Friday, May 3, 2013

Rare Interview with Charlie Munger

This weekend is Berkshire Hathaway-palooza and as a part of that, CNBC sat down with Charlie Munger for a rare interview that we wanted to highlight.

He thinks things are "suboptimal" right now and notes that there's a lot of people on the sidelines still.

As to how they're preceding, he said that, "At Berkshire, we're trying to swim well against the tide or with it, we just keep swimming."

Regarding what they look for in potential deals, he noted that, "We've always liked quality people with the best ability."  They're willing to pay more money for the best businesses and he says this was the case with Heinz.

On the Federal Reserve's actions, Munger said that, "Very low interest rates will change behavior and raise prices."

Charlie also talked about how Berkshire's given more money to Todd Combs and Ted Weschler to manage and he feels that they'll be "huge contributors to the future of Berkshire."

Embedded below is the video of Charlie Munger's interview where he talks about housing and many other subjects as well:

For more on this great investor, head to Munger's secrets to success as well as notes from Munger's Daily Journal meeting.

What We're Reading ~ Hedge Fund Links 5/3/13

Seth Klarman cautions "false sense of calm in the US" [ValueWalk]

Emerging manager interview with Tappan Street Partners [Distressed Debt Investing]

Children's Investment Fund trumpets Japan Tobacco investment [Moneybeat]

Paul Singer on gold's irreplaceability and euro's dark future [ValueWalk]

Corvex's Keith Meister lays out investment in Commonwealth [Moneybeat]

Valiant Capital has rough first quarter [Institutional Investor's Alpha]

JANA's Rosenstein slams Agrium [Absolute Return]

SEC said to push for lifting ban on hedge fund ads [Bloomberg]

Hedge funds scooping up personal property tax liens [Term Sheet]

Highfields Capital faces uphill task with Tim Hortons [Hedgeworld]

Eddie Lampert tries to convince shareholders Sears is on the right track [Hedgeworld]

Lansdowne exits Prudential short after meaningful losses [Bloomberg]

You've never heard of one of the best performing hedge funds [Quartz]

Tough times for hedge funds that bet on market tumult [Reuters]

Hedge funds drive demand for Greek Corporate Debt [Moneybeat]

Indian hedge funds dare where foreign investors fear [Reuters]

The hunt for Steve Cohen [Vanity Fair]

Thursday, May 2, 2013

Warren Buffett's Berkshire Hathaway Sells Some Moody's Shares

It's been a while since Warren Buffett's Berkshire Hathaway has filed a Form 4 with the SEC on a stock other than Davita (DVA).  And while they've been buying DVA shares, today we see that Berkshire has been selling Moody's (MCO) shares.

In a Form 4 with the SEC, Berkshire has disclosed portfolio activity on April 29th, 30th, and May 1st.  All told, Buffett sold 1,746,700 shares with the majority coming at weighted average prices ranging from $59.9348 to $60.7241.

After these sales, Berkshire still owns 26,668,550 shares of MCO, so these transactions are just a drop in the overall bucket.  That said, it's still worth pointing out that Buffett trimmed his MCO stake numerous times in 2010.  What's interesting is that in 2010, MCO shares were trading for half the amount they are now.

It's also worth mentioning that ValueAct Capital's Jeff Ubben presented Moody's as an investment idea late last year at the Invest For Kids Chicago event.

Per Google Finance, Moody's is "a provider of credit ratings; credit and economic related research, data and analytical tools; risk management software, and quantitative credit risk measures, credit portfolio management solutions and training services." 

For more on the Oracle from Omaha, head to new book recommendations from Warren Buffett.

Third Point Shows Japan Tobacco Stake, International Paper Now Top 5 Holding

Dan Loeb's Third Point Offshore Fund finished April up 1.4% and is now up 10.5% for the year.  In their latest exposure report, we see a few holdings revealed, including positions in Japan Tobacco (a top winner last month) and Banco do Brasil SA (a top loser last month).  The former has been a large holding at Children's Investment Fund.

The other takeaway from April is that Third Point has listed International Paper (IP) as a top holding.  Loeb's firm outlined their thesis on IP in Third Point's Q1 letter and sized up the position in the first quarter.  But now we get some context as to how big of a position it is since it's now a top 5 holding.

The hedge fund originally started a position in this company in the fourth quarter of 2012 and at the end of December, this position was worth almost $60 million.  Since then, IP has run up from $38 to a high of $49 thus far this year so part of the position size could also be attributed to price appreciation.  We've also highlighted how fellow hedge fund Senator Investment Group added to their IP position as well.

Third Point's Top Positions

1. Yahoo! (YHOO)
2. Virgin Media (VMED)
3. American International Group (AIG)
4. International Paper (IP)
5. Ally Financial (multiple securities held)

Looking at their top holdings compared to last month, gold has fallen out of the list (most likely due to the fact that gold prices have fallen this year).

Third Point's net long equity exposure came in at 45.4% at the end of April.  This is largely unchanged compared to the month prior at 45.1% net long.

Dan Loeb was recently listed among the top 10 highest paid hedge fund managers of 2012.

Video of Jim Chanos' Presentation on China From Wine Country Conference

Earlier, we posted up Jim Chanos' slideshow presentation on China from the Wine Country Conference.  Now the conference has uploaded video of his presentation so you can hear his thoughts in his own words.  The video is embedded below and his talk lasts a little over a half hour:

For more resources on this short seller, head to Jim Chanos' recent interview.

Wednesday, May 1, 2013

What We're Reading ~ Analytical Links 5/1/13

The Art of Value Investing: How the World's Best Investors Beat the Market [Amazon]

The fine art of being wrong [The Big Picture]

Notes from the Ben Graham Centre's 2013 Value Investing Conference [Santangels]

A profile of Berkshire's Todd Combs & Ted Weschler [] 

Warren Buffett at the Coca-Cola annual meeting [Joe Kusnan]

In China, a persistent edge for big insiders [Barrons]

The competing incentives and pressures that influence sell-side analysts [CFA]

Stock analysts tell all [WSJ]

Netflix (NFLX) CEO Reed Hastings on the future of TV/cable [AllThingsD]

Pharmaceutical firms seeing bullish investor sentiment [Markit]

Travel sites merge, which some see as boon for consumers [NYTimes]

The behavior of individual investors [SSRN]

Does Apple (AAPL) show statistical evidence of an economic moat? [Greenbackd]

The tax advantages of being a landlord [Markewatch]

Sam Zell's tips for real estate newbies [TheRealDeal]

Corsair Capital's Thesis on Ryman Hospitality: Q1 Letter

Jay Petschek and Steven Major's hedge fund Corsair Capital finished the first quarter of 2013 up 8.1% net and their compounded net annual return sits at 14.5%.  Their Q1 letter detailed a write-up of their thesis on Ryman Hospitality (RHP), a current core investment.

Corsair's Thesis on Ryman

In summary, the company is a transformation story as they've morphed from Gaylord Hotels into Ryman, specializing in the premium large group segment. 

They've converted from a C-Corp into a REIT, sold the Gaylord brand and management rights to Marriott, and are looking to leverage Marriott's group customer base.

Due to these (and numerous other changes outlined below), Corsair feels that Ryman has great revenue visibility and thinks it should trade closer to the valuation of shopping mall REITs. 

With a 4.5% yield, they see a $60 stock in the near term and the potential to head as high as $70 if investors give it the premium valuation they think it deserves.

Embedded below is Corsair Capital's Q1 letter with their thesis on Ryman Hospitality:

For more from this hedge fund, we've highlighted some of Corsair's recent portfolio activity as well as their thesis on Acacia Research too.

Tuesday, April 30, 2013

2013 Hedge Fund Performance Numbers: Q1

It's been a while since we checked in on the performance of prominent hedge funds so today we'll highlight how some of the top managers have been faring in 2013. 

Some of the top performers thus far include Glenview Capital (up 17.94%), Third Point Ultra (up 15.44%), Odey European (up 15.29%), and Owl Creek (up 15.17%).  The following numbers are year-to-date as of the end of the first quarter or as of the 2nd week of April.

2013 Hedge Fund Performance Numbers: Q1 YTD

Long/Short Equity / Equity Diversified

Greenlight Capital (David Einhorn): 5.78%

Maverick Capital (Lee Ainslie): 2.30%

Lansdowne (Paul Ruddock & Steve Heinz): 7.01%

Passport Global (John Burbank): 5.95%

Cobalt Offshore (Wayne Cooperman): 5.17%

Elm Ridge Value (Ronald Gutfleish): 8.31%

Eminence Fund (Ricky Sandler): 6.33%

Glenview Capital (Larry Robbins): 17.94%

Ivory Capital (Curtis Macnguyen): 3.35%

Omega Overseas (Leon Cooperman): 6.55%

Joho Capital (Robert Karr): 12.21%

GLG European Long Short (Pierre Lagrange): 2.38%

Marshall Wace Core (Ernesto Fragomeni): 5.82%

Odey European (Crispin Odey): 15.29%

Kingdon Offshore (Mark Kingdon): 9.69%

Renaissance Institutional Equities (Jim Simons): 11.42%

Zweig-Dimenna: 6.92%


Marcato International (Mick McGuire): 6.52%

Merger Arbitrage

Paulon Enhanced (John Paulson): 11.56%


Brevan Howard Emerging Market Strategies: (3.17%)

Caxton Global (Andrew Law): 6.39%

Discovery Global Opportunity (Robert Citrone): 14.64%

Eclectica Fund (Hugh Hendry): 3.40%

Moore Global (Louis Bacon): 6.63%

Tudor BVI Global Fund (Paul Tudor Jones): 8.68%


Davidson Kempner: 4.08%

Owl Creek Overseas (Jeffrey Altman): 15.17%

Paulson Advantage (John Paulson): 2.84%

Paulson Advantage Plus (John Paulson): 3.47%

Paulson Recovery Fund (John Paulson): 14.11%

Perry Partners (Richard Perry): 8.18%

Pershing Square International (Bill Ackman): 4.64%

Third Point Offshore (Dan Loeb): 10.44%

Third Point Ultra (Dan Loeb): 15.44%

York Investment Ltd (Jamie Dinan): 4.69%

Millennium International (Israel Englander): 3.65%


BlueMountain Long Short Credit: 3.17%

Appaloosa Management (David Tepper's Palomino Fund): 10.58%

Saba Capiatl (Boaz Weinstein): 0.56%

Fixed Income/Global

Pine River (Steve Kuhn): 7.04%


King Street Europe: 4.95%

Canyon Value Realization Fund (Mitch Julis): 8.02%

Cerberus International (Steve Feinberg): 2.46%

Contrarian Capital (Jon Bauer): 4.56%

King Street Capital: 5.28%

Paulson Credit Opportunities (John Paulson): 10.17%

Source: HSBC Hedge Weekly Report

Eminence Capital Starts Asbury Automotive Group Stake

Ricky Sandler's hedge fund firm Eminence Capital recently filed a 13G with the SEC regarding shares of Asbury Automotive Group (ABG).  Per the filing, Eminence has revealed a 5.5% ownership stake in ABG with 1,718,704 shares.

This is a brand new position for the hedge fund and the 13G was required due to portfolio activity on April 19th. 

Per Google Finance, Asbury Automotive Group is "an automotive retailer in the United States. It offers a range of automotive products and services, including new and used vehicles; vehicle maintenance; replacement parts and collision repair services; new and used vehicle financing, and aftermarket products, such as insurance, warranty and service contracts."

This most likely isn't Eminence's only play in the space.  In their 13F filing which detailed positions as of the end of 2012, their second largest disclosed stake was in Advance Auto Parts (AAP).  We won't find out if they still own the position until the middle of May when the next batch of 13F filings are released.  But given the size of the investment and the fact that they over doubled their stake in AAP during the fourth quarter, it seems somewhat likely that they still retain a position.

For more on this hedge fund, we've detailed some of Eminence's previous activity here.

Scout Capital Discloses SeaWorld Entertainment Stake

Adam Weiss and James Crichton's hedge fund firm Scout Capital filed a 13G on shares of SeaWorld Entertainment (SEAS) and revealed a 7.8% ownership stake with 7,200,257 shares.

The 13G was required due to activity on April 18th.  SeaWorld recently completed its initial public offering and it's likely that Scout participated in the IPO.

Per Google Finance, SeaWorld Entertainment is "a theme park and entertainment company. The Company is engaged in delivering personal, interactive and educational experiences that blend imagination with nature and enable its customers to celebrate, connect with and care for the natural world. The Company own or license a portfolio of globally recognized brands including SeaWorld, Shamu and Busch Gardens. The Company has built a diversified portfolio of 11 destination and regional theme parks that are grouped in key markets across the United States. Its theme parks feature a diverse array of rides, shows and other attractions with broad demographic appeal which deliver memorable experiences and a strong value proposition for its guests."

This hedge fund has been active recently and we also highlighted Scout's other new position.

JANA Partners Reveals New Activist Position in Oil States International

Barry Rosenstein's hedge fund JANA Partners today filed a 13D with the SEC revealing a brand new position in Oil States International (OIS).  Per the filing, JANA now owns 9.1% of the company with 5,000,002 shares.

The 13D was required due to portfolio activity on April 19th.  They've been out buying OIS shares as recently as April 29th at a price of $76.66.  JANA's reported 5 million share position is inclusive of options to purchase 824,600 shares. 

Drilling down this position, we see that JANA owns 3,640 call options with a strike price of $65 and 4,606 call options with a strike of $60, both with expiration on June 3rd, 2013.

Additionally, they've sold 3,640 put options with a strike price of $65 that expire on June 3rd, 2013.  JANA's been busy of late as they also recently revealed a position in Ashland (ASH) as well.

JANA's New Activist Position

In the 13D filing, we see that JANA has pursued shareholder activism as the purpose of transaction section notes that JANA:

"acquired the Shares because it believes the Shares are undervalued and represent an attractive investment opportunity. The Reporting Person has had discussions with the Issuer’s management relating to the Issuer’s corporate structure including a discussion on April 26, 2013 regarding separating its Well Site Services, Offshore Products, and Tubular Services segments (referred to collectively as "Oilfield Services") from its Accommodations segment and the formation of a REIT for Accommodations. The Reporting Person also may seek to discuss the Issuer’s capitalization, operations, strategy and future plans."

Per Google Finance, Oil States International is "a provider of specialty products and services to natural resources companies worldwide. The Company operates in oil and natural gas and coal producing regions, including Canada, onshore and offshore the United States, Australia, West Africa, the North Sea, South America and Southeast and Central Asia. Its customers include national oil companies, oil and natural gas companies, onshore and offshore drilling companies, other oilfield service companies and mining companies. It operates in four segments: accommodations, offshore products, well site services and tubular services."

For more on this activist investor, be sure to check out a very interesting interview with Barry Rosenstein.