Thursday, August 2, 2012

Dan Loeb's Third Point Buys Kraft, Various Healthcare Plays: July Exposure Report

Just yesterday we posted up Dan Loeb & Third Point's Q2 letter and now we have some more portfolio metrics in the form of their latest monthly exposure report.  In July, Third Point Offshore was up 1.6% and is up 5.5% for the year.

Here are a few new takeaways from their latest exposure report:

- Long Kraft (KFT): The biggest news is that Third Point has disclosed a new position in Kraft Foods (KFT) and it is now their fifth largest position.  The company of course will be splitting into two: a North American grocery business and an emerging snacks business.

Although Pershing Square Capital no longer owns KFT shares, you can see Ackman's presentation on Kraft from a few years ago.  Third Point is most likely playing the spin-off, though.  Nelson Peltz's Trian Fund has also been a large owner of KFT.

- Long Healthcare Plays: Loeb's hedge fund also appears to have started new positions in UnitedHealth Group (UNH), Humana (HUM), Wellpoint (WLP), and Cigna (CI).  All of these names were 'top losers' for the fund during the month.  This is worth highlighting because it is the first time these stakes have been disclosed.  We recently flagged why David Einhorn likes Cigna as he recently bought the name as well.

- Third Point is net long the Americas by 70%, but net short EMEA by -4% and net short Asia by -10%.

- In equities, Loeb's firm is 35.4% net long (67.6% long and -32.2% short).  This marks a decent increase from June, where they were net long 27.3%.  Their largest net long sector exposure comes in technology, media & telecom (largely due to sizable Yahoo and Apple stakes).

- Their credit exposure remains somewhat unchanged from last month at 29.3% net long (37.8% long and -8.5% short).  Their largest exposure there continues to be asset backed securities.

Third Point's Top 5 Positions as of the end of July:

1. Yahoo! (YHOO)
2. Gold
3. Apple (AAPL)
4. Delphi (DLPH)
5. Kraft Foods (KFT)

Third Point's just-released Q2 letter details why Dan Loeb still owns Delphi, among other position updates.  We've also flagged how Loeb recently added to his Yahoo stake.

Wednesday, August 1, 2012

What We're Reading ~ 8/1/12

The Family Office Book [Richard Wilson]

Blue Ridge Capital alum Rick Gerson launches fund [Dealbook]

Poison pen: a look at Dan Loeb's latest chapter [WSJ]

Louis Bacon plans to return $2 billion to investors [Dealbook]

On investing in insurers [Aleph Blog]

Hedge funds build on mortgage gains ]AR+Alpha]

A write-up on Amazon (AMZN) [Bigger Capital]

Another interesting take on Amazon [Kid Dynamite]

Why a fund manager changed his mind on Microsoft [Bronte Capital]

Selling strategy and psychological effects [Old School Value]

Average investors poised to bite into hedge funds [Reuters]

RadioShack as a net-net? [Oddball Stocks]

Explanation of rogue algorithm in trading today [PreMarketInfo]

The Investment Checklist [.PDF]

On lottery arbitrage []

A beekeeper's perspective on risk [Harvard Biz Review]

Twitter launches clickable stock symbols [Techcrunch]

Manchester United IPO Q&A [ESPN]

Why Dan Loeb Still Owns Delphi: Third Point's Q2 Letter

Dan Loeb's hedge fund firm Third Point is out with its second quarter letter to investors.  In it, they talk about why they still own Delphi (DLPH), as well as touch on numerous other positions.

Loeb writes, "In July, we increased our net equity exposure, initiated several new positions, and added to some existing names."  We revealed that Third Point bought new positions in News Corp and Chesapeake Energy in June.  We also recently highlighted how Loeb has also added to his Yahoo stake.

One of the new names they took a position in is the European IG bond index iTraxx.  The letter also details their position in Progress Energy Resources (PRQ).

Why Third Point Still Owns Delphi (DLPH)

The most interesting part of Third Point's letter is the detail of why they still own Delphi.  They originally purchased the company's DIP loan facility in June 2009 and continue to hold after the company has completed its initial public offering.

Third Point writes,

"In our view, Delphi is a best-in-class supplier which still trades at the valuation of more commoditized and disadvantaged comparable companies.  Delphi has premium business lines, an excellent geographic customer base, no need for further deleveraging, virtually no North American unionized labor, and significantly smaller pension liabilities than almost all of its peers.  Using multiples closer to the upper quartile of suppliers - where we feel Delphi belongs and is headed - Delphi's stock should be worth between $35-$40 per share, or a 30-40% upside from current levels."

The list of large owners of Delphi stock is littered with prominent hedge funds (as of the end of the first quarter): Paulson & Co, Elliott Management, SIlver Point Capital, Oaktree Capital, Centerbridge Partners, Greenlight Capital, Perry Capital, Senator Investment Group, Owl Creek Asset Management, Monarch Alternative Capital, and many more.

Third Point highlights this ownership base in their letter and identifies it as one of the "biggest concern(s)" for Delphi owners.  They foresee a diversification of a currently concentrated shareholder base which will reduced volatility.

Also worth highlighting is the fact that numerous directors of Delphi have sold shares recently, combining for over $5.46 million in sales.

Third Point continues, saying:

"We expect Delphi to expedite its multiple expansion by returning a significant portion of its free cash flow - about 25% of the current market cap by year end 2013 - to shareholders through continued share repurchases and the initiation of a quarterly dividend."

Embedded below is Third Point's Q2 letter to investors:

For more on this hedge fund's portfolio, head to Third Point's latest exposure report.

And to read more hedge fund letters, check out the latest from David Einhorn's Greenlight Capital.

Bill Gross on the Death of Equities: PIMCO Investment Outlook

PIMCO's Bill Gross is out with his latest market commentary entitled "Cult Figures" where he essentially claims stocks are dead:  "The cult of equity is dying."

Before reading his latest missive, it's worth noting his inherent conflict of interest: he's at one of the largest fixed income managers out there (of course he would love it if equities were dead and billions in AUM flowed to fixed income managers).

While some may argue his call as a contrarian signal to buy equities, you have to consider that such a call would be a clearer signal if an *equity* investor was staking such a claim.  Capitulation, a shangri-la for contrarians, can't truly come to fruition until the most ardent defenders throw in the towel.

However, one other conclusion from his note is evident regarding inflation.  He writes, "Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed countries over the next few years and even decades." 

Obviously, he argues investors need to prepare for such an environment and we've posted up the best investments for inflation before (as well as the best investments for deflation for those in the other camp).

At any rate, you can read Bill Gross' latest market commentary embedded below (and download a .pdf here):

For more commentary from the PIMCO man, check out his piece on how to generate returns in a low yield environment.

Monday, July 30, 2012

Chase Coleman's Tiger Global Sells Some LinkedIn (LNKD)

Chase Coleman's tech-oriented hedge fund Tiger Global Management has filed an amended 13D with the SEC regarding its stake in LinkedIn (LNKD).  Per the filing, Tiger Global has reported a 3.3% ownership stake in LNKD with 2,421,981 shares.

This marks a decrease in their position size and the footnotes reveal that Tiger disposed beneficial ownership of 1,620,947 class A shares.

Tiger sold shares on June 18th & 19th, as well as on various dates between July 20th and 27th.  The bulk of their sale came in blocks at $108.67 and $106.57, though they also sold shares as low as $100.99 (shares now trade around $104).

We previously detailed when Coleman's fund took a 1% stake in LinkedIn back in 2010 for $20 million (a $2 billion valuation).  Nowadays, LNKD trades at a $10.7 billion market cap.

The remaining reported shares are mainly held in their "Private Investment Partners" vehicle.  In the past, we've highlighted how Tiger has allocated capital to private investments in the tech sector and have done extremely well there.  LinkedIn completed its initial public offering a year ago.

Chase Coleman was named one of the top 25 highest earning hedge fund managers of 2011.

Per Google Finance, LinkedIn is "a professional network on the Internet with more than 90 million members in over 200 countries and territories. Through the Company’s platform, members are able to create, manage and share their professional identity online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities. Its platform provides members with solutions, including applications and tools, to search, connect and communicate with business contacts, learn about career opportunities, join industry groups, research organizations and share information."

For more on this hedge fund, head to Tiger Global's Burger King stake.

David Einhorn Boosts Marvell Technology Position

David Einhorn's hedge fund Greenlight Capital filed a 13G with the SEC regarding its position in Marvell Technology (MRVL).  Per the filing, Einhorn has revealed a 5.3% ownership stake in the company with 29,595,179 shares.

This means he's boosted his holdings by 61% since the end of the first quarter.  The filing was made due to portfolio activity on July 16th.  Einhorn talked about his stake in MRVL in Greenlight's Q2 letter.

He likes that the company only trades at "roughly 5x next year's earnings net of the cash on the balance sheet."  Einhorn hopes the company's latest repurchase program will be aggressive and he used weakness in shares to add to his position.  Over the past three months, shares are down 24%.

Per Google Finance, Marvell Technology is "a fabless semiconductor provider of application-specific standard products.The Company develops complex System-on-a-Chip (SoC) devices. Its product portfolio includes devices for data storage, enterprise-class Ethernet data switching, Ethernet physical-layer transceivers (PHY), mobile handsets and other consumer electronics, wireless networking, personal area networking, Ethernet-based personal computer (PC) connectivity, control plane communications controllers, video-image processing and power management solutions. Its products serve diverse applications used in carrier, metropolitan, enterprise and PC-client data communications and storage systems."

For the latest on this hedgie, head to Einhorn on Apple, Green Mountain Coffee and Amazon (interview).

Larry Robbins' Glenview Capital Adds to Rovi Stake

Larry Robbins' hedge fund firm Glenview Capital just filed a 13G with the SEC regarding its position in Rovi Corp (ROVI).  Per the filing, Glenview has revealed a 7.09% ownership stake in Rovi with 7,866,100 shares.

This means they've increased their share count by over 1000% since the end of the first quarter.  Robbins' firm initiated a new position in the first quarter of this year, but only owned 711,000 shares at that time.

Glenview's original purchase in Q1 could have ranged from $25 to $37.  But the bulk of their stake seems to have been bought anywhere between $10 and $30.

However, given the drop in shares the past few weeks (from $18 down to $9), and the timing of this filing, they certainly took advantage of the recent volatility.  The 13G was required due to activity on July 18th.

Per Google Finance, Rovi is "focused on powering the discovery and enjoyment of digital entertainment by providing a set of integrated solutions that are embedded in its customers’ products and services and used by end consumers to simplify and guide their interaction with digital entertainment. The Company’s offerings include content discovery, video delivery and advertising."

For more on this hedge fund, we've posted Larry Robbins' Ira Sohn presentation on THC, HMA, HCA, LPNT and ITC.  We've also highlighted why Larry Robbins likes Life Technologies as well.