Friday, October 8, 2010

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Soros Fund Management Increases Plains Exploration & Production (PXP) Position

George Soros' firm, Soros Fund Management, recently filed a 13G with the SEC regarding shares of Plains Exploration & Production (PXP). Due to portfolio activity on September 27th, 2010, Soros has disclosed a 5.03% ownership stake in PXP with 7,051,815 shares.

This marks a 38.5% increase in their position size, as they owned 5,091,315 shares in their last disclosure detailing positions as of June 30th, 2010. Plains Exploration is a name Soros Fund Management has seemingly long been involved in, holding a position for many quarters now. To see the rest of Soros' investments, view his portfolio in Hedge Fund Wisdom, our brand new publication.

Taken from Google Finance, Plains Exploration & Production is "an independent oil and gas company engaged in the activities of acquiring, developing, exploring and producing oil and gas properties primarily in the United States. The Company owns oil and gas properties with principal operations in Onshore California, Offshore California, the Gulf Coast Region, the Gulf of Mexico, the Mid-Continent Region and the Rocky Mountains. It also has an interest in an exploration block offshore Vietnam."

In terms of other recent activity from Soros, we see that his hedge fund has been buying Exar Corp (EXAR) as well.

Bill Ackman Starts New Activist Position in J.C. Penney (JCP)

Bill Ackman's hedge fund just filed a 13D with the SEC regarding shares of J.C. Penney (JCP). Due to portfolio activity on September 28th, 2010 Pershing Square has disclosed a 16.5% stake in JCP with 39,075,771 shares. This is a brand new position for Ackman's hedge fund and the 13D signifies activist intent. To see the rest of Pershing's portfolio, head to our newsletter: Hedge Fund Wisdom.

Breaking down his over $900 million position, we see that Pershing Square started buying common stock around $20 in mid-August. Ackman also owns 4,156,700 shares of common stock underlying listed American-style call options purchased yesterday (October 7th). These options have strike prices ranging from $20 to $30 with two main expiration dates: May 21, 2011 and January 21, 2012. The hedge fund's largest individual option position (by underlying share count) is in the May 2011 $27 calls. They also own large positions in May 2011 calls at strike prices of $25, $26, and $28. You can view Pershing's trades in JCP here.

Pershing also has economic exposure to 602,600 notional shares of common stock under cash-settled total return swaps. These swaps have an expiration date of April 13, 2012 with a conversion/exercise price of $29.29. This exposure technically brings their ownership up to 16.8% of the company with aggregate economic exposure to 39,678,371 shares.

Pershing's filing interestingly also notes that entities tied to Vornado Realty Trust (VNO) are filing a separate 13D reporting beneficial ownership as well. Ackman believes shares of J.C. Penney are undervalued and an attractive investment. Pershing expects to engage in discussions with management alongside with Vornado in connection with their respective investments in the company.

Given Vornado's concurrent involvement and Ackman's past experience with real estate as well as his investment in fellow retailer Target (TGT), it would seem as though they are approaching their JCP investment as some sort of real estate play. You'll recall that in the past Ackman had proposed to put Target's land into a REIT and spin it off. We'll have to wait and see what Ackman's exact thesis is and we have a feeling this is the investment he'll be talking about at the Value Investing Congress next week.

In other recent activity from the hedge fund, we saw that Pershing Square received warrants from Borders Group (BGP) and also bought BP (BP) credit default swaps in the second quarter.

Taken from Google Finance, J.C. Penney is "a retailer, operating 1,108 JCPenney department stores in 49 states and Puerto Rico as of January 30, 2010. Its business consists of selling merchandise and services to consumers through its department stores and Direct (Internet/catalog) channels. JCPenney sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside JCPenney and home furnishings."

To see the rest of Ackman's investments, as well as the portfolios of other prominent hedge funds, check out our newsletter: Hedge Fund Wisdom.

Bruce Kovner's Hedge Fund Starts New Veeco Instruments (VECO) Stake

Bruce Kovner's global macro hedge fund Caxton Associates recently filed a 13G with the SEC regarding shares of Veeco Instruments (VECO). Due to portfolio activity on September 28th, 2010, Caxton Associates has disclosed a 5.3% ownership stake in VECO with 2,168,800 shares. This is a brand new position for the hedge fund as they did not own it as of June 3oth. Kovner of course has graced the pages of Forbes' billionaire list due to his success as a hedge fund manager.

Taken from Google Finance, Veeco Instruments is "designs, manufactures, markets and services enabling solutions for customers in the high brightness light emitting diode (HB LED), solar, data storage, scientific research, semiconductor and industrial markets."

To see what hedge funds have been buying & selling, scroll through our latest coverage of SEC filings.

What We're Reading ~ 10/8/10

What to expect this earnings season [Pragmatic Capitalism]

McGuire, ex-Pershing Square, to launch hedge fund [FINalternatives]

Google (GOOG): Value? Growth? Try both [Motley Fool]

Revisiting the post re-org equity of Visteon (VSTOV) [DistressedDebtInvesting]

Classic Wall Street quotations remixed for 2010 [ReformedBroker]

A look at John Malone of Liberty Media [Street Capitalist]

Why Yahoo (YHOO) is 23% undervalued & should break itself up [Cautious Bull]

Why did Falcone sell off half his Inmarsat stake? [Teri Buhl, Forbes]

Our coverage of Harbinger's Inmarsat regulatory filings [Market Folly]

Interview with Farnam Street [NewRulesOfInvesting]

China Biotics (CHBT) is a fraud [Citron Research]

Macro forces confound stockpickers [WSJ]

The bullish cash for Take-Two Interactive (TTWO) [Barron's]

Long Term Capital Management's Meriwether launches another hedge fund [FINalternatives]

Q & A session with Howard Lindzon of StockTwits [The Kirk Report]

Don't follow the wisdom of crowds (retail investors) [Washington Post]

Top 25 most valuable blogs in America [24/7 Wall Street]

Thursday, October 7, 2010

Notes From Ira Sohn West: John Burbank, Barry Rosenstein, Jeffrey Ubben, Brian Zied & More

Zero Hedge recently posted up notes from the Ira Sohn West Conference that just took place out in San Francisco. It included a heavy-hitting speaker line-up of prominent hedge fund managers. Let's quickly summarize their investment picks and presentations:

John Burbank of Passport Capital: He focused on how the US should be viewed as an 'emerging market' from an investment perspective due to increased sovereign risk of the US. Burbank argues that the US is at an inflection point and can head in the direction of either Argentina or Germany. You can read more from this manager in a recent interview Burbank did as well.

Barry Rosenstein of JANA Partners: He thinks the activist investor environment is improving. Rosenstein also points out the high levels of cash at corporations and notes that private equity has $500 billion on the sidelines. In terms of investment picks, he likes Netherlands based TNT (TNT NA). The global transport company could be attractive to FedEx, who only has small market share in Europe. TNT trades at 6x EBITDA and 11x earnings. Rosenstein actually thinks the company will break up in the next 6-9 months and thinks it goes to 27 euros from its current price of 20 euros. The JANA Partners fund managers also is fond of Charles River Labs (CRL) as the company has raised prices and gained market share. Currently at $32, he believes $46 is attainable with a breakup value of above $50 per share.

Brian Zied of Charter Bridge Capital: Before founding Charter Bridge, Zied was previously a Managing Director at Lee Ainslie's Maverick Capital. Zied likes Sirius XM Radio (SIRI) here as 60% of new cars have built in satellite radios and 46% of those convert into paying customers. While the company is leveraged, he expects them to pay off debt soon. He also highlights John Malone's significant ownership stake in the company, arguing that they could acquire Sirius.

Jeffrey Ubben of ValueAct Capital: In his activist investing, he looks for oligopolistic industries and intellectual property. In recent investments, his hedge fund acquired 20% of Valeant Pharmaceuticals (VRX) as a turnaround story. We've covered some of ValueAct's recent portfolio activity here.

Many other manages provided their thoughts and latest investment ideas at the event. Embedded below courtesy of Zero Hedge is a set of notes from the Ira Sohn West Conference (Email readers will need to come to the site to view it):

For more on the latest hedge fund portfolio movements, click here to scroll through our coverage.

Dan Loeb Discloses Gold Bullion and Potash (POT) Positions

For September, Dan Loeb's hedge fund Third Point was up 3.9%. Year to date for 2010, their offshore fund is up 19.1%. Third Point's annualized return now sits at 18% with a correlation to the S&P 500 of 0.41 and a Sharpe Ratio of 1.27. To follow in his successful footsteps, check out Dan Loeb's recommended reading.

In a monthly disclosure to investors, Loeb's portfolio reveals some interesting new plays. At the end of September, Third Point's top positions were:

1. Chrysler (multiple securities)
2. Gold Bullion

3. Delphi Corp (multiple securities)

4. Potash (POT)

5. CIT Group (multiple securities)

The most notable change right off the bat is the listing of gold bullion as Third Point's 2nd largest position. As far as we're aware, Loeb has not owned gold since around the beginning of 2009 when he utilized it as an uncertainty hedge. This position was not present in the previous monthly disclosures from the hedge fund so its fresh appearance is duly noted.

Many investors will be curious as to his rationale for the position. In Third Point's latest letter, Loeb outlined how the firm had put on numerous "asymmetrical trades using derivatives, options and debt securities to hedge against extraordinary global events." They are allocating 1% of fund assets per annum to this protection. In late 2008 and into the first quarter of 2009, Third Point utilized gold (among other things) as 'doomsday and fat tail risk' trades. Gold bullion could again be a part of that basket, but they might have purchased for other reasons too, there's no clear answer.

The second notable portfolio change is Third Point's addition of Potash (POT) to the portfolio in size. As their fourth largest holding, this stock is an arbitrage play. Potash received an unsolicited buyout offer of $130 per share from BHP Billiton (BHP). Shares currently trade above the offer at $141 as speculation grows a bidding war will emerge or BHP will raise their offer.

Third Point's recent winning positions include: Lyondell (LALLF), a post-reorganization equity that many hedge funds have been fond of, including Jamie Dinan's York Capital. In Loeb's second quarter letter to investor, he asserted his fondness for post-reorganization equities and mortgage exposure. Loeb's fund also saw positive performance from their Anadarko Petroleum (APC) stake, a position we revealed after the unfortunate Gulf oil spill. Other winning stakes for Third Point include NewPage Corp and Liberty Media Corp Interactive (LINTA). Losing positions for the firm consist of four undisclosed short positions.

Back in the second quarter, we noted that Third Point reduced equity exposure. That theme is largely still prevalent as the hedge fund is only 26.3% net long equities. They are net short energy at -0.3% and their largest net longs are consumer at 7.9% and financials at 5.9%. In credit, we see a new position as Third Point is net short Government at -14.4%. They are net long mortgage backed securities (MBS) at 19.5% and distressed at 15.8%. In terms of other portfolio positions, we noted how both Loeb's Third Point and David Einhorn's Greenlight Capital recently provided a bridge loan to BioFuel Energy (BIOF).

Tuesday, October 5, 2010

Bruce Berkowitz's Fairholme Capital Issues Statement on AIG

As Market Folly detailed recently, Bruce Berkowitz's Fairholme Capital has filed an activist 13D on shares of AIG (AIG). At the time, their activist intent wasn't clearly outlined so we're waiting to see what Fairholme has in store in that regard. AIG and the government have proposed a solution to sell the government's stake. Fairholme Capital recently released this statement which gives us a little more clarity regarding their position size and announced their support of the proposed plan:

"Miami, FL – September 30, 2010 – Fairholme Capital Management today issued the following statement:

On behalf of our approximate 440,000 shareholders and clients, Fairholme owns approximately 24% of the outstanding common stock, 38% of the mandatory convertible bonds and other debt instruments of American International Group, Inc. (AIG).

Fairholme invested over $1.8 billion in AIG securities, more than 10% of assets under management, with the knowledge that for decades AIG was the premiere insurer - a shining example of how the United States can compete around the world. We also invested in AIG with the belief that such a past is not easily destroyed.

Nevertheless, all of us at Fairholme applaud and appreciate the yeomen's work of AIG's management and board of directors, the United States Treasury, the Federal Reserve System and its trustees and countless others involved in this most complex process.

We strongly support the proposed solution to revitalize AIG in a fair and equitable manner for all constituents, foremost our country's taxpayers, and look forward to a vibrant future for AIG and the U.S. economy.

Contact: Bruce R. Berkowitz
Founder and Managing Member Fairholme Capital Management, L.L.C."

Yesterday we also got news that Berkowitz's Fairholme is set to invest $1 billion in the IPO of AIA Group, a subsidiary of AIG. This IPO was mentioned in our recent article examining AIG's road to recovery. So it will be interesting to see what (if any) activist measures Berkowitz takes. One thing is for certain though, he is betting heftily on an AIG recovery.

For other portfolio activity, we've detailed Fairholme's MBIA stake as well as their new position in Morgan Stanley (MS).

Bill Ackman's Pershing Square Receives Borders Group (BGP) Warrants

Bill Ackman's hedge fund Pershing Square Capital Management recently filed a Form 4 with the SEC regarding shares of Borders Group (BGP). In the filing, we see that Ackman received BGP warrants on September 30th, 2010. The hedge fund has received warrants in the past which we also detailed back in May.

As a result of certain anti-dilution adjustments outlined in Pershing Square's previous 13D filing, Bill Ackman's firm has received warrants to purchase an aggregate of 8,542,399 shares of common stock of BGP. The exercise date is September 30th and the expiration date is October 9th, 2014. These warrants have a conversion/exercise price of $0.65 . In total, all of Ackman's related entities now own 25,944,236 BGP warrants.

In terms of other recent activity out of his hedge fund, Bill Ackman bought BP (BP) credit default swaps in the second quarter. You can view Pershing Square's entire portfolio in our new newsletter: Hedge Fund Wisdom.

Taken from Google Finance, Borders Group is "an operator of book, music and movie superstores and mall-based bookstores. As of January 30, 2010, Borders operated 511 superstores under the Borders name, including 508 in the United States and three in Puerto Rico."

To hear Bill Ackman's latest investment ideas, he's speaking at the Value Investing Congress in New York City next week. Sign-up here as only a limited amount of tickets remain.

Lansdowne Partners Acquires Central Asia Metals (LON: CAML) Position

Steven Heinz and Paul Ruddock's hedge fund Lansdowne Partners have recently taken a 17.94% stake in Central Asia Metals (LON: CAML). Due to a regulatory filing in the UK, it shows that Lansdowne bought their shares on the 29th of September when Central Asia Metals listed in London and placed £38.1m shares. The company plans to use the money raised to build a SX-EW plant at Kounrad that will have the capability to produce 10,000 tonnes of copper cathode a year.

It's unclear as to whether the hedge fund acquired these shares in the IPO or on the open market, but given Lansdowne's prominence, we'd guess the former. For more coverage of this UK hedge fund, we recently detailed a portfolio update on Lansdowne.

According to Reuters, the "newly listed company is looking to sign the deals for when it ramps up copper production from its 60-percent owned Kounrad project in Kazakhstan at the end of next year, but is wary of setting prices too early."

Central Asia Metals plc is an AIM-listed UK incorporated company based in London. Its main countries of operation are Kazakhstan and Mongolia. CAML is a precious and base metals mining, exploration and development company with majority stakes in copper, gold and molybdenum projects throughout Central Asia.

In terms of other recent hedge fund activity in UK markets, we detailed that Harbinger Capital sold some of Inmarsat.

Hedge Fund Harbinger Capital Sells Some Inmarsat (ISAT)

Yesterday, Philip Falcone's hedge fund Harbinger Capital Partners announced its intention to sell 13% of its stake in Inmarsat plc (LON: ISAT), or 60,000,000 shares. A regulatory filing in the UK details that, "Harbinger hereby announces that it does not intend to make an offer to acquire the entire issued and to be issued share capital of Inmarsat not already held by Harbinger." It had long been thought that Falcone's fund would make a play for Inmarsat, but that is clearly not the case now. You'll recall that Harbinger has been building out a 4G network via LightSquared.

In the filing, Falcone also made a statement about Inmarsat saying, "Inmarsat has been a terrific investment for Harbinger and its investors. Although we have determined that we are not going to make an offer for all of the company, I remain a strong believer in the company's future and am extremely happy to maintain a core position in the company's stock and our partnership with Inmarsat through LightSquared Inc."

Per UK regulatory filings, Harbinger owns 14.1% of Inmarsat's outstanding shares as of October 5th, 2010 with 64,277,349 shares. This halves their prior stake of 28.76% owned back in March of 2009. Interestingly, the filing also notes that Harbinger's remaining shareholding will be "subject to a 180 day lock-up arrangement with Credit Suisse and UBS Investment Bank." Even though Falcone won't be pursuing the rest of the company, Harbinger's LightSquared has been working with Inmarsat on implementation of its spectrum co-operation plan for the 4G network.

In terms of other portfolio activity from Falcone's hedge fund, we've highlighted that Harbinger reduced its Tate & Lyle position (TATE). Also, the firm added to Crosstex Energy (XTXI) last month.

Taken from Google Finance, Inmarsat is "a provider of global mobile satellite communications services (MSS), providing data and voice connectivity to end users worldwide. The Company’s Inmarsat Global MSS segment is engaged in the supply of internally generated airtime, equipment and services to distribution partners and end users of mobile satellite communications by the Inmarsat business. Its Stratos segment is engaged in the supply of mobile and fixed-site remote telecommunications services, the provision of customized remote telecommunications solutions, value-added services, equipment and engineering services to end-users."

For more coverage of Harbinger's bet on 4G, Teri Buhl has an exclusive interview with Falcone and has also detailed Falcone's defense of his 4G plan.

David Tepper ~ Quote of the Week

Recently David Tepper, founder of hedge fund Appaloosa Management, sat down for a rare interview with CNBC where he said he likes equities here. In it, he gave us some interesting words of wisdom and his most astute advice came when he sat reflecting on the markets back in August:

"This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.”

~ David Tepper

Prudent words, certainly. To see what Tepper's Appaloosa has invested in, head to our quarterly newsletter: Hedge Fund Wisdom.