Monday, December 31, 2012

Lone Pine Capital Adds to TripAdvisor Stake

Steve Mandel's hedge fund firm Lone Pine Capital recently filed a 13G with the SEC during the holidays on shares of TripAdvisor (TRIP).  Per the filing, Lone Pine has revealed a 5% ownership stake in TRIP with 6,523,653 shares.

This marks around a 13% increase in their position size since the end of the third quarter.  The 13G was filed due to portfolio activity on December 12th.

Lone Pine has been busy doing some buying and we've posted up some of their other portfolio activity here.

Liberty Media Also Likes TRIP

It's also worth flagging that John Malone's Liberty Media (LMCA) recently bought a big slug of TripAdvisor as well. Barry Diller sold his stake to Liberty for $62.50 a share (a 40% premium at the time).  This transaction gave Liberty 57% of the company's voting shares.

Per Google Finance, TripAdvisor is "an online travel research company, enabling users to plan and have a trip. TripAdvisor features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides. TripAdvisor’s travel research platform features reviews and opinions from its community of travelers about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation rentals), restaurants and activities worldwide, through its TripAdvisor brand."

Larry Robbins' Glenview Capital Boosts Health Management Associates Stake

Highlighting some relevant SEC filings from over the holidays, we wanted to flag a series of Form 4's and an amended 13G filed by Larry Robbins' hedge fund firm Glenview Capital on Health Management Associates (HMA). 

Per the filings, Glenview has revealed over a 13% stake in HMA with 34,059,503 shares.  Around two weeks ago, Glenview purchased 5,430,227 HMA shares at prices between $9 and $9.19.  This marks almost a 33% increase in their position size since the end of the third quarter.

While those share prices are weighted averages from the SEC filings, HMA is largely still trading around those levels now.

Glenview Continues To Bet On Hospitals

Hospitals and healthcare plays have been a big theme in Glenview's portfolio and Robbins has done extremely well with some of these positions (in particular Tenet Healthcare).  Robbins originally pitched going long hospitals back in May and Glenview was also recently out adding to its position in Community Health Systems.

Earlier this month, HMA was profiled on an episode of CBS' show "60 Minutes," which called into question the company's admission policies.  HMA defended itself ahead of the investigative journalism piece that aired.

Per Google Finance, Health Management Associates "operates general acute care hospitals and other health care facilities in non-urban communities."

Bill Ackman's Presentation on Shorting Herbalife (HLF)

Playing catch up after the holidays, we wanted to make sure everyone had a chance to see Bill Ackman's presentation on his latest short position: Herbalife (HLF).

The Pershing Square Capital Management CEO gave the pitch at a recent special Ira Sohn event.  In a very thorough and detailed presentation (334 slides), Ackman labels the multilevel marketing company a pyramid scheme.

Making the media rounds after his presentation concluded, Ackman noted that he has an "enormous" short position, over 20 million shares and that they began shorting around 7 months ago. While HLF shares originally plummeted from around $40 down to $25 on news of Ackman's short, they've since rebounded up to $32.

Some readers may recall that we also previously flagged when Greenlight Capital's David Einhorn surfaced on an Herbalife earnings call and started asking questions.  His brief cameo caused the stock to plummet on sheer speculation that he was going to short the company.

There still has been no word from Einhorn whether he is long, short, or not involved at all in the name.  Ackman also commented in a recent media appearance that he had not spoken to Einhorn about the HLF position.

Embedded below is Ackman's presentation on Herbalife (HLF) entitled, "Who wants to be a Millionaire?"

You can download a .pdf copy here.

The Pershing Square founder also created a website for his pitch: if you want to see the full webcast of his talk as well as other resources he's posted up.

For more from this hedge fund manager, we recently posted up Bill Ackman's presentation on everything you need to know about finance and investing.

Friday, December 28, 2012

Discount On Our Hedge Fund Wisdom Newsletter Expires in 3 Days! Last Chance To Save

If you haven't taken advantage of our holiday sale yet, now is your last chance.  The 33% discount on our premium Hedge Fund Wisdom newsletter is expiring in 3 days!   

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Free Sample Issue: Please click here to download a .pdf of a full past issue to see what you're missing.

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Wednesday, December 19, 2012

What We're Reading ~ 12/19/12

Tiger Cubs' gains largely thanks to a handful of stocks [II Alpha]

In-depth research on how TV is set to change [SumZero]

Soon quarterly window-dressing won't work [Dealbreaker]

On investment analysis: invert, always invert [Psy-Fi]

A pitch on Las Vegas Sands [HedgeFundIntelligence]

The bull case on Q-Logic [Graham Disciple]

Update on the latest activity from Karsch Capital [ValueWalk]

The best fund manager you've never heard of [Bronte Capital]

Third Point makes $500m on Greek bonds [Telegraph]

Different kind of Black Friday coming for physical retailers [Fortune]

More hedge fund managers optimistic about 2013 [P&I]

Supercycle for forest products expected to send lumber prices up [VancouverSun]

How not to create your own hedge fund [Seeking Alpha]

Tiger Asia to pay $44 million for illegal trading [SEC]

Prime reason why Amazon's sales may be falling behind this holiday [AllThingsD]

Best places to work [Cnet]

24 things I know now that I wish I knew then [Moz]

Corvex Management Trims Ralcorp Position

Keith Meister's hedge fund firm Corvex Management filed an amended 13D with the SEC regarding its position in Ralcorp (RAH).  Per the filing, Corvex has disclosed a 3.69% ownership stake in RAH with 2,031,540 shares.

They've reduced their position by selling shares on December 14th, 17th, and 18th at prices around $89.xx.  In total, they've reduced their position size by around 30%, selling 883,456 shares recently.

Corvex originally went activist on RAH in August of this year, arguing that the company should sell itself or merge with another food company, and that's exactly what's happened.

ConAgra last month agreed to acquire Ralcorp for $5 billion.  Shares of RAH currently trade just slightly below the $90 per share offer.  Perhaps Corvex was simply taking money off the table to deploy to more compelling opportunities now.  We've also highlighted how Corvex has gone activist on ADT.

Per Google Finance, Ralcorp is "engaged in manufacturing, distributing and marketing private-brand food products and other regional and value-brand food products in the grocery, mass merchandise, drugstore and foodservice channels. The Company’s products include nutritional bars; snack mixes, corn-based chips and extruded corn snack products; crackers and cookies; snack nuts; chocolate candy; salad dressings; mayonnaise; peanut butter; jams and jellies; syrups; sauces; frozen griddle products, including pancakes, waffles and French toast; frozen biscuits and other frozen pre-baked products, such as breads and rolls; frozen and refrigerated doughs, and dry pasta."

Jeff Gundlach: Investors Should Hold Cash

DoubleLine Capital's CEO Jeff Gundlach recently appeared on Bloomberg to talk about how to invest in this environment and claimed that "investors should be holding cash."  Below are some excerpts from his interview as well as the video.

He noted that risk assets have diminishing returns and that he didn't see much value in the US stock market and said to act cautiously in the US bond market.

On how to trade this environment:

"I think that investors should be looking for lower prices on most risk assets in these developed countries with the exception of Japan... investors should be looking for the potential inflationary consequences of all this money printing exercise and the place to look for that is Japan."

On whether investors should get more disciplined and look at fundamentals:

"The fundamentals are always important but it does get trumped by policy decisions when policy decisions are so radical as has been the case in recent years…There seems to be diminishing returns on the various rounds of quantitative easing. It's almost like a half-life of a radioactive particle. The first quantitative easing brought 50%, the second brought a little more than half of that, the third half again, the fourth less than half again. It just seems that the idea of a Pavlovian reaction when you see quantitative easing that you should go out and buy risk assets--it has worked four times, but it doesn't seem like you are getting much bang for your buck any more…I would point out that gold, for example, hasn't done much of anything in the last couple of rounds of quantitative easing. It seems that the fundamentals are starting to exert themselves more powerfully against the backdrop of endless quantitative easing, so it's possible that the market support is close to finding its limit. This is why I think that investors should be holding cash and buying risk assets at lower prices once the fundamentals assert themselves."

On where to put money now:

"You've got to survive with virtually no return if that's the way you look at things. I actually recommend that for many investors. I think the small amount of money that you might make by trying to push it here as we get closer and closer to the end game where this thing might tail out--the amount of money you might make will be dwarfed by the amount of money you might lose when things reprice lower. Put it another way, if you just stay in cash and earn a small return or stay in a low risk investment and earn a middling single digit return--the money you might be able to make as we move into late 2013 or early 2014 with repricing, the amount of money you might make if you are able to deploy the money at that point will make all the difference. People always want investments to go up like a line…That's just not reality. You make 80% of your money in 20% of the time in investing and you have to be patient…I see some values in some of these foreign markets. I don't see a lot of value in the U.S. stock market and I think you have to play it safe in the U.S. bond market with funds that are really dedicated to having low volatility." 

Embedded below is the video of Gundlach's interview with Bloomberg TV:

Tuesday, December 18, 2012

Lee Cooperman Adds To McMoRan Exploration Stake

Lee Cooperman's hedge fund firm Omega Advisors just filed a 13G with the SEC regarding their position in McMoRan Exploration (MMR).  Per the filing, Omega has disclosed a 7.5% ownerships take in MMR with 12,417,655 shares.

This marks an increase of almost 70% in their aggregate amount of shares owned since the end of the third quarter.  The filing was made due to activity on December 6th.

It's also worth pointing out the fine print of Omega's filing: Their 7.5% ownership stake includes their position in McMoRan's 5 3/4% convertible perpetual preferred stock.

Readers will recall that Cooperman pitched McMoRan Exploration at the Great Investors' Best Ideas conference in late October. 

On December 5th, Freeport McMoran (FCX) announced it had agreed to buy McMoRan Exploration for a cash sum of approximately $2.1 billion where MMR's shareholders would also receive 1.15 units of a royalty trust.  The stock traded massively higher up to $15.xx on this news and it appears as though Cooperman added to his position.

Per Google Finance, McMoRan Exploration is "is engaged in the exploration, development and production of oil and natural gas in the shallow waters (less than 500 feet of water) of the Gulf of Mexico and onshore in the Gulf Coast area of the United States. McMoRan’s oil and gas operations are conducted through McMoRan Oil & Gas LLC (MOXY), its principal operating subsidiary. The Company has acreage positions in the shallow waters of the Gulf of Mexico and Gulf Coast areas."

Carl Icahn Files Amended 13D on Greenbrier: American Railcar Makes Bid

Carl Icahn just filed an amended 13D with the SEC on Greenbrier Companies (GBX).  Per the filing, another company Icahn is involved with, American Railcar (ARII), made a $20 per share in cash offer for Greenbrier (GBX). 

Icahn just recently established his new position in Greenbrier.  The Q3 issue of our Hedge Fund Wisdom newsletter drew attention to this last month and postulated that he had plans for the two companies (as both are involved in railroad freight car equipment). 

And now we see that ARII (with Icahn as its top investor) has made a bid for GBX.  Shares of GBX are now trading at a slight premium to this offer.

Robert Karr's Joho Capital Starts Yelp Position

Robert Karr's hedge fund Joho Capital filed a 13G with the SEC regarding shares of Yelp (YELP).  Per the filing, Joho has disclosed a 5.26% ownership stake in YELP with 894,795 shares.  Joho is one of the 'Tiger Cub' hedge funds as Karr previously worked at Julian Robertson's Tiger Management.

This is a brand new position for Joho Capital as they did not report a stake at the end of the third quarter on their most recent 13F filing with the SEC. The new 13G disclosure was required due to portfolio activity on December 7th.

Per Google Finance, Yelp is "operates a directory services and social networking website. Its online community provides information on urban city guide. The Company is based in the United States and its information helps people to find places to eat, shop, drink, relax, and play. It also operates a search engine for finding restaurants, dentists and hairstylists. It provides a space for feedbacks and reviews of people regarding their experiences with local businesses and services."

It's also worth pointing out that Yelp has recently been integrated into Apple's iOS platform via their maps application, allowing users to locate, rate, and review attractions. 

This integration could be a part of Joho's attraction to the name, in addition to the fact that shares have dropped from $23 down to $18 in recent months and have traded as low as $16.30.

For more on this hedge fund, we've also revealed one of Joho's short positions.

Monday, December 17, 2012

David Tepper Sees "A Lot" of Upside in Equity Markets: Latest Media Appearance

Appaloosa Management's founder David Tepper made a rare media appearance on CNBC this morning so we wanted to highlight the key takeaways and post up the full videos below.

Many of you will recall that one of Tepper's appearances a few years ago launched the aptly-titled 'Tepper rally' in the markets after he said he wouldn't fight the Fed.  So what's his take on the markets this time around?  Read on below:

David Tepper's Latest Thoughts

CNBC noted that Tepper's $16 billion hedge fund is up 25% net on the year. He thinks there's a "pretty good economy, growing 2% give or take" with tailwinds in housing and autos.  He highlighted how the Fed is focused on unemployment.

On Europe

Tepper also drew attention to Europe's situation, noting that "whenever Draghi wants to lower interest rates in Europe, he can do it."  He feels this aspect wasn't really well reported and that it's important because you have a "series of puts over in Europe" via central bank action.

On Credit Markets

The Appaloosa man said that credit markets are "rich and spreads are at pretty good levels right now."  He didn't want to call them in bubble territory, but said they're close.

Andrew Ross Sorkin asked Tepper if he was shorting some high yield, and Tepper said: "No.  I would short with a trillion dollar of stimulus of Fed coming in and short?  You can short it if you want, I'm not going to short it ... This money has to go someplace."

On Equity Markets

Tepper points out that there's a 12-handle PE on the S&P, saying "it's cheap relative to everything, it's the only market that hasn't really rose to new heights."  He says the situation in Washington is holding everybody back, noting that there could be 3-5% downside in the market if things become dire.

When asked how much upside was left in the equity markets, Tepper simply replied "a lot."  It's clear that Tepper continues to live by the mantra 'don't fight the Fed.'

While stocks have risen a solid amount since his original 'Tepper rally' call in 2010, he notes that the P/E hasn't expanded that much.  When asked about current valuation, he replied that "it is really, really interesting.  I hate to say how cheap it is."

On Inflation

He also touched on the Fed's actions and potential inflation:  "At some point everybody's concerned about inflation.  On the way to inflation in the real economy, you're gonna have another sort of inflation.  It's inflation in asset prices."

Tepper pointed out that a lot of hedge fund managers have taken money off the table because they "don't want to take a year-end loss," again pointing to the Fiscal cliff situation and noting the potential downside there.  Tepper says he's willing to take a chance (but you also have to keep in mind he's already up 25% this year."

Appaloosa's 2012 Playbook

Tepper laid out how his hedge fund has essentially played this year:  In December (2011), they waited for the LTRO and *then* invested.  In April, he thought the economy was slowing so he bought some puts (noting he saw low put vol at the time).  Then Draghi "gave away" a market put and Appaloosa got invested.  Then in front of the US election, he took down his long exposure, assuming the market would sell-off on Obama's re-election.  And when things sold off, he started buying some equities again, getting long into year-end.

As far as his allocations go, he outlined that "We probably have 70% of our book in bonds and stocks.  We move them up and down based on the individual names."  Then they use options to trade around volatility.

Tepper on Selling Due to Potential Capital Gains Increase

"Yea, we've basically taken a bunch of our long-term gains this year to lock-in these lower rates for our investors."  This is a phenomenon that's certainly happened across the markets and notably amongst hedge funds.  We'd cite Apple (AAPL) as a primary example as many prominent funds were sitting on a large position with large long-term gains.

Videos of Tepper's Interview

Embedded below are videos of Tepper's latest CNBC appearance:

Video 1

Video 2

Video 3

It looks like CNBC has the wrong code for the third video, but you can watch it here.

For more on the Appaloosa founder, head to our review of The Alpha Masters, a book that Tepper is profiled in.

Wednesday, December 12, 2012

What We're Reading ~ 12/12/12

13 insights from Paul Tudor Jones [Ivanhoff Capital]

Barron's favorite stocks for 2013 [Barron's]

The case for Hewlett Packard to be broken up [CNNMoney]

Why spinoff stocks are sizzling [Forbes]

The value gene - Buffett, Klarman and evolution [Graham & Doddsville]

Do hedge funds manipulate stock prices? [WSJ]

Hedge funds fall out of love with equities [CNBC]

SocGen's 2013 global investment outlook [BusinessInsider]

Jeff Gundlach's latest DoubleLine presentation [BusinessInsider]

Hedge fund operations: a manager's view [Prohedge]

Barclays spins off $2b distressed debt fund [HedgeFundIntelligence]

Equity long/short funds capture over 60% of upside during Q3 [Hedgeweek]

Pension funds pulled $6.4b from hedge funds last month [NYPost]

The long case for Xerox [Graham Disciple]

The trail of cases leading to SAC Capital [Dealbook]

The student loan time bomb [Daily Reckoning]

Samsung, Apple & the new age of capital intensity [Asymco]

Hennessee Group on How Hedge Funds Are Navigating This Market

Hennessee Group LLC has released its November performance data for its Hedge Fund Index: it advanced +0.36% in November (+5.47% year to date).  Below is some select commentary on what they're seeing from various funds and how they're positioned:

Stockpicking Environment Improved

Hennessee Group's Managing Principal Charles Gradante said that hedge funds gained during the month mainly due to alpha from stock selection (as well as managing exposure levels). 

He went on to say that, "As correlation among securities has declined, the environment for stock selection has improved.  That said, managers remained concerned about continuing fiscal and political uncertainty and have reduced net exposure levels."

Managing Principal Lee Hennessee also highlighted that many fund managers are "somewhat optimistic about 2013 due to an accommodative Fed, an increase in bank lending, a continued housing recovery supported by record low mortgage rates, and lower gasoline prices, which should help the consumer."  

Hedgies Like Mortgages

Gradante also noted how many managers that initially were short subprime in 2007/08 have reversed course, building long positions via structured products earlier this year.

He pointed out that, "This has been a significant profit generator in 2012 and a lot of the easy money has been made.  While we have seen some profit taking in recent months, managers believe that this will continue to be a profitable trade as we continue to see mortgage quality improving."

Kyle Bass of Hayman Capital recently shared that 90% of what he owns is in bonds via a ton of RMBS/subprime exposure.

Citadel Ramps Up Brinker International Stake

Ken Griffin's investment firm Citadel has filed a 13G with the SEC regarding shares of Brinker International (EAT).  Per the filing, Citadel has disclosed a 5.5% ownership stake in EAT with 4,014,981 shares.

This marks a sizable increase in their stake and the filing was required due to portfolio activity on December 7th.  The number of shares they own has increased by 4,752% since the end of the third quarter as they only held a tiny position then.

Per Google Finance, Brinker International "owns, develops, operates and franchises the Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) restaurant brands."

Tuesday, December 11, 2012

Bill Ackman on Everything You Need To Know About Investing & Finance In 1 Hour

Pershing Square Capital Management CEO Bill Ackman did a video for Floating University and The Big Think entitled "Everything You Need to Know About Finance and Investing In Under an Hour."

On Finance / Business

The first segment of the video is ideal for beginners and students as it combines concepts from introductory accounting, finance and business classes.  He covers topics such as:

- How business works
- How to raise capital
- How to monetize your business investment
- Dynamics of investing in debt versus equity
- Assessment of risk
- Valuation

On Investing

The second part of the video delves into investing, noting that "the most valuable asset in investing is time."  He highlights the keys to successful investing:

1. Invest in public companies
2. Understand how the company makes money
3. Invest at a reasonable price
4. Invest in a company that could last forever
5. Find a company with limited debt
6. Look for high barriers to entry
7. Invest in a company immune to extrinsic factors
8. Invest in a company with low reinvestment costs
9. Avoid businesses with controlling shareholders

Ackman summarizes things by saying, "Find a business that you understand, has a record of success, makes an attractive profit, and can grow over time."  He says the best investments don't require a lot of reinvestment capital and generate a healthy cashflow to pay out in dividends to shareholders

He also addresses other investing concepts such as compound interest, psychology of investing, and how to withstand volatility

Other takeaways: Ackman said that, "(The) key here is not just shooting for the fences, but avoiding losses."  It's also worth highlighting that Ackman said he became interested in investing when he was 22 as he read The Intelligent Investor by Benjamin Graham.

Embedded below is Bill Ackman's video for Floating University:

We've also posted up a ton of other educational investment info (scroll through the list). 

For more advanced topics, head to more from this hedge fund manager via Bill Ackman's recommended reading list.

Moore Capital Reveal New Position in Monitise

Louis Bacon's global macro hedge fund firm Moore Capital Management has disclosed a new position in UK holding company Monitise (LON: MONI). 

Moore now hold 3.28% of Monitise's voting rights (or equivalent).  At first sight, we thought that Moore had bought their holding via the recent placing held on December 3rd.  However, closer inspection of the notification of holdings document shows that their stake is held completely via contracts for difference (explanation of CFDs here).

Per Google Finance, Monitise is "a United Kingdom-based holding company. The principal  activity of the Company is as a technology company delivering mobile banking, payments and  commerce networks worldwide. The Company’s segments include Live Operations, Investment in  future operations and Investment in technology platform. Live operations include both territory  deployments and development contracts, which consist of Monitise United Kingdom, Monitise  Americas and Global accounts. Investment in future operations segment represents the Company’s  operations which are not live operations covering both pre-sales and start-up period. Investment in  technology platform segment comprises the ongoing development, enhancement and maintenance  costs of the Monitise technology platform."

Moore's Other UK Positions 

Moore Capital Management's other disclosed holdings in UK markets which are greater than 3% of voting rights are as follows:

Brightside Group 8.21%
Camper and Nicolsons Marina 5.81%
Helphire Group 5.06%
Loudwater Trust 9.84%
Max Property Group 4.55%
NBNK Investments 8.76%
NewRiver Retail 3.93%

The hedge fund currently has not disclosed any short positions in the UK market.  We recently posted up a list of hedge fund short positions in European markets.

For more on the history of Louis Bacon's hedge fund, head to one of Moore Capital's 2010 letters.

Lone Pine Capital More Than Doubles Its Dollar Tree Stake

Steve Mandel's hedge fund firm Lone Pine Capital filed a 13G with the SEC regarding its position in Dollar Tree Stores (DLTR).  Per the filing, Lone Pine has disclosed a 5.2% ownership stake in DLTR with 11,804,692 shares.

This marks a 203% increase in the number of shares they own since the end of the third quarter.  The filing was required due to portfolio activity on November 28th.  Lone Pine first started building its Dollar Tree Stores stake in the third quarter.

This makes them one of the largest institutional holders of DLTR shares, along with Blue Ridge Capital, who also increased their position in the third quarter.

Per Google Finance, Dollar Tree is "an operator of discount variety stores offering merchandise at the fixed price."

We've recently highlighted additional Lone Pine portfolio activity here.

Monday, December 10, 2012

PointState Capital Increases Verisign Position ~ 13G Filing

Sean Cullinan's hedge fund firm PointState Capital filed a 13G with the SEC regarding shares of Verisign (VRSN).  Per the filing, PointState has disclosed a 3% ownership stake in the company with 4,666,670 shares.

The filing was made due to trading activity on November 29th and marks an increase of 158% in the number of shares they own since the end of the third quarter.

The November 29th date is relevant here, mainly because the day after that, shares dropped from $40 to $34 on news that Verisign won the .com domain renewal, but wasn't going to be allowed to raise prices by the government.  Since then, shares have slightly rebounded back to around $37.

Hedge fund Lone Pine Capital has also been long Versign and we've highlighted Steve Mandel's pitch on VRSN from the Invest For Kids Chicago event last month.  Mandel argued that even if no price increases are allowed by the government, the downside is low.

The company recently announced it would double its stock repurchase plan to $1 billion.

About PointState Capital

This is the first time we've highlighted this fund, so here's some background: Point State was founded with around $5 billion a few years ago by former colleagues of Stan Druckenmiller's at Duquesne Capital.  Druckenmiller himself invested in the fund but does not have an ownership stake. 

Sean Cullinan is the CEO of Point State while other former Duquesne portfolio managers are there as well.  Point State is named after a park in Pittsburgh by the location of the old Fort Duquesne.

About Verisign

Per Google Finance, Verisign is "a provider of Internet infrastructure services. The Company provides domain name registry services and infrastructure assurance services. VeriSign segment includes Naming Services, which consists of Registry Services and Network Intelligence and Availability (NIA) Services. The Company has operations inside, as well as outside the United States. Registry Services operates the directory of all .com, .net, .cc, .tv, and .name domain names and the back-end systems for all .gov, .jobs and .edu domain names."

Seth Klarman's Baupost Group Raises NovaCopper Stake

Seth Klarman's hedge fund firm Baupost Group filed a 13G with the SEC regarding shares of NovaCopper (NCQ).  Per the filing, Baupost now owns 10.73% of the company with 5,005,298 shares.

This filing was made due to portfolio activity on November 30th and marks almost a 9% increase in the number of shares they own since the end of the third quarter.

Our Hedge Fund Wisdom newsletter a few weeks ago pointed out how Baupost was buying in Q3 as well.  While they've added to the stake, it's still a small position relative to their other equity holdings and overall assets under management.

They originally received shares of NCQ in the spin-off from NovaGold Resources (NG), which they also own and have consistently been buying this year as it trades lower.

Per Google Finance, NovaCopper is "a base metals exploration company. The Company is focused on exploring and developing the Ambler mining district, which VMS deposits containing copper, zinc, lead, gold and silver and carbonate replacement deposits containing copper, cobalt and silver."

We recently posted up an old profile of Klarman for those interested as well.

Charlie Munger on the Psychology of Human Misjudgment: Harvard Speech

Berkshire Hathaway's Charlie Munger gave a speech at Harvard University back in the 1990's on the topic of the psychology of human misjudgment.  T2 Partners' Whitney Tilson was kind enough to transcribe it and we've posted up below.

It seems that outside of the requisite financial analysis, investors are often faced with two other keys to success: mastering emotions and making good decisions.  In a sense, both of those can be intertwined as you often have to set aside emotion to make smart decisions.  Munger tackles some of these issues in his speech by focusing on the biases we often have to overcome.

Embedded below is the transcript of Munger's Harvard speech:

You can download a .pdf copy here.

For more reading on behavioral finance and decision making, head to Blue Ridge Capital's recommended reading list

Thursday, December 6, 2012

Holiday Gift Guide For Financial Professionals

It's time for our annual holiday gift guide for financial professionals.  We like to highlight relevant discounts, great books, and useful tools for clients, bosses, colleagues or even yourself.  Here are this year's picks:

Discounts on Publications

Hedge Fund Wisdom: 33% Discount - Our holiday sale runs through the end of the year.  Save 33% on MarketFolly's premium newsletter that analyzes hedge fund portfolios.

Wall Street Journal: 67% Discount - Save on a subscription to the market's top news source.

Barron's: 65% Discount - More savings on this widely-read investment idea publication.

2012 Hedge Fund Compensation Report - If you're looking to make a move in the industry or negotiate a raise, this is a great resource with tons of data points on salary (base & bonus), hours worked, vacation days & more.

Portable Electronics

Apple iPad Mini - The most popular tablet, now even more portable.  Help out all the hedge funds that own AAPL shares by boosting Apple's topline.

Google Nexus 7 - A tablet for Android lovers. 

Kindle Paperwhite - Great for reading finance books and even SEC filings.

Apple MacBook Air - Very portable laptop for travel.

Samsung Chromebook - Another portable laptop option.

Monitors / Trading Station

Dell LED 27 Inch IPS Monitor - Tons of screen real estate here

ASUS 24 Inch LED IPS Monitor - Includes a rebate; great for a multi-monitor setup

Dell UltraSharp 24 Inch LED Monitor - Another good option

Dual Monitor Desk Mount - For assembling your monitors 

Triple Monitor Desk Mount - Turn your desk into a trading station

Great Finance Books

The Art of Short Selling by Kathryn Staley - The most highly recommended book on shorting.

Hedge Fund Market Wizards By Jack Schwager - The latest version in this awesome series featuring new interviews with 15 top money managers including Ray Dalio, Joel Greenblatt & more.

Investment Psychology Explained by Martin Pring - On how to overcome emotional and psychological impediments that distort decision making.

The Alpha Masters by Maneet Ahuja - Profiles of and interviews with 9 top hedge fund managers including David Tepper, Dan Loeb, Marc Lasry & more.

The Behavior Gap by Carl Richards - Great book on how to rein in emotion when thinking about money and making decisions.

Quality of Earnings by Thornton O'Gove - Recommended by Bill Ackman, this book teaches you how to understand various financial information companies provide.

Movies & Documentaries

Margin Call (DVD) - Movie starring Kevin Spacey, Jeremy Irons and Demi Moore about an investment firm during the financial crisis (get the Blu-ray version here).

Too Big To Fail (DVD) - Paul Giamatti, Ed Asner, William Hurt and more fill this star-studded cast in a detailed account of the financial crisis of 2008 (and Blu-ray here).

Arbitrage (DVD) - Starring Richard Gere and Susan Sarandon, this film depicts a hedge fund manager trying to sell his empire before his fraud is exposed (and Blu-ray here).

Inside Job (DVD) - The Academy Award winner for Best Documentary. Directed by Charles Ferguson & narrated by Matt Damon. (and the Blu-ray version here)

Happy holidays everyone!

Wednesday, December 5, 2012

What We're Reading ~ 12/5/12

Notes from the the Bloomberg Hedge Fund Summit [Reformed Broker]

More coverage from the summit [ValueWalk]

Goldman Sachs top 10 market themes for 2013 [ZeroHedge]

The confusion between volatility and risk [Jack Schwager]

Einhorn ramps up net long exposure [Institutional Investor]

The bullish case for gold [Sober Look]

John Paulson said to blame bet against Europe for most of loss [Bloomberg]

Aggregation of talks from the UVA Investment Conference [Santangel's Review]

Pondering fixed income in 2013 [Economic Musings]

Interview with Warren Buffett & Carol Loomis [Charlie Rose]

Xerox may be the next big writedown disaster [TheHour]

Pershing Square investors to convert into permanent capital vehicle [Reuters]

Kleinheinz Capital & Corriente return client money [Bloomberg]

In-depth look at DoubleLine's Jeff Gundlach [Bloomberg]

A holiday book giveaway [Abnormal Returns]

Nominees for the 2012 Absolute Return hedge fund awards [HF Intelligence]

Lunch with Warren Buffett [New Yorker]

Gene Munster's Apple presentation at Ignition [Business Insider]

Broyhill's Presentation on Oaktree Capital Group: Solid as an OAK

Broyhill Asset Management recently released a slideshow presentation with their pitch on Oaktree Capital (OAK).  Entitled "Solid as an OAK," they believe it's an exceptional company trading at a significant discount to intrinsic value.

Oaktree is one of the most widely recognized credit managers in the industry and shares of the company went public earlier this year.  We've covered commentary from their Chairman Howard Marks numerous times as it's one of Warren Buffett's favorite reads.

Broyhill's Thesis on OAK

They feel OAK is:

- Run by superior management with high ownership interest
- Has favorable industry tailwinds
- Has a catalyst for realizing value

They see accelerating cash distributions in 2013 and 2014 as a catalyst for investors.

Other notable institutional owners of OAK shares as of the end of Q3 include David Einhorn's Greenlight Capital, Kingdon Capital, as well as Farallon Capital.

Embedded below is Broyhill's full presentation: Solid as an OAK:

For more on this stock, Brooklyn Investor has also published a series of research on it, highlighting OAK's stake in DoubleLine Capital.

Jeremy Grantham's Latest Commentary: On the Road to Zero Growth

It's been a while since we last checked in on GMO's Jeremy Grantham so today we wanted to highlight his Q3 2012 letter: "On the Road to Zero Growth."

In it, Grantham examines GDP growth rate, slowing population growth, productivity, and reduced capital spending.  He concludes that,

"With a little luck, U.S. GDP growth (even after an increasing squeeze from rising resource costs and environmental damage) should remain modestly positive, even out to 2030 and 2050, in the range of 1% at the high down to a few basis points at worst."

Grantham doesn't offer any investment advice given the scenario he laid out, arguing that it's a complicated set of short-term and intermediate-term consequences.  It sounds like he'll address that in his letter next time around.

Embedded below is Grantham's Q3 letter:

We've also highlighted some of Grantham's past commentary for those interested: betting against bull market irrationality.

Tuesday, December 4, 2012

Are These The Next Warren Buffetts? Wisdom From Klarman, Perry, Chanos & More

Fortune recently republished an article that originally appeared in the 1989 issue of Fortune magazine.  "Are These The New Warren Buffetts?" was written by Brett Duval Fromson and highlights investors from that period who were thought to be talented enough to match the investing acumen of Warren Buffett.  Twenty-plus years later, the article accurately pinpointed some amazing investors.

The article identified the following (at the time) young investors:

- Seeking Subtle Signs of Value: Seth Klarman (Baupost Group)
- The Bargain Hunter: Michael Price (MFP Investors)
- Turning Value Upside Down: Jim Chanos (Kynikos Associates)
- A Formula For Deals: Richard Perry (Perry Partners)
- Pairing Value With Arbitrage: Eddie Lampert (ESL Investors)
- A Freudian Grahamite: Randy Updyke
- The Passionate & The Skeptical: Glenn Greenberg & John Shapiro (Chieftain Capital)
- A Scientist on Wall Street: Thomas Sweeney (Fidelity)
- Mr. Preservation of Capital: John Constable (Constable Partners)
- Mr. & Mrs. Aggressive: Jim and Karen Cramer

Wisdom From The "Next Buffetts"

As you can see, the list highlights some gems.  However, the best part of the article is that each investor shared some rare nuggets of wisdom regarding their approach that we wanted to draw attention to:

Seth Klarman: "Klarman's exceptionally quick and subtle mind allows him to see value in many different guises.  With stocks high, he looks for 'market-insensitive opportunities.'  By that he means companies whose financial performance depends on bankruptcies, announced mergers, liquidations, restructurings, or spinoffs -- corporate events largely independent of the vagaries of the financial markets."  Klarman focuses on the downside, saying: "I focus on what could go wrong.  Before buying, we always ask ourselves, 'what would we pay to own this company forever.' "  For more from this great investor, we've posted up Seth Klarman's recommended reading list.

Michael Price: "I like cheap stocks.  I'm basically a guy who looks at a company's balance sheet and asks, 'what is the company worth? Give me a number.'  If the answer is, 'Substantially more than the price,' then I get interested."

Richard Perry: "His investment approach? E(V) = {P(UPx) + [(1-P) (DPx)]} / (1 + COF).  That simply means he values a deal by calculating the odds that it will go through, how long it will take, and what the investment is worth with and without the deal.  Why all the effort to quantify?  Says Perry: 'There are no lay-ups in the arbitrage business.  This helps us maintain clear, high standards for buying a deal.' "  For more thoughts on this strategy from well-known investors, we've also posted up John Paulson on the risk in risk arbitrage.

Jim Chanos: "Chanos is in truth a perverse kind of value investor.  Using the same techniques as the others, he looks for overvalued stocks.  He stays mainly in large-capitalization issues.  That way there is more liquidity and thus less chance of a short squeeze, which would force him to liquidated his position because he could no longer borrow shares from brokers."  For more on his approach, we've posted up Chanos on the psychology of short selling as well as Chanos on the power of negative thinking.

Eddie Lampert: "Arbitrage helps our value investing.  If we can earn 20% to 25% annualized returns in arbitrage, then for the long term we can buy only stocks that we think will earn comparable rates of return.  Conversely, if deal stocks get overpriced, we will begin investing in companies with good long-term prospects at low prices." 

Randy Updyke: "Investing is about survival.  I stay away from the herd.  I like to buy things for a lot less than I think they are worth.  But to me the psychology and mood of the market are more important than anything."

Thomas Sweeney: "People always panic.  If you study this phenomenon over time, you see that eight times out of ten you make money by buying into a panic."

Be sure to check out the full re-published version of the Fortune article, where you can see Chanos rocking a sweet mustache and other great vintage pictures.

The Arithmetic of Equities By Whitebox Advisors

Andrew Redleaf of Whitebox Advisors penned an interesting letter a few months ago entitled, "The Arithmetic of Equities."  In it, he points to the folly of Bill Gross' "death of equities" commentary and makes the case for stocks.

Redleaf asks a simple question: "Why do U.S. institutions hold less of their money in equities than they have for decades?"  Instead of summarizing, we'll leave you with the entire letter embedded below:

You can download a .pdf copy here.

Warren Buffett on Hedge Fund Managers and Going Long Versus Short

Berkshire Hathaway's Warren Buffett recently was interviewed by Andrew Ross Sorkin for Dealbook and he made some interesting comments about hedge funds, respected investors, and short selling that we wanted to flag:

Buffett on Hedge Fund Managers: "They're not as good as the old ones generally.  The field has gotten swamped, so there's so much money playing and people have been able to raise money by just saying 'hedge fund.  That was not the case earlier on; you really had to have some performance for some time before people would put money with you.  It's a marketing thing."

Julian Robertson echoed this sentiment when he also recently commented that hedge funds aren't doing as well as they used to because the competition is more hedge funds.   

Buffett mentioned a few hedge fund managers who were successful like Julian Robertson (Tiger Management), and he mentioned that he liked Seth Klarman (Baupost Group).  As we highlighted today, Klarman was named one of the 'next Warren Buffetts' way back in 1989 by Fortune.

On Short Selling: "Charlie and I have both talked about it. We probably had a hundred ideas of things that would be good short sales.  Probably 95 percent of them at least turned out to be, and I don't think we would have made a dime out of it if we had been engaged in the activity.  It's too difficult."

On Going Long: "The whole thing about 'longs' is, if you know you're right, you can just keep buying, and the lower it goes, the better you like it, and you can't do that with shorts."

On Running 'Too Much' Money: "... money starts getting self-defeating at a point, too."

Head over to Dealbook for the full interview with Buffett.

Dan Loeb's Third Point November Exposure Report

Dan Loeb's Third Point Offshore Fund is out with its latest exposure report for November.  They finished the month up 2.9% and sit up 17% year-to-date and manage $10 billion.

Exposure Levels

Loeb's firm reduced net long equity exposure by a noticeable amount.  They went from 44% net long in October down to 38% net long at the end of November.  Their largest sector exposure continues to be tech, media & telecom (primarily due to their large stake in Yahoo).

In credit, Third Point is 27.7% net long, a 1% increase from the month prior.

Third Point's Top Positions

1. Yahoo! (YHOO)
2. Greek Government Bonds
3. American International Group (AIG)
4. Gold
5. Murphy Oil (MUR)

Their top holdings as a group remain unchanged this month, though their GGB and AIG stakes flipped position ranks.

Top Winners & Losers

Third Point's top winners included Greek Government bonds, Yahoo, Delphi (DLPH), Aveta, and Ally Financial (multiple securities held).  Their top losers included AIG, Short A, Short B, Apple (AAPL), and Liberty Global (LBTYA).

Embedded below is Third Point's November exposure report:

Overall, not too many notable changes in Loeb's portfolio aside from the reduction in net long equity exposure.  Head to Third Point's Q3 letter for more color on their positions.

Friday, November 30, 2012

Bruce Berkowitz Interview at University of Miami

Fairholme Capital's Bruce Berkowitz recently sat down for a conversation with the "Executive in Residence" program at University of Miami's business school.  Here are some key takeaways and select quotes from him:

On the macro: "At Fairholme, we tend not to think too much about the macro picture... but it's clear: a recovery."

On his approach: "We buy that which is hated.  When it's hated, it's usually cheap.  We usually are too early, we suffer from premature accumulation ...  We want to make sure that when we invest in something, that there's a big margin of safety."

On why he focuses less on the income statement: "There are less ways to cheat on a balance sheet than on an income statement."

On a question he asks: "What's the worst thing that can happen, and can we still make money?" (assuming that bad thing happens)

On mistakes: "Why do so many people make the same mistake over and over again?  One of the reasons has to do with biology ... with how your brain is wired.  In the last couple of years, you've had to be more a psychologist than an accountant. That's where the behavioral finance issue comes in.  You get into all the issues how people can be their own worst enemy."

His last point is one of the most important as so many great investors have talked about setting aside emotion when managing money.  We've also highlighted Blue Ridge Capital's behavioral finance reading list which is recommended.

On permanent capital:  "That is the secret sauce: permanent capital.  That is essential.  I think that's the reason Buffett gave up his partnership.  You need it, because when push comes to shove, people run ... That's why we keep a lot of cash around."

Embedded below is the video of Berkowitz's full interview:

More resources on this investor: an additional interview with Berkowitz on portfolio concentration as well as Berkowitz's checklist for investing.

Conversation With Warren Buffett (Forbes 400 Summit)

Berkshire Hathaway's Warren Buffett recently sat down with Randall Lane for the Forbes 400 Summit on Philanthropy.  Since some value investors out there like to absorb every single thing he says, we've embedded the video of the interview below:

For more resources on the Oracle of Omaha, head to Warren Buffett's recommended reading list.

Howard Marks' Latest Letter: "A Fresh Start (Hopefully)"

Oaktree Capital's Chairman Howard Marks is out with his latest letter entitled, "A Fresh Start (Hopefully)."  This memo is more political focused given that the election just took place. 

His prior missive, On Uncertain Ground, is more investment focused and highlights his macro concerns for those who missed it.

Embedded below is Marks' latest memo:

You can download a .pdf copy here.

For more wisdom from this excellent investor, be sure to check out Marks' book: The Most Important Thing Illuminated.

Hedge Fund Short Positions in Ireland

Continuing our coverage of hedge fund short positions in Europe, next up is Ireland. European rules are forcing hedge funds to disclose information about the most carefully guarded part of their business activities: short positions. 

Since November 1st when the EU Regulation on short positions came into force, there has been a deluge of information from financial regulators in EU countries about short positions across all market sectors.  

Public disclosure is required for net short positions of shares that reach 0.5% of the issued share capital of the company concerned and again at each 0.1% increment above that.  Additionally, disclosure is required publicly when the position subsequently falls below 0.5%.  

At the end of 2011, Ireland lifted its 3 year ban on short selling of bank stocks which had begun at the heart of the financial crisis in September 2008. Unlike Spain and Italy, Ireland has not resorted to the implementation of short selling bans across all sectors of the stock market. 

Perhaps the most striking feature at the moment is how few short positions there are in the Irish market.  This could possibly be because institutions simply don't have short positions large enough the require disclosure.

Hedge Fund Short Positions in Ireland Revealed

Name of hedge fund / % of company's shares short / Name of company

Farallon Capital:  Short -1.18% Icon

FVP Master Fund: Short -0.55% CRH

BNP Paribas: Short -0.55% CRH

To see more hedge fund shorts, head to our other coverage:

 - Hedge fund short positions in the UK

- Hedge fund short positions in Germany

- Hedge fund short positions in France

- Hedge fund short positions in the Netherlands  

- Hedge fund short positions in Belgium

- Hedge fund short positions in Finland

- Hedge fund short positions in Sweden

- Hedge fund short positions in Denmark 

- Hedge fund short positions in Poland 

- Hedge fund short positions in Italy

Thursday, November 29, 2012

Notes From the Boston Investment Conference 2012

The first Boston Investment Conference took place earlier this month and today we're posting up some notes from it.  The event benefited the Boston Children's Hospital and featured an impressive list of speakers, moderators, and host committee chairs.

Out of respect for the event organizers, these notes are a little bit different than what we typically post in that the pitches won't be linked to a particular investor.  So unfortunately, you'll have to play a bit of a guessing game here, but we figured something is better than nothing given the quality of the speakers.

List of Speakers/Moderators

Seth Klarman, Baupost Group
Jon Jacobson, Highfields Capital
Richard Perry, Perry Corporation
Will Danoff, Fidelity Contrafund
David Abrams, Abrams Capital Management
Jeffrey Vinik, Vinik Asset Management
Max Stone, D.E. Shaw & Co
Edward Shapiro, PAR Capital Management
Jane Mendillo, Harvard Management Company
Nancy Zimmerman, Bracebridge Capital
Michael Trotsky, MA Pension Reserves Investment Management
David Zervos, Jefferies
Andrew Perold, HighVista Strategies
Lawrence Summers, Harvard University
Eric Doppstadt, The Ford Foundation
Jay Light, Harvard Business School
Andrew Bary, Barron's

Ideas Pitched (Listed in Random Order)

Yahoo! (YHOO)
JAL Japan Airlines (TYO:9201)
Google (GOOG)
Global Eagle Acquisition Corp (EAGL)
Fannie and Freddie preferreds
News Corp (NWSA)
Canadian Natural Resources (CNQ)
JZ Capital Partners (LON:JZCP)

Notes From the Boston Investment Conference

Some of the above stocks were discussed only with one or two comments, but we've posted up notes from some of the detailed pitches below.  Again, unfortunately we can't attribute the ideas to a particular speaker:

Japan Airlines (JAL)

- $8.5b IPO out of bankruptcy, Japanese government sold entire stake (IPO'd around 3,800 Yen and is now around 3,750 Yen)

- Revenues for JAL are about 1/2 of Delta (1/2 of JAL's revenues are from domestic market)

- Changes during bankruptcy: reduced headcount by 35%, decreased salaries by 50%, canceled all debt, eliminated some service on underperforming routes, reduced capacity by 40%, reduced non-fuel expenses by 1/3rd

- Valuation: lowest multiple of any global airline.  JAL around 3.1 EV/EBITDAR, P/E around 6.5

- Headwinds: Orders for 45 Dreamliners.  JAL has already started its non-stop Boston to Japan flight.  Overall market liberalization - competitors can now coordinate on prices and schedules (get the benefits of a merger without having to deal with the operational headaches or merging 2 airlines).  High barriers to entry in the Japanese market: JAL is 37% of market and ANA is 47%, little room for new players

- Largest risk: entry of a low cost carrier into Japanese market: currently low penetration of LCC in Japan.  Not seen as a huge threat because LCCs are typically used for short flights and Japanese tend to take trains for short trips.  Also, there are limited slots for new airlines at the airport closest to the city.  If a LCC flew into the airport farther outside the city, the cost of a taxi or train into the city would negate taking a low cost flight to Japan.

Yahoo! (YHOO)

- Cheap when looking at balance sheet.  Market value of 35% of Yahoo Japan = $7.7, market value of stake in Alibaba = $8.1, preferred shares = $0.8 (these three tax-adjusted equal $11.6b), cash = $9.4, shares out = 1.2 for a value of $17.5 (you are paying close to nothing for $4.3b in revenue or $700m in free cashflow).

- Investor thought Marissa Meyer will be a very good CEO   

- MarketFolly note: Our newly released issue of Hedge Fund Wisdom last week highlighted that David Einhorn's Greenlight Capital and Chase Coleman's Tiger Global both started new positions in YHOO during the third quarter.  Also, recall that Dan Loeb's Third Point has been an activist investor in the name.    

Google (GOOG)

- Cheap stock - trading around where it was in 2007 and EPS has increased from $15 then to $40 now 

- MarketFolly addendum: We previously posted Eminence Capital's thesis on GOOG as well. 

This concludes notes from the Boston Investment Conference.  We've covered a ton of events recently, so be sure to also check out:

- Notes from Sohn London Investment Conference (Hohn, Chanos & more)

- Notes from Invest For Kids Chicago (Mandel, Peltz & more) 

- Notes from Great Investors' Best Ideas (Einhorn, Bass & more)