep in mind that you can see the rest of Paulson's latest investments in the just released issue of our newsletter. Additionally, the issue examines the investment thesis of a position Paulson was buying in the quarter. You can check out our latest issue here.

Taken from Google Finance, Cheniere Energy is "an energy company primarily engaged in liquefied natural gas (LNG)-related businesses. The Company owns and operates the Sabine Pass LNG receiving terminal in Louisiana through its 90.6% ownership interest in and management agreements with Cheniere Energy Partners, L.P. (Cheniere Partners). It also owns and operates the Creole Trail Pipeline, which interconnects the Sabine Pass LNG receiving terminal with downstream markets."

Lastly, in other recent commentary from Paulson, he recently said to buy stocks and sell bonds.

Louis Bacon's Moore Capital Starts New Position in Mecom (LON: MEC)

Louis Bacon’s Moore European Capital has opened a new position in publisher, Mecom (LON: MEC). Due to trading on the 16th of November, Moore now control the voting rights of over 5,039,870 shares or 4.45% of outstanding shares. This is not the only position that Moore European Capital have opened recently via the London market. They also started a new position in Collins Stewart (LON: CLST), a financial advisor.

Regarding other recent positions hedge funds have taken in UK markets, we detailed how Larry Robbins' Glenview Capital increased its Punch Taverns (PUB) position and that Odey Asset Management disclosed a short position in Provident Financial (PFG).

Taken from Google Finance – “Mecom Group plc (Mecom) is engaged in the operation of content and consumer businesses in Europe. The Company owns over 300 printed titles and over 200 Websites in its four divisions, with operations in the Netherlands, Denmark, Norway and Poland."

Hedge Fund Wisdom Q3 Issue Now Available!

MarketFolly is pleased to announce that the latest issue of our quarterly newsletter has just been released. The Q3 2010 edition of Hedge Fund Wisdom is 85 pages and includes the following:

- The latest portfolios of 23 prominent hedge funds (3 new funds added)

- Commentary/analysis of their moves: stocks they bought/sold and why

- Hedge Fund "Quick Pitches": Investment thesis summaries on 4 stocks

- Equity Analysis: In-depth research reports on 2 stocks hedge funds bought


To see the completely updated portfolios of top hedge funds, take advantage of our introductory pricing! To pay by credit/debit card, click the 'subscribe' button and then on the next page look for the "Pay using your credit or debit card" link at the bottom. You can also pay via PayPal:

1-Year Subscription (Save 17% with this option)!: $199 per year

Quarterly Subscription: $60 per quarter

What We're Reading ~ 11/24/10

Interview with Meb Faber of World Beta [KirkReport]

It's survival of the smallest for fund of funds [AbsoluteReturn+Alpha]

How to live forever [James Altucher]

A piggyback strategy requires a disciplined approach [AbnormalReturns]

What is going on in the municipal markets? [DistressedDebtInvesting]

"Good enough" with Ken Fisher, Marty Whitman & Warren Buffett [AdvPerspectives]

On how to accumulate information [ResearchPuzzle]

How to read SEC filings on an Amazon Kindle [RationalWalk]

What OpenTable (OPEN) shorts don't talk about [ValueHuntr]

ValueAct Capital to raise $500m, then close to investors [FINalt]

An interview with trader & blogger Charles Kirk [AbnormalReturns]

Welcome to Omaha, Todd Combs [CNNMoney]

An op-ed by Warren Buffett [NYTimes]

Interesting article on Clarium Capital's Peter Thiel [NYPost]

Jim Chanos versus China [Fortune]

New SEC rules for hedge funds [Marketwatch]

Hedge fund forced Novell (NOVL) buyout [WSJ]

Four reasons to buy muni bonds [BusinessInsider]

Bill Ackman Files 13D on Howard Hughes Corp (HHC)

Bill Ackman's hedge fund Pershing Square Capital Management has recently filed an activist 13D on shares of Howard Hughes Corp (HHC). Per the filing (with activity on November 9th), Ackman has revealed a 13.8% ownership stake in HHC with 5,484,684 shares. This figure includes warrants exercisable for 1,916,667 shares. To see Pershing Square's entire updated portfolio, head to the brand new issue of our Hedge Fund Wisdom newsletter that was just released.

Pershing Square received shares of HHC due to their ownership of shares in General Growth Properties (GGP). Upon GGP's emergence from bankruptcy, GGP spun-off various assets in the form of a new company: Howard Hughes (HHC). GGP owners received 0.098344 shares of HHC per every 1 share of GGP owned on November 1st. Ackman also recently updated his ownership stake in GGP.

While Ackman has disclosed a 13.8% ownership in HHC via common stock, his economic exposure to the company is technically much higher at around 28% (including common stock, warrants, and cash settled total return swaps). These swaps give Pershing exposure to an additional 5,399,839 shares, bringing their aggregate economic exposure to 10,884,523 shares of HHC (or 27.5% of the outstanding shares).

Ackman's activist 13D on HHC also attached numerous other documents, including a standstill agreement which effectively caps Pershing's potential ownership stake at 40%. Ackman will also act as chairman of the board for the company.

Taken from Yahoo Finance, Howard Hughes is "a real estate investment and development company, engages in the development and management of retail, commercial, and industrial buildings in North America. Its facilities feature residential, entertainment, mixed use, recreation, culture, and resort components. The company also develops single-family homes, town homes, and condominiums, as well as involves in office buildings and land developments."

Be sure to check out the rest of Ackman's latest investments (and those of 22 other top investors) in our just released new issue of Hedge Fund Wisdom.

Glenview Capital Files 13G on Life Technologies (LIFE)

Larry Robbins' hedge fund Glenview Capital has filed a 13G with the SEC regarding shares of Life Technologies (LIFE). Due to portfolio activity on November 19th, Glenview has disclosed a 5.1% ownership stake LIFE in with 9,450,612 shares. This marks a 17% increase in Robbins' position size since September 30th, as his hedge fund owned 8,077,282 shares at the end of the third quarter.

Robbins is obviously fond of this name and recently pitched it at the Invest For Kids Conference in Chicago. You can see notes from his presentation here. In summary, he sees Life Technologies trading at an attractive valuation and thinks the company should buyback shares. In terms of other recent activity out of the hedge fund, we also detailed how Glenview increased its position in Punch Taverns.

Taken from Google Finance, Life Technologies (formerly Invitrogen Corporation), "incorporated 1989, is a biotechnology tools company. The Company delivers a range of products and services, including systems, instruments, reagents, software, and custom services. Its range of products includes technologies for capillary electrophoresis based sequencing, sequencing, patient care report (PCR), sample preparation, cell culture, ribonucleic acid (RNA) interference analysis, functional genomics research, proteomics and cell biology applications, as well as clinical diagnostic applications, forensics, animal, food, pharmaceutical and water testing analysis."

See What Top Hedge Funds Are Buying & Selling

If you want the most comprehensive hedge fund portfolio tracking out there, then you've come to the right place. Hedge Fund Wisdom is MarketFolly.com's quarterly newsletter created in collaboration with other hedge fund analysts. Market Folly's expert analysis is your go-to source for hedge fund updates and our latest issue will be released early next week. Here's what you'll find in the upcoming third quarter issue:

- 80 pages detailing the latest portfolios of 23 top hedge funds
- Expert commentary detailing what they bought & sold and why
- In-depth equity analysis of 3 stocks hedgies were buying

Portfolios covered in this issue of Hedge Fund Wisdom include:

Seth Klarman (Baupost Group)
Warren Buffett (Berkshire Hathaway)
David Einhorn (Greenlight Capital)
Stephen Mandel (Lone Pine Capital)
David Tepper (Appaloosa Management)
Bill Ackman (Pershing Square Capital Management)
Bruce Berkowitz (Fairholme Capital)
Chase Coleman (Tiger Global Management)
John Burbank (Passport Capital)
Leon Cooperman (Omega Advisors)
Dan Loeb (Third Point)
John Griffin (Blue Ridge Capital)
John Paulson (Paulson & Co)
Lee Ainslie (Maverick Capital)
Julian Robertson (Tiger Management)
George Soros (Soros Fund Management)
Roberto Mignone (Bridger Management)
Chris Shumway (Shumway Capital Partners)
Richard Perry (Perry Capital)
Larry Robbins (Glenview Capital)

...and we added 3 new hedge funds this quarter:
Andreas Halvorsen (Viking Global)
Thomas Steyer (Farallon Capital)
Carl Icahn (Icahn Capital)

Take advantage of our special introductory offer! You can pay via credit card, debit card, or PayPal by clicking "subscribe" below (email readers please come to the site to do so):

1-Year Subscription (Save 17% with this option!): $199/year

Quarterly Subscription: $60/quarter

*To pay by credit/debit card, click the "subscribe" button and then on the next page look for "Pay using your credit or debit card" at the bottom.

Mandel's Lone Pine Capital Starts New Position in Towers Watson (TW)

Stephen Mandel's hedge fund Lone Pine Capital has disclosed a brand new position in Towers Watson (TW) due to portfolio activity on November 1st, 2010. Per a 13G filed with the SEC, Lone Pine now shows a 4.0% ownership stake in TW with 1,935,435 shares. For the rest of Lone Pine's updated third quarter portfolio, subscribe to our Hedge Fund Wisdom newsletter as our next issue is only days away.

Mandel founded Lone Pine Capital after previously working at Julian Robertson's Tiger Management and Goldman Sachs. His hedge fund is named after a historical lone pine tree at his alma mater, Dartmouth College. In terms of other recent activity, Lone Pine also increased its Polo Ralph Lauren (RL) stake.

Taken from Google Finance, Towers Watson is "a global professional services company, which helps organizations improve performance through people, risk and financial management. The Company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management."

Bill Ackman Updates General Growth Properties (GGP) Stake

Bill Ackman's hedge fund Pershing Square Capital Management has filed a 13G on General Growth Properties (GGP). This comes as the company has exited bankruptcy, spun off the Howard Hughes Company (HHC) and now trades as 'new' GGP shares. As such, Ackman discloses a 9.34% ownership stake in the new General Growth Properties entity with 89,237,316 shares.

This 13G filing replaces a previous activist 13D filing on the 'old' GGP entity. This ownership calculation in new GGP is based on 962,622,559 shares of common stock outstanding as of September 30th, 2010 as reported in Form S-11.

Ackman has labeled this the best investment he's ever made. To see what else is in his portfolio in the third quarter update, head to our Hedge Fund Wisdom newsletter. For other recent investment conference commentary from Pershing Square, we detailed how Ackman is bullish on housing.

Taken from Google Finance, General Growth Properties is "a self-managed real estate investment trust (REIT). The Company has ownership interest in, or management responsibility for, over 200 regional shopping malls in 43 states, as well as ownership in master planned communities and commercial office buildings."

Joel Greenblatt's Recommended Reading List

Teaching a class on Value and Special Situation Investing at Columbia's Business School, Joel Greenblatt provided a recommended reading list and we wanted to detail this below. Greenblatt is the founder of Gotham Capital, a noted value investor, and the founder of the Value Investor's Club as well. Here's his recommended reading list:

You Can Be a Stock Market Genius by Joel Greenblatt. Baupost Group's Seth Klarman also actively recommends this book as it examines catalyst based investing such as spin-offs, mergers, risk arbitrage, etc in an effort to exploit market inefficiencies.

Security Analysis on Wall Street by Jeffery Hooke. A great book we've also read that highlights how to analyze a stock in step-by-step fashion. If you're in the markets professionally or want to refine your valuation skills, this is the textbook for success.

New Finance by Robert Haugen. This book focuses on evidence, causes, and the history of overreactive pricing in the stock market.

Value Investing: From Graham to Buffett and Beyond by Bruce Greenwald. This book is authored by another well-known Columbia Business School professor.

The Essays of Warren Buffett by Lawrence Cunningham. Self-explanatory and a great read.

The Little Book That Still Beats the Market by Joel Greenblatt. Application of a formula that seeks out good businesses trading at bargain prices.

Contrarian Investment Strategies by David Dreman. Teaches and advocates going against the crowd by buying stocks that are out of favor and selling the 'darling' stocks.

What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time by James O'Shaughnessy. Examines three decades of stock market data to demonstrate the viability of 15 of the most common investment strategies.

The Intelligent Investor by Benjamin Graham. Considered to be the best book on value investing out there, this title is also recommended by the likes of investing greats Warren Buffett and Seth Klarman.

---

That wraps up Joel Greenblatt's recommended reading list. This joins our coverage of other books advocated by prominent investors such as:

- Seth Klarman's recommended reading list (Baupost Group)

- Dan Loeb's favorite reads (hedge fund Third Point LLC)

- Hedge fund Blue Ridge Capital's picks

What We're Reading ~ 11/12/10

Interview with hedge fund legend Michael Steinhardt [Benzinga]

Analyst from Druckenmiller's fund preps new hedge fund [AbsoluteReturn+Alpha]

The latest on Phil Falcone's hedge fund [Forbes]

Clarium Capital down 17% this year [FINalternatives]

Rumors of death of mean reversion are exaggerated [StreetCapitalist]

Appaloosa Management's returns for this year [Dealbook]

Alumni of Stan Druckenmiller's firm starting new hedge fund [Bloomberg]

A slightly old but interesting interview with Galtere International's Renee Haugerud [Barron's]

Doug Kass says to short Fastenal (FAST) [TheStreet]

Klarman's Baupost Group returning some cash to investors [BusinessInsider]

The biggest lesson I learned from running a hedge fund [Forbes]

Study says big hedge funds generate less alpha [WSJ]

Soros Fund Management to open Hong Kong office [Reuters]

Junk bonds are getting pricey [WSJ]

Hedge fund FrontPoint cautioned manager on trades [WSJ]

Notes From Invest For Kids Conference: Ackman, Robbins, Whitney, Zell

The Invest For Kids Conference took place last week in Chicago and was a resounding success, raising over $1 million to benefit local children. We wanted to post up a quick summary of the event, including in-depth notes below from the prominent hedge fund managers that presented. Speakers included Bill Ackman (Pershing Square), Larry Robbins (Glenview Capital), Meredith Whitney, and more. Here are some of their latest investment recommendations:

Bill Ackman of Pershing Square Capital Management: Instead of doling out equity specific investment advice, Ackman instead turned to real estate. At the conference, he proclaimed his bullishness on the housing market and said to buy single family homes, citing home affordability at its highest level in many years. The low interest rate environment obviously helps this but he cautions rates won't stay low for long. This is the same recommendation as John Paulson who said to buy housing recently as well. Stay tuned next week as we'll examine Ackman's latest portfolio in our newsletter, Hedge Fund Wisdom. For our recent posts on the manager, head to Ackman's potential thesis on JC Penney (JCP).

Meredith Whitney of Whitney Advisory Group: Whitney harped on the issues found on the state and local government level regarding their fiscal problems. In short, she feels that municipalities are in trouble, especially New Jersey, Illinois, Massachusetts, and Michigan.

William Browder of Hermitage Capital: Browder focused on emerging markets and an inflationary environment. As such, he tossed out Koza Gold as an idea, a miner in Turkey. He cites their cheap valuation and cheap production costs at $320 an ounce. He also recommended Renhe Commercial Holdings, a shopping mall developer in China.

Larry Robbins of Glenview Capital: Robbins has been presenting the case for McKesson (MCK), Express Scripts (ESRX), and Life Technologies (LIFE) as of late. This conference was no different as he again pointed out the attractiveness of each investment. ESRX is well positioned for the generic drug boom in 2012 and Robbins likes their $6 billion in cash. He fancies LIFE due to its valuation and thinks the company should buyback shares. MCK is attractive due to the company's use of cash to accelerate EPS growth. He also cautioned about mortgage put-backs and appears to be short two banks with high exposure there. Head to our Hedge Fund Wisdom newsletter to view the rest of Glenview's portfolio. We also recently detailed how Glenview increased its position in Punch Taverns.

Joshua Friedman of Canyon Partners: Friedman's suggestion was to play the Lehman Brothers bankruptcy but cautions that it's a complex situation, to say the least. More detailed thoughts are found below.

John W. Rogers of Ariel Investments: Rogers offered three ideas: CBS (CBS), Viacom (VIA), and Gannett (GCI), the last of which he likes the best. He believes a natural move for CBS would be to go private later on as Sumner Redston ages. He also believes Redstone could push VIA private as well. Of the two, Rogers says VIA is cheaper and has solid upside. On GCI, Rogers argues that despite the unpopular print media business, he has been buying on the way down. In a sense, this is an economic recovery play as ad sales pick up.

Doug Silverman of Senator Investment Group: Possibly the most telling information from Silverman's presentation was the fact that they had previously focused on credit the past few years but are now focused on value equities. In terms of specific recommendations, Senator likes rental car companies at present. He referenced the bidding war for Dollar Thrifty (DTG) and sees consolidation in the space. Senator owns 6% of Avis Budget (CAR) and then a lot of Hertz (HTZ) shares as well. You can read his detailed thoughts below.


Numerous other speakers presented at the Invest For Kids Conference and we highly recommend reading the full set of notes attached. Embedded below are the notes, courtesy of Simoleon Sense:



You can download a .pdf copy here.

Overall the second annual conference was a resounding success, raising over $1 million to benefit local children. And, the various hedge fund managers that spoke presented some interesting investment ideas.

Patrick McCormack's Tiger Consumer Starts Skechers (SKX) Stake

Patrick McCormack's hedge fund Tiger Consumer Management has just filed a 13G with the SEC regarding Skechers USA (SKX). Due to portfolio activity on October 28th, Tiger Consumer has revealed a 5.69% ownership stake with 2,060,317 shares. This is a brand new position for the hedge fund as they did not own shares as of their last SEC disclosure on June 30th. Other activity out of McCormack's fund includes an increase in their Medifast (MED) position a few months ago.

What's interesting about McCormack's Skechers stake is that it's not the first time he's owned it. Tiger Consumer showed a position in SKX back in the first quarter of 2010. But then in the second quarter, disclosures revealed they had sold completely out of the position. But now in the fourth quarter, they own SKX again so we'll have to see how long they own it this time around.

Tiger Consumer is one of the many firms seeded by Tiger Management founder, Julian Robertson. And as its fund name implies, Tiger Consumer focuses primarily on the consumer sector.

Taken from Google Finance, Skechers "design and market Skechers-branded contemporary footwear for men, women and children under several lines. addition to Skechers-branded lines, the Company also offers several designer, fashion and street-focused footwear lines for men, women and children. These lines are branded and marketed separately from Skechers and appeal to specific audiences. Its brands are sold through department stores, specialty stores, athletic retailers, and boutiques as well as catalog and Internet retailers."

Eric Mindich's Eton Park Capital Raises Lonrho Stake (LONR)

Eric Mindich's hedge fund Eton Park Capital have increased their long position in Lonrho (LON: LONR). Due to trading in UK markets on October 29th, Eton Park has boosted their stake from 5.97% of Lonrho shares outstanding up to a 9.42% ownership stake. LONR is an interesting play on Africa as the company owns numerous businesses on that continent. Regarding other recent activity from Mindich's fund, you can see an update on Eton Park here.

Taken from Google Finance, Lonrho is "a pan-African company with a portfolio of investments in agribusiness, infrastructure, hotels, transportation and support services. The Company's agribusiness sector include Rollex 51% holding. Its infrastructure portfolio of investments include Luba Freeport Limited 63% holding and KwikBuild Corporation Limited 70% holding. Its transportation portfolio includes Fly540 Angola 60% holding and Fly540 Ghana 60% holding. Its hotel portfolio include Hotel Cardoso in Mozambique 59% holding plus management contract and The Grand Karavia Hotel in Lubumbashi 50% holding plus management contract. Its support services include Bytes & Pieces 65% holding, Lonrho IT 50% holding plus board control and CES Zambia 45% holding plus Board control."

You can scroll through all our past coverage of Eric Mindich's hedge fund here.

Hedge Fund Lansdowne Reduces Short Position in Aviva

UK based hedge fund Lansdowne Partners has reduced their short position in Aviva (LON: AV). Paul Ruddock and Stephen Heinz's hedge fund have gone below the -0.25% shares outstanding threshold, meaning that they no longer have to disclose the position to UK regulators.

Just because they've reduced the short position does not mean they've covered entirely. In fact, they've gone below this threshold once before already this year. Here is a timeline of Lansdowne's short in Aviva (AV):

February 2009: Short -0.34% of shares outstanding
March 2010: Short reduced below the -0.25% reporting threshold
June 1th, 2010: Increased short position to -0.49% of shares outstanding
November 2010: Reduced below the threshold again

So, it's anyone's guess as to whether they've just reduced position size or covered completely here, we won't know unless Lansdowne comments on the position or adjusts their size again. In the past, we've taken a look at Lansdowne's other short positions as well.

As noted in our latest hedge fund performance update, Lansdowne was -3.87% for the year at the end of September. In terms of other portfolio activity from the hedge fund, we saw them acquire a position in Central Asia Metals (LON: CAML).

Taken from Google Finance, Aviva is "engaged in the provision of financial products and services, focused on long-term insurance and savings business, fund management and general insurance and health."

To see what else this hedge fund has been up to, check out all our posts on Lansdowne Partners here.

Louis Bacon's Moore Capital Starts New Collins Stewart Position

Louis Bacon's global macro hedge fund Moore Capital Management has disclosed a new position in Collins Stewart (LON: CLST) traded in UK markets. Due to trading on the 2nd of November, Moore now holds 3.29% of CLST's shares outstanding. It must also be noted that Bacon's entire position has been acquired via the Contract For Difference market (CFDs). If you're unfamiliar with this instrument, we've penned a primer on CFDs here.

Though we haven't seen their investor letters as of late, we detailed Moore's first quarter letter here for those interested. Moore is one of the premier global macro funds out there as Bacon has been fixated on risk management as the path to success.

Regarding other hedge fund activity in UK markets, we just posted up that Larry Robbins' Glenview Capital raised its stake in Punch Taverns (PUB) and that Odey Asset Management disclosed a short position in Provident Financial (PFG).

Taken from Google Finance, Collins Stewart plc is "a United Kingdom-based company. It is an independent financial advisory group servicing corporates, financial institution, private equity houses, private clients, governments and quasi-governmental bodies.

The Company's services covers institutional stockbroking, United Kingdom, European and United States research, corporate broking, corporate finance, debt capital markets, restructuring and debt advisory services and private client wealth management. The Company has four operating divisions: Wealth Management, Securities, Corporate Broking and Advisory. Wealth Management is a portfolio manager and stockbroker with a focus on administering assets. The Securities division offers a research, sales and execution service to institutional clients across Europe and North America. It is a distributor of small and mid-cap equity, both primary and secondary, and specializes in raising such capital. Its corporate advisory firm Hawkpoint, provides advisory services."

Find out what other foreign positions hedge funds have moved into with our coverage of UK markets.

Tom Brown's Second Curve Capital Almost Triples Position in Banner Corp (BANR)

Tom Brown's hedge fund Second Curve Capital has filed a 13G with the SEC regarding shares of Banner Corp (BANR). Due to portfolio activity on November 2nd, Second Curve has disclosed a 5.3% ownership stake in with 5,865,000 shares. This almost triples their position size as they owned only 2,000,000 shares back on June 30th. In terms of other portfolio activity from this hedge fund, we detailed how Tom Brown was buying more CompuCredit (CCRT) as well.

Taken from Google Finance, Banner is "a bank holding company. The Company is engaged in the business of planning, directing and coordinating the business activities of its wholly owned subsidiaries, Banner Bank and Islanders Bank. Banner Bank is a Washington-chartered commercial bank that conducts business from its main office in Walla Walla, Washington."

To see the latest stocks hedge funds are buying, stay tuned to our daily coverage of SEC filings.

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]

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.

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.