Friday, September 30, 2011

Mandel's Lone Pine Capital Starts Williams Sonoma (WSM) Position

Steve Mandel's hedge fund Lone Pine Capital just filed a 13G with the SEC regarding shares of Williams Sonoma (WSM). They crossed the 5% ownership threshold on September 20th according to the filing and now 5.6% of the company with 5,824,323 shares.

This is a brand new position for the hedge fund as they did not report owning any shares at the end of the second quarter. In other activity from this manager, we detailed how Lone Pine doubled its SolarWinds position as well.

Per Google Finance, Williams Sonoma is "a specialty retailer of products for the home. The Company has two segments: direct-to-customer and retail. The direct-to-customer segment has six merchandising concepts Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm and Williams-Sonoma Home. The retail segment has four merchandising concepts, Williams-Sonoma, Pottery Barn, Pottery Barn Kids, and West Elm, operating 592 retail stores located in 44 states."

John Thaler's JAT Capital Loads Up on Netflix (NFLX)

John Thaler's hedge fund firm JAT Capital just now filed a 13G with the SEC regarding shares of Netflix (NFLX). The hedge fund now has a 7.6% ownership stake in Netflix with 4,017,691 shares as of September 29th.

This means they've ramped up their position size by a massive 768% since the end of the second quarter. The fine print of the filing also shows that of the 4 million shares they now own, 2,617,691 are common stock and 1,400,000 are represented by options. The options portion of their position is new because they only owned 467,812 shares of common stock at the end of Q2.

This position increase is interesting for a number of reasons:

1. NFLX shares have largely sold off because of CEO Reed Hastings' recent announcement that the company will be separating its streaming business (Netflix) and its DVD business (with the newly named Qwikster). Also, NFLX shares have been under pressure due to a subscriber exodus over a recently announced price increase.

It's clear that Hastings feels that the streaming business is the future (and he's right). By separating the businesses, he's allowed the company to focus on its long-term future. However, critics question whether or not the split has come too soon and they've lambasted Hastings for a public relations nightmare in the way he's handled everything.

Thaler's hedge fund has clearly identified the NFLX sell-off as an opportunity to increase their wager on the company's long-term positioning and future. Thaler himself has 10+ years of experience in the technology-media-telecom space. Before founding JAT, he managed the Omni Fund at Shumway Capital Partners.

2. Hedge funds only have to file a 13G with the SEC when they cross the 5% ownership threshold of a given company's shares. JAT's filing indicates they crossed that level on September 20th. The only problem here is you don't know exactly when they were doing the bulk of their buying. As of September 29th, they own 7.6% of the company. On the 20th, NFLX was trading around $130 and shares currently trade around $113.

3. On Thursday, the internet was flooded with rumors of a hedge fund liquidating, mainly due to large price declines in "momentum stocks" such as NFLX. Some rumors even recklessly tossed out JAT's name as a fund that could potentially be "blowing up" since some of their other large positions were trading down sharply like Baidu (BIDU) and Sina (SINA).

However, those rumors were quickly quashed once people actually looked at JAT's numbers. As of September 16th, JAT Capital's Offshore fund was up 37.29% for the year. These performance figures of course don't include the week's most recent volatility, but we've been hearing they're still up big.

In the end, just focus on the facts. The SEC filing shows JAT was buying Netflix and they crossed the 5% ownership threshold on September 20th. And as of September 29th, they own 4 million shares via common stock and options.

For the time being, it appears as though Thaler's fund is betting on NFLX still having a bright future. In other coverage of this hedge fund, we detailed JAT's buy of IMAX in early August.

What We're Reading ~ 9/30/11

Notes from DoubleLine lunch with Jeff Gundlach [Reformed Broker]

The big difference between Apple & Amazon [Abnormal Returns]

Is Apple the new Microsoft? [Abnormal Returns]

Hedge fund redemptions not like 2008 [Barrons]

30 most influential finance sources [BigPicture]

Meet the institutional investors [FT Alphaville]

Notes from Bloomberg dealmakers summit [Distressed Debt Investing]

The road from depression [George Soros]

Yandex (YNDX): careful when you talk to hedgies [Barrons]

SEC registration plan may apply to midsize hedge funds [WSJ]

Slamming short selling restrictions [COO Connect]

Mohawk Industries (MHK): sum of parts analysis [FrankVoisin]

How the AMZN Kindle Fire changes digital media landscape [ContentMatters]

Netflix co-founder says company didn't screw up [Fortune]

Endowment & foundation investing today [John Bogle]

Tuesday, September 27, 2011

David Einhorn, Ricky Sandler & Boykin Curry to Speak at Value Investing Congress

The Value Investing Congress just announced three new speakers that will be presenting at the event. The big headliner here is David Einhorn of Greenlight Capital.

In 2007 at the Value Investing Congress, Einhorn presented his case to short Lehman Brothers before the company collapsed. Hear what his latest idea is: use discount code N11MF10 and click here to register for the event. This final discount expires tomorrow!

The event is taking place on October 17th & 18th in New York City. Other new speakers announced include Ricky Sandler of hedge fund Eminence Capital, as well as Boykin Curry of Eagle Capital, who has returned 15.1% annualized since 1988.

Here's the full list of speakers for the Value Investing Congress:

- David Einhorn, Greenlight Capital
- Bill Ackman, Pershing Square Capital
- Jim Chanos, Kynikos Associates
- Leon Cooperman, Omega Advisors
- James Crichton & Adam Weiss, Scout Capital
- Joel Greenblatt, Gotham Capital
- Ricky Sandler, Eminence Capital
- Boykin Curry, Eagle Capital
- Alexander Roepers, Atlantic Investment Management
- Guy Gottfried, Rational Investment Group
- Bernard Horn, Polaris Capital Management
- Timothy Hartch, Brown Brothers Harriman
- Vladimir Jelisavcic, Longacre Fund Management
- Whitney Tilson & Glenn Tongue, T2 Partners

To hear the latest investment ideas from these prominent hedge fund managers, click here to register with a discount. This final discount expires tomorrow, so take advantage before it's too late.

Andreas Halvorsen's Viking Global Buys Oncothyreon (ONTY)

Andreas Halvorsen's hedge fund Viking Global filed a 13G with the SEC regarding shares of Oncothyreon (ONTY).

Viking has revealed a 7.1% ownership stake in the company with 2,960,650 shares. This is a brand new position for the hedge fund as they did not report owning a stake at the end of the second quarter.

Remember that all SEC filings are made on a delayed basis, so while their filing says this activity occurred on September 14th, they weren't required to file with the SEC until yesterday.

This is the only 13G or 13D filing we've seen from Viking since we detailed they ramped up their position in Universal Health Services (UHS) back in April.

Per Google Finance, Oncothyreon is "a clinical-stage biopharmaceutical company. The Company focuses primarily on the development of therapeutic products for the treatment of cancer. Oncothyreon’s cancer vaccines are designed to stimulate the immune system to attack cancer cells, while its small molecule compounds are designed to inhibit the activity of specific cancer-related proteins.

The Company’s lead product candidate under clinical development is a vaccine it calls Stimuvax. Stimuvax incorporates a 25 amino acid sequence of the cancer antigen MUC1, in a liposomal formulation. Stimuvax is designed to induce an immune response to destroy cancer cells that express MUC1, a protein antigen widely expressed on many common cancers, such as lung cancer, breast cancer and colorectal cancer. Oncothyreon has granted an exclusive, worldwide license to Merck KGaA of Darmstadt, Germany (Merck KGaA), for the development, manufacture and commercialization of Stimuvax."

Owl Creek & Cyrus Capital Active in YRC Worldwide (YRCW)

Hedge funds have been active in shares of YRC Worldwide (YRCW) recently. Jeffrey Altman's hedge fund Owl Creek Asset Management and Stephen Freidheim's Cyrus Capital Partners recently filed various forms with the SEC regarding the company. There are a lot of moving parts to their positions, so let's dig in.

Owl Creek Asset Management's Position

The 13G shows the latest activity as of September 16th and reveals Owl Creek has a 17.4% ownership stake in YRC Worldwide. This is based on 75,011,292 shares of common stock, 218,570,388 shares of common stock issuable upon conversion of Series B notes ($13,507,650 in aggregate principal amount), and finally 94,284,663 shares of common stock issuable either as make-whole shares or upon conversion of the PIK notes.

Digging into the footnotes, we see that Altman's hedge fund holds $17,573,269 in aggregate principal amount of 10% Series A Notes. These notes are not convertible until July 22, 2013 and the current conversion price is $0.1134.

Their Form 4 filed with the SEC shows they sold common stock in YRCW in the latter half of September, reducing their position from 110.5 million shares down to the current 75 million shares. The majority of their sales came at $0.07x.

For all the particulars of Owl Creek's position in YRCW, head to their 13G here. We also recently detailed how Altman's firm started a position in Forest Oil (FST).

Cyrus Capital Partners' Position

Stephen Freidheim's hedge fund Cyrus Capital actually filed an activist 13D on the company compared to Owl Creek's passive 13G. Cyrus revealed a 20.3% ownership stake in YRCW with 447,860,113 shares. This includes 289,738,036 shares of common stock issuable upon exercise of the Series B notes. For all the fine print of Cyrus' filing, head here.

YRC's Reorganization

YRCW is currently trading around $0.059 and underwent a charter amendment merger on September 16th, "whereby a wholly-owned subsidiary of the Issuer merged into the Issuer and the certificate of incorporation of the Issuer was amended and restated to increase the number of common stock authorized."

Due to this, the above hedge funds' preferred stock automatically converted into common stock and the Series A notes became convertible two years from the date of issuance (as detailed above). The Series B notes became immediately convertible at a fixed price into shares of common stock.

The company recently announced that Jeff Rogers will be YRC President and Mike Naatz will be Holland President, both reporting to YRC Worldwide CEO James Welch. Some analysts, though, haven't ruled out a bankruptcy filing for the trucking company.

Per Google Finance, YRC Worldwide is "a holding company. YRC Worldwide, through wholly owned operating subsidiaries offers its customers a range of transportation services. These services include global, national and regional transportation, as well as logistics."

Monday, September 26, 2011

Strategist Jeff Saut Says 1,100 = Key Level on S&P 500

Given the recent volatility, we thought it would be prudent to check in on market strategist Jeff Saut. His weekly investment strategy note reiterates how he has pointed to 1,100 on the S&P 500 as a key technical level if the market were indeed in the midst of a bottoming process. He still maintains this stance as the market currently trades above it.

We've noted for a while now how many hedge funds have low net exposure to the market. Under the notion that cash is a position, Saut says that "we have still been pretty circumspect in recommitting capital to the broad stock market until it is apparent THE bottom has been recorded."

This raises an interesting point. Everyone seems to have a lot of cash on the sidelines now, afraid to be the first one to jump back into the pool. It's clear any future rally could be a fierce one as cash comes rushing back from the sidelines. But the question is, will there be a bottom and what will cause it?

Saut says that if the market breaks S&P 1,100, the next downside level he would target would be 1020-1030.

Embedded below is Jeff Saut's market commentary:

You can download a .pdf copy here.

Check out more thoughts from Jeff Saut on why this isn't a recession as well as Saut's favorite stocks.

Pershing Square Buys Total Return Swaps on J.C. Penney (JCP)

Bill Ackman's hedge fund Pershing Square Capital Management just filed a Form 4 with the SEC regarding shares of J.C. Penney (JCP).

The filing indicates that Pershing Square bought total return swaps on September 22nd with a conversion price of $26.14 and an expiration date of 9/22/2016, representing 15,969,239 shares of J.C. Penney.

Here's the fine print of the SEC filing:

"Under the terms of the cash settled total return swaps (i) certain of the Pershing Square Funds will be obligated to pay to the bank counterparty any negative price performance of the 15,969,239 notional number of shares of Common Stock subject to the swap, plus interest at the rates set forth in the applicable contracts, and (ii) the bank counterparty will be obligated to pay certain of the Pershing Square Funds any positive price performance of the 15,969,239 notional number of shares of Common Stock subject to the swap. Any dividends received by the bank counterparty on such notional shares of Common Stock during the term of the swap will be paid to the Pershing Square Fund. All balances will be settled in cash."

Additionally, the hedge fund recently amended their activist 13D filed with the SEC. This now shows Pershing's ownership stake in JCP as 18.3% of the company with 39,075,771 shares. They've only added to their common stock position by 360,200 shares since the end of the second quarter. We've of course detailed how Ackman bought $600 million worth of various investments during the August volatility.

Late last month, Pershing disclosed their intention to own exposure equal to 26% of JCP's outstanding stock via a "synthetic long position." In the agreement with the company, Ackman reduced his voting rights to 15% of shares outstanding and made it so that any additional shares purchased require written consent from JCP.

For recent activity from this hedge fund manager, check out Bill Ackman's presentation on the Hong Kong dollar.

Philippe Laffont's Coatue Management Buys Universal Display (PANL)

Philippe Laffont's hedge fund Coatue Management just filed a 13G with the SEC regarding shares of Universal Display (PANL). In the filing, Coatue reveals they now own 6.3% of PANL with 2,881,463 shares.

This is a brand new position for the hedge fund as they previously did not own any shares at the end of the second quarter. Given that Coatue is fixated on technology, this investment plays right into their focus on the theme of mobility. PANL provides essential display parts to smartphones, tablets, etc.

Per Google Finance, Universal Display is "engaged in research, development and commercialization of organic light emitting diode (OLED), technologies and materials. OLEDs are thin, lightweight devices that emit light, making them highly suitable for use in full-color displays and as lighting products."

For more activity from this hedge fund, we've detailed how Coatue was buying SINA earlier this summer, a name that has been hit recently due to increased fears of regulation in China.

Soros Fund Management Adds to ClickSoftware (CKSW) & Ciena (CIEN) Positions

Soros Fund Management recently filed two 13G's with the SEC. First and most recently, filed a 13G on ClickSoftware (CKSW). Due to portfolio activity on September 20th, Soros has disclosed a 5.12% ownership stake in the company with 1,580,040 shares. This marks only a 14.6% increase in their position size as they owned 1,378,666 shares at the end of the second quarter.

Second, the hedge fund firm also disclosed a a 5% ownership stake in Ciena (CIEN) with 5,102,085 shares due to trading activity on September 13th. At the end of the second quarter, Soros only owned 1,100 common shares of CIEN. However, they also owned senior convertible notes representing 74,934,000 shares at that time.

If you haven't already heard, Soros Fund Management will be returning outside investor capital and morphing into a family office to manage George Soros & family's wealth.

Per Google Finance, Ciena is "a provider of communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic."

ClickSoftware is "a provider of software products and solutions for workforce management and optimization for the service sector. The Company derives revenues from the licensing of its software products and the provision of consulting and support services. ClickSoftware’s solutions are grouped into four main suites which together comprise its Service Optimization Suite: Field Service Daily Suite, Mobility Suite, Roster (Shift Planning) Suite and Forecasting and Planning Suite."

For more recent hedge fund activity, we posted up how Philippe Laffont's Coatue Management just bought Universal Display (PANL).