Wednesday, August 10, 2011

Insider Buying: CEO's Buying Stock En Masse

There has been an increased amount of insider buying over the past few days. But what caught our eye in particular was the vast amount of CEO's that were buying.

To pull all this data, we used Insider Trade Reports who says that "over four decades of academic research has shown that by following in the footsteps of company insiders and buying the stocks that they are buying, you can outperform the market by 6% to 10.2% per year."

As CEO's bought into the recent market sell-off, it's clear they believe the market was undervaluing their companies.

List of Recent CEO Insider Buying

- Six Flags Entertainment (SIX) CEO buys $2,499,189 worth

- Morgan Stanley (MS) CEO buys $2,062,070 worth

- Fifth Street Finance (FSC) CEO buys $2,014,323 worth

- Huntsman (HUN) CEO buys $1,137,270 worth

- WMS Industries (WMS) CEO buys $1,000,224 worth

- General Growth Properties (GGP) CEO buys $856,489 worth

- Kinder Morgan (KMI) CEO buys $679,621 worth

- First Industrial Realty Trust (FR) CEO buys $642,000 worth

- Winthrop Realty Trust (FUR) CEO buys $589,550 worth

- Tupperware Brands (TUP) CEO buys $507,045 worth

- Life Technologies (LIFE) CEO buys $420,000 worth

- Greenbrier Companies (GBX) CEO buys $268,705 worth

- Kansas City Southern (KSU) CEO buys $253,050 worth

- AK Steel (AKS) CEO buys $199,030 worth

We're proud to announce that Market Folly readers receive a special 33% discount on Insider Trade Reports' annual subscriptions and a 25% discount on monthly & quarterly subscriptions.

You can choose how often you receive insider buying/selling alerts (daily, weekly, high conviction reports) which is a great feature. They also have a proprietary scale that measures the significance of each transaction with commentary to provide context.

We've been using Insider Trade Reports for months now and it's a very useful resource for investors so take advantage of the discount.

Bill Ackman's Pershing Square Buys More Fortune Brands (FO)

Bill Ackman's hedge fund firm Pershing Square Capital has taken advantage of the recent market sell-off to add to their position in Fortune Brands (FO).

Per a Form 4 filed with the SEC, Pershing acquired 3,648,512 additional shares at prices ranging from $52.67 to $54.47 on August 5th, 8th, and 9th.

After this series of buys, Pershing Square now owns 20,818,545 shares of Fortune Brands. The majority of their purchase came at $52.67 and $52.78 and FO now trades around $53.95. This is the second time Ackman has purchased FO in the past three months.

This is an activist investment for Pershing as they've pushed for Fortune to break-up its three distinct businesses: spirits/liquor, home finishes, and they've already sold their golf segment.

For more from Ackman, head to notes from the leaders in investing summit. Ackman will also be presenting his latest investment ideas at the upcoming Value Investing Congress in New York on October 17th & 18th along with many other hedge fund managers. Be sure to sign-up here.

Seth Klarman's Baupost Group Adds to PDL BioPharma Stake

Seth Klarman's hedge fund Baupost Group has acquired more shares of PDL BioPharma (PDLI) per a 13G just filed with the SEC.

Due to portfolio activity on July 31st, Baupost has disclosed a 10.53% ownership stake in PDLI with 14,718,814 shares. This marks a 40% increase in their position size as they only owned 10,495,225 shares at the end of the first quarter.

Notorious for holding large cash positions when he doesn't see opportunity, Klarman has used the recent market decline to deploy some of that cash into one of his very few equity positions. Last month, we detailed other activity from the fund as Baupost doubled its Syneron Medical stake.

To see the rest of Baupost's updated equity investments, we'll have a brand new issue of our Hedge Fund Wisdom newsletter out in a week and a half.

Per Google Finance, PDL BioPharma is "engaged in the management of its antibody humanization patents and royalty assets, which consist of its Queen et al. patents and license agreements with pharmaceutical and biotechnology companies. The Company receives royalties based on these license agreements on sales of a number of humanized antibody products marketed and also may receive royalty payments on additional humanized antibody products launched before final patent expiry in December 2014."

Tuesday, August 9, 2011

David Tepper's Appaloosa Sells Bank of America (BAC) and Wells Fargo (WFC)?

David Tepper's hedge fund Appaloosa Management filed their 13F early with the SEC and in it are some noteworthy moves. The filing reflects portfolio activity as of June 30th, but it does give us a glimpse as to what he was up to in the second quarter.

The big talking point here is that in the second quarter, Tepper sold 41% of his position in Bank of America (BAC), selling over 7.2 million shares. He also sold 5% of his position in Wells Fargo (WFC) and 6% of his position in Citigroup (C), his top equity holding at the end of Q2.

However, David Faber at CNBC is hearing that Tepper has since sold completely out of BAC and WFC in recent weeks. He also apparently sold a chunk of his stake in C too. Tepper has not confirmed this though.

Turning back to the factual information from the 13F we do have though, Tepper also sold 54% of his stake in Hewlett Packard (HPQ).

In terms of new positions, Appaloosa started new stakes in Mosaic (MOS), Western Refining (WNR) and Google (GOOG). It's likely that Appaloosa took advantage of the MOS secondary as Dan Loeb's Third Point also bought MOS. Tepper also bought more CVR Energy (CVI) which we already highlighted back in June.

On the long side, refining seems to be a big theme for Appaloosa as they ramped up their stake in Valero (VLO) by 202% in the second quarter in addition to starting their stake in WNR. To see what other top hedge funds have been buying & selling, subscribe to our Hedge Fund Wisdom newsletter as a new issue is due out in just a week and a half.

Jeff Saut A Buyer of Select Equities During Weakness

Back in July, market strategist Jeff Saut was worried about market action and rightfully so. This time around, he makes two major points in his latest commentary:

1. The Dow Theory sell signal that was registered last week is concerning.

2. Stocks are ridiculously oversold and surely a relief rally is in sight?

With those conflicting viewpoints, which side did he take? Well, he has concluded that buying *select* equities makes sense here. Why?

Saut backs up his decision by rattling off points such as: "there is no economic evidence the country is sliding into recession -- slow growth, yes; recession, no. That view is reinforced by the Yield Curve, which has been one of the most reliable predictors of recessions. To wit, every recession for the past 50 years has been preceded by an inverted Yield Curve (short-term interest rates above long-term interest rates). Currently, the Yield Curve is very steeply sloped."

The market strategist also moves on to highlight that 68% of companies beat revenue estimates during the recent earnings season. He is looking for a reflex rally off the massively oversold conditions. During this theorized rally, he instructs readers to 'prune' portfolios of underperforming stocks.

The only question we're left with is which *select* stocks is Saut referring to? He advocates buying "fundamentally sound stocks with decent dividend yields." And even though this list is from May, here are Saut's favorite investment ideas. Do with that what you will.

Embedded below is Jeff Saut's latest market commentary:

You can download a .pdf copy here.

Calling All Contrarians: What Signals Do You See?

Since every site on the internet seems to be spewing venom about how the government sucks, the ratings agencies suck, and the markets suck, we thought we'd head a different direction and start compiling a list of any contrarian signals out there.

First, a disclaimer: this isn't some batshit bottom-calling bonanza post. We don't engage in the X-Games sport of chainsaw juggling. This is merely an exercise similar to the one we penned back on March 8th, 2009 in our post: ranting, raving & contrarian signals that outlined just how crazy things were at the time.

This past Sunday night before markets opened to trade for the first time since the US debt downgrade, some people were exclaiming that it felt like the eve of Lehman Brothers' demise.

On Twitter, we opined that such a claim seemed ridiculous. Maybe the financial crisis made us numb to volatility, but it didn't feel nearly as extreme as 2008; not even close. Lehman was a forced deleveraging while this seems to be an unwind of QE2 excesses.

Comparisons aside, we thought it would be a prudent exercise to rationally process and analyze what we're seeing rather than spit out another article of doom that you've already read ten times. Legendary investor Jim Rogers once said, "I sell euphoria and buy panic." So today we look for signs of panic.

Current Contrarian Signals?

1. The Volatility Index (VIX) has surged from 17.5 in late July to 48 currently. The last time it was this high? Summer 2010 during the market's pullback. Since inception 25 years ago, the volatility index has only been above 44 on 9 different occasions. While it can still undoubtedly go higher (it touched 80 during the financial crisis), there has been a dramatic ramp in volatility.

2. Capitulation? This term is extremely overused. The word 'capitulation' was thrown around 396 times on CNBC last week with their octaboxes of people all talking over each other. On August 4th we tweeted that capitulation usually comes AFTER those calling for it piss themselves and reverse course. You need true panic. One example follows:

3. Hedge Fund Manager Barton Biggs: While this is only one example of 'capitulation', it does give hope to the contrarians out there. Last week $1.4 billion hedge fund Traxis Partners head Barton Biggs called stocks a "strong buy." Only a week later, he himself has capitulated (or made a smart move, depending on your view) by taking "some risk off," saying he hated to be doing so. This is merely one example of people throwing in the towel, but this is the type of behavior seen during true capitulation.

4. Retail Investors Freaking the F Out: You all probably have that one retail investor friend that doesn't pay attention to markets all that often but still wants to make money. You are their "go-to" market guy. When they start calling you wondering what the f*ck is going on, that might be a contrarian signal. When they call you saying they sold everything, that's usually a contrarian signal. Don't know about you, but we received these phone calls yesterday.

5. Bank Charges For Holding Cash: This is somewhat an outlier given it applies to accounts holding $50 million or more, but it's still worth mentioning. Instead of being invested, there is so much cash sitting around in accounts at Bank of New York Mellon that they began charging clients to hold cash in their accounts. One-month Treasury bills traded at a negative yield and indicated that investors were willing to *pay* the government to take their money.

5. ZeroHedge Crashes: The popular market website with a cult-like following crashed on Sunday night due to insane traffic as bears tried to congregate in victory and scared bulls looked for answers.

5. Dow Posts Sixth-Largest Point Loss: The market saw its worst day since the financial crisis as it tumbled 634 points. Stocks have fallen 15% in just over two weeks and such outlier events can be contrarian signals.

6. ??? What other contrarian signals (if any) are you seeing? On the flip side, what bearish confirmations are you seeing? We're looking for both sides of the argument so let us know your thoughts in the comments below.

Again, the disclaimer for those who forgot: bottom-calling is for schoolboy bitches and this post is merely surveying the carnage.

Monday, August 8, 2011

David Gallo's Valinor Management Adds to Popular (BPOP) Position

David Gallo's hedge fund firm Valinor Management recently filed a 13G with the SEC due to portfolio activity on July 26th in shares of Popular Inc (BPOP). Per the filing, Valinor has revealed a 5.12% ownership stake in BPOP with 52,300,172 shares.

This marks a 52% increase in Valinor's position size in Popular since the first quarter. While this recent trading took place in late July, it's impossible to guess if the hedge fund has done anything with the position since then during August's tumultuous market decline. Since July 26th, shares of BPOP are down 16% and hit a new 52 week low today.

In other activity from the hedge fund, we've detailed Valinor's stake in Swift Transportation (SWFT).

Per Google Finance, Popular is "a diversified, publicly owned bank holding company. The Company operates in two markets: Puerto Rico and Mainland United States. In Puerto Rico market the Company provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (BPPR), as well as auto and equipment leasing and financing, mortgage loans, investment banking, broker-dealer and insurance services through specialized subsidiaries. In Mainland United States market, the Company operates Banco Popular North America (BPNA), including its wholly owned subsidiary E-LOAN, Inc. (E-LOAN)."

Eric Mindich's Eton Park Capital Buys More MSCI

Eric Mindich's hedge fund Eton Park Capital just filed a 13G with the SEC on its position in MSCI Inc (MSCI ). Per portfolio trading on July 29th, Eton Park has disclosed a 5.81% ownership stake in with 7,000,000 shares.

This activity represents a 18.6% increase in the hedge fund's position size because at the end of the first quarter, they owned 5,900,000 shares. Per data from the first quarter, Eton Park is now the fourth largest shareholder of MSCI shares.

MSCI is very visible in markets as popular indexes (and exchange traded funds) bear its name, such as the iShares MSCI Emerging Markets Index (EEM).

Of other funds we track, Stephen Mandel's hedge fund Lone Pine Capital had previously owned MSCI back in 2009 but sold it in 2010. Thomas Steyer's Farallon Capital held a sizable position at the end of Q1, but we won't know their recent Q2 position size until next week.

In other activity from Eton Park, we detailed their new position in 3Leg Resources.

Per Google Finance, MSCI Inc is "a provider of investment decision support tools, including indices, portfolio risk and performance analytics and corporate governance products and services. The Company consists of two segments: the Performance and Risk business and the Governance business."

Larry Robbins' Glenview Capital Buys Clearwire (CLWR): Investment Thesis

Larry Robbins' hedge fund firm Glenview Capital just filed a 13G with the SEC regarding shares of Clearwire (CLWR). Due to portfolio activity on July 28th, Glenview has disclosed a 6.53% ownership stake in CLWR with 16,228,264 shares.

This activity marks a 76.5% increase in their position size since the end of the first quarter. So while they were buying as recently as the end of July, the crazy market volatility that has followed in August makes it hard to know if they've battened down the hatches and held onto these recently acquired shares, or if they instead chose to reduce risk. We've also detailed how Glenview bought Flextronics (FLEX) as well.

Glenview's Thesis on Clearwire

Glenview's previous letter outlined their thesis on Clearwire (CLWR) as they own equity and debt. The company owns 45 billion MHz of wireless spectrum and was the first true '4G' wireless network. They like CLWR under the notion that capex was behind the company ($20 billion) and growth was ahead. The stock currently trades around $1.52.

Robbins goes on to say that the main backdrop for investing in CLWR is that, "over the next four years, mobile traffic growth is expected to increase 40 times, driven by increased video usage and data plans on PCs/tablets/smartphones ... The appeal of Clearwire is therefore simple; Clearwire has aggregated an unmatched amount and a sufficient quality of spectrum to be a viable 4G offering for a wireless carrier."

The hedge fund likes Clearwire because: "a) there is significant downside support from asset value, b) the investment to build those assets is substantially behind them, and c) the wireless industry is at an inflection point in terms of demand for these assets."

Another bit worth noting: CLWR is owned mainly by strategic investors (~84%), primarily by Sprint (S). Glenview hypothesizes that should the AT&T (T) and T-Mobile merger be approved, Sprint could compete by moving to purchase the rest of Clearwire. Either way, Glenview likes the risk/reward of CLWR.

To see the rest of Glenview's investments, be sure to subscribe to our Hedge Fund Wisdom newsletter, as a new issue will be released in the next two weeks that updates top hedge fund portfolios.

What We're Reading ~ 8/8/11

Dreman's contrarian investment rules [World Beta]

What concerns Passport Capital [Distressed Debt Investing]

On bond management [Aleph Blog]

Let's face it, market correction makes sense [Peridot Capitalist]

Why this is not 2008 [Capital Observer]

Paulson's flagship fund down 21.6% [FT]

Profile of Lansdowne's Paul Ruddock [Bloomberg]

Andy Beal becomes billionaire with FDIC assets [Bloomberg]

Are hedge funds too big to fail? [WSJ]

Steven Cohen's forbidden transcript [Reuters]

Introduction of the social web index [StockTwits]

Web 2.0: how to spot the top [Reformed Broker]

Don't call it the next tech bubble yet [Fortune]

Social networks: are real names required for real socializing? [AVC]

An inside look at the rise and fall of Research in Motion (RIMM) [Boy Genius Report]

Depressing but nonetheless: 25 documents you need before you die [WSJ]

E-Trade Baby Loses Everything - Fake Commercial

This fake commercial titled, 'E-Trade Baby Loses Everything' is pretty appropriate given the torrential wave of selling the stock market has seen over the past week. If you're at work, be warned that there's lots of cursing/bleeping.

Email readers will need to come to the site to watch the video: