Friday, March 22, 2013

What We're Reading ~ Hedge Fund Links 3/22/13

An earnings report every hedge fund manager should review [All About Alpha]

Nelson Peltz reportedly plotting Mondelez/Pepsi merger [Telegraph]

Hedge funds continue with their dollar love affair [ValueWalk]

Hedge funds dividing into haves and have-nots [II Alpha]

When David Einhorn talks, markets listen, usually [BusinessWeek]

SAC Capital's CR Intrinsic unit agrees to insider trading settlement [SEC]

After disappointing start to 2013, how will hedge funds catch up? [Reuters]

SEC digging into fund fees [WSJ]

Hedge funds are fueling foreclosure inflation [UPI]

Farallon Capital launches real estate vehicle [Reuters]

Behavioral finance helps fund managers spot losers [Wall Street and Tech]

Hedge funds build treasury bets to '07 high [Bloomberg]

Can investors win by following Carl Icahn into battle? [Yahoo Finance]

Hedge fund fees under pressure [Financial Standard]

Wednesday, March 20, 2013

Eric Sprott: Sell-off In Gold Is Opportunity To Buy "At An Artificially Low Value"

Eric Sprott of Sprott Asset Management has penned his latest commentary entitled "Do Western Central Banks Have Any Gold Left???"  In it, he examines the selling pressure in gold recently, arguing that it's a great time to buy the precious metal.

Sprott notes that the supply of gold has pretty much remained the same, and that demand has steadily increased (thanks to India and China).  He also points out how central banks have been net buyers (instead of net sellers) of the precious metal.

He writes,

"Much ado has been made about the recent sell-off in the yellow metal forcing certain  ETPs to liquidate, adding a supply of gold into the market in the process. Our work  reveals that the previous ETP sell-offs, (which occurred in January 2011, December 2011,  May 2012 and July 2012) have all coincided with gold finding strong price support and  rallying higher."

Sprott concludes that this sell-off in gold is an opportunity to buy it "at an artificially low value."  While he does make some prudent points, it is worth highlighting, however, that Sprott has been a gold bull for quite some time.

Embedded below is the latest commentary from Sprott Asset Management: Do Western Central Banks Have Any Gold Left?

For more from this manager, be sure to check out Sprott's previous commentary: ignoring the obvious.

Bill Ackman's Latest Herbalife Presentation: Comparing HLF to Fortune Hi-Tech Marketing

If you haven't seen it yet, Bill Ackman of hedge fund Pershing Square Capital has released a new slideshow on his short position in Herbalife (HLF).  In it, he further elaborates on his claim that HLF is a pyramid scheme and compares it to Fortune Hi-Tech Marketing.

Ackman made this comparison due to the FTC's recent legal action against Fortune Hi-Tech Marketing.  Obviously, he feels there are numerous similarities and he points them out in the slideshow.

Embedded below is Ackman's latest Herbalife slideshow presentation:

For more analysis on this name, head to Ackman's original short thesis on Herbalife (HLF).  He also followed up with questions for Herbalife.

What We're Reading ~ Analytical Links 3/20/13

What matters more in decisions: analysis or process? [Farnam Street]

The stock market and the economy are two very different animals [Abnormal Returns]

One of the most sentiment-driven rallies ever [Reformed Broker]

A pitch on retailer Coach (COH) [Old School Value]

Walt Disney (DIS): Can ESPN sustain its fee subscriber growth? [Trefis]

A small investors' guide to activist investing [Fool]

When will interest rates rise? [LearnBonds]

Technical tools for helping to identify possible market tops and bottoms [Chris Perruna]

Confirmation bias and the importance of asking "why might I be wrong?" [Incblot]

Why Redfin, Zillow (Z) and Trulia (TRLA) haven't killed off real estate brokers [BW]

This is the future of TV [Quartz]

Is it time to short Canada? [Bonddad]

How to beat Amazon (AMZN), Best Buy (BBY) edition [WSJ]

The scariest statistic about the newspaper business today [The Atlantic]

Short sellers flee the scene [WSJ]

10 signs stocks are about to tumble [Marketwatch]

Should investors be on Twitter? [Felix Salmon]

March madness analytics: blind bracket tool [WSJ]

Tuesday, March 19, 2013

Discount to the London Value Investor Conference 2013

We're excited to announce a special discount for Market Folly readers to the upcoming London Value Investor Conference 2013 that benefits children's charity Place2be.

London Value Investor Conference 2013

£100 Discount Code: MARKETFOLLY123 
Click here to register

Market Folly has managed to secure a very limited number of discounted tickets to the forthcoming London Value Investor Conference 2013.  This year's conference takes place on the 9th of May 2013 at Central Hall Westminster with the following excellent speaker line-up:

- Howard Marks, Oaktree Capital - The Most Important Thing
- Michael Price, MFP Investors - The Peter Cundill Foundation Address
- David Harding, Winton Capital - Searching for Value in Data
- Anthony Bolton, FIdelity China Special Situations Fund - Q&A Session
- Nick Purves and Ian Lance, RWC - New Challenges for Value Investors
- Richard Oldfield, Oldfield Partners - Still Simple, Still not Easy
- Plus speakers from smaller, less well known funds (see the full list of speakers here)

As part of their presentation, each of the speakers will give at least one current investment idea.  Winton Capital has also kindly agreed to sponsor a drinks reception after the event, which will be a great opportunity for networking amongst the value investing community.

With 8 weeks to go, the number of delegates attending is already well ahead of the total who came last year.  It is expected that the 2013 conference will be the largest gathering of value investors ever outside of the USA.

In order to claim your special £100 discount to this conference,
please use the code MARKETFOLLY123 when signing up here.

The last London Value Investor Conference donated its profits to the children's charity, the SMA Trust.  This year's conference will be supporting the children's charity Place2be.

Monday, March 18, 2013

Ruane Cunniff Goldfarb: Sequoia Fund Annual Letter 2012

Catching up on a few more notable 2012 annual letters, we turn next to the Sequoia Fund run by Ruane Cunniff & Goldfarb.  An investment of $10,000 at inception in 1970 has grown to over $2.89 million as of the end of 2012.  They returned 15.68% in 2012.

Key Takeaways

- They currently don't see many compelling investment opportunities.  Began 2012 with 21% cash position, ended the year with 16%

- "In the fourth quarter of 2012, we were modest net sellers of equities for the first time since 2008, in response to specific situations at several of our portfolio holdings."  They exited Target (TGT) and Becton Dickinson (BDX).

- "Valuations for stocks are heavily influenced by interest rates, and particularly by the risk-free rate of return on 10-year and 30-year United States Treasury bonds. Relative to the current return on Treasury Bonds, stocks continue to be quite attractive.However, the current risk-free rate of return is not a product of market forces.  Rather, it is an instrument of Federal Reserve policy."

Top Holdings At 2012 Year-End

1. Valeant Pharmaceuticals (VRX): 11.6% of assets
2. Berkshire Hathaway (BRK.A): 10.9%
3. TJX (TJX): 7.5%
4. Fastenal (FAST): 5.6%
5. Mohawk Industries (MHK): 4.0%
6. Idexx Laboratories (IDXX): 3.2%
7. Advance Auto Parts (AAP): 3.1%
8. Precision Castparts (PCP): 3.1%
9. Rolls-Royce (LON:RR): 3.0%

Embedded below is Ruane Cunniff's annual letter from the Sequoia Fund where they go into detail about some of their positions and overall market views:

For more on this fund, late last year we posted up why Ruane Cunniff likes Valeant Pharmaceuticals.

PointState Capital Reveals Stake in iStar Financial (SFI)

On Friday, Zach Schreiber's hedge fund PointState Capital filed a 13G with the SEC regarding shares of iStar Financial (SFI).  Per the filing, PointState has revealed a brand new equity position in the company.

The hedge fund firm now owns a 6.5% stake in SFI with 5,492,500 shares and the filing was required due to portfolio activity on March 5th.

PointState was founded by former Duquesne Capital employees with seed capital from Stanley Druckenmiller after he wound down Duquesne as well as capital from other former investors in Duquesne.  We recently highlighted lessons from Druckenmiller, which has been a popular post.  Druckenmiller also gave a rare interview recently.

Per Google Finance, iStar Financial is "a fully integrated finance and investment company focused on the commercial real estate industry. The Company provides investment capital to high-end private and corporate owners of real estate and invests directly across a range of real estate sectors. The Company is a real estate investment trust (REIT). The Company operates in three segments: lending, net leasing and real estate investment."

A few months ago, we also highlighted other portfolio activity from PointState.

Market Folly's 4th Annual Free March Madness Bracket Contest

It's that time of year again: march madness.  This year marks Market Folly's 4th annual bracket contest for college basketball fans.

To join the free contest, please click this link
The password to join is: mf


1st place:  The winner of the contest will receive a free one year subscription to our Hedge Fund Wisdom premium newsletter (a $300 value).

2nd place:  A free copy of Bethany McLean and Joe Nocera's book: All the Devils Are Here: The Hidden Story of the Financial Crisis.

Only one entry per person.  You must fill out your bracket before games start this Thursday!  Good luck!