Friday, October 18, 2013

What We're Reading ~ Hedge Fund Links 10/18/13

Ray Dalio on the Japanese & world economies [Japan Society]

Why aren't hedge funds advertising? [InvestmentNews]

Children's Investment Fund up big in strong year for activists [II Alpha]

Activist Barington Capital pushes Darden Restaurants [Dealbook]

Hedge fund chart guru sees dark days ahead [BusinessWeek]

An activist attacks Carl Icahn [Turnkey Analyst]

Kyle Bass on why Japan is still in trouble [II Alpha]

Interview with Steve Romick [Morningstar]

Bill Fleckenstein to re-start short fund next year [TheStreet]

Thursday, October 17, 2013

Corsair Capital's Thesis on News Corp: Q3 Letter

Jay Petschek and Steven Major's hedge fund Corsair Capital has released its Q3 letter and in it, they detail the thesis of one of their holdings: News Corp (NWSA).

They see this as a typical undervalued spin-off play as the old News Corp this year has split up into a publishing entity ('new' News Corp) and an entertainment division (21st Century Fox).  Many nvestors held shares of the growth company (Fox), and dumped shares of NWSA.

Corsair's Thesis on News Corp (NWSA)

Corsair writes,

"The misperception of NWSA as a  shrinking newsprint business enabled new investors to purchase several growing video/digital assets (which  contribute approximately 50% of the company’s EBITDA) at a cheap valuation. With solid cash generative businesses, a net-cash rich balance sheet of almost $4.00 per share and a management team focused on creating  shareholder value, NWSA shares offer limited downside and upside of a $25.00 stock price in the next 12  months. Potential catalysts include accretive acquisitions, share buybacks, a growing dividend policy, more  bullish sell-side coverage and a re-rating of the stock."

Corsair also recently disclosed a new position in Perion Network.

Embedded below is Corsair's Q3 letter with their write-up on NWSA:

For more hedge fund letters, we just posted up David Einhorn's Q3 letter as well.

Odey Adds to Shanta Gold Position

Crispin Odey’s Odey Asset Management has been adding to its holding of London listed Shanta   Gold (LON: SHG). Due to trading on October 10th,  Odey now own 16.1% of Shanta’s voting rights.  

It has been nearly a year since Odey first disclosed a stake in Shanta. Since then, they have filed eight times to disclose an increased holding. Odey seem to have bought between £17 and £9 per share, adding to their position as the price has moved downwards.

Although it has moved down considerably, Shanta’s stock price has not been as volatile as many other gold miners during the last year.

Per Google Finance - “Shanta Gold Limited is engaged in gold exploration, development and mining in Tanzania. The Company’s properties include New Luika, Lupa Goldfields , Singida, Mgusu, and Songea. The Company’s portfolio of properties includes approximately 35 prospecting licenses, which covers a total surface area of approximately 962 square kilometers. Its flagship project, New Luika Gold Mine has approximately five prospecting licenses covering approximately 199 square kilometers.”

You can view a recent interview with Crispin Odey's market outlook here.

Tiger Global Increases BBA Aviation Stake Again

Chase Coleman and Feroz Dewan's investment firm Tiger Global has been adding to its BBA Aviation (LON:BBA) stake again.  Due to trading on October 14th, Tiger Global now hold 11.14% of BBA's voting rights.  That's more than double the voting rights from their last filing back on September 17th.

As the BBA stake has grown, it has become a significant holding when compared to all of Tiger's other disclosed holdings.  Tiger initially disclosed an interest in BBA back in July of this year.

Per Google Finance: “BBA Aviation plc is a provider of aviation services and aftermarket support to   operators of business and general aviation, military and commercial aircraft. The Company delivers   its services at over 220 locations on five continents. The Company operates through two segments:   Flight Support segment and Aftermarket Services segment. The Company’s Flight Support segment   provides refuelling, ground handling and other services to the business, general and commercial   aviation markets. Its Aftermarket Services segment maintain, manufacture and support engines   and aerospace components, sub-systems and systems. The Flight Support segment consists of   Signature Flight Support and ASIG, and Aftermarket Services and Systems segment consists of Engine   Repair and Overhaul, Legacy Support and APPH. Its Flight Support has approximately 200 locations   worldwide, and its Aftermarket Services has approximately 23 locations worldwide.”

Wednesday, October 16, 2013

What We're Reading ~ Analytical Links 10/16/13

Being a long-term investor in a short-term world [The Big Picture]

Living in a low return world [Abnormal Returns]

The most important variable governing market prices [Minyanville]

Sears (SHLD) rally belies big worries about the retailer's prospects [Barrons]

In-depth look at Amazon's (AMZN) Jeff Bezos [BusinessWeek]

Pay TV: the future is not written [FT]

Takeaways from Liberty Media's (LMCA) analyst day [StreetInsider]

US cable companies home in on security [Reuters]

Scott Adams' secret to success [WSJ]

Iron Mountain (IRM) drops as Barclays says REIT conversion unlikely [Barrons]

How the Winklevoss twins found Bitcoin [Bloomberg]

Thoughts on Twitter's IPO & a good trade/bad investment [Aswath Damodaran]

Profile of Twitter & Square's Jack Dorsey [NewYorker]

Corsair Capital Discloses New Perion Network Stake

Jay Petschek and Steven Major's hedge fund Corsair Capital has filed a 13G with the SEC and disclosed a brand new position in Perion Network (PERI).  Per the filing, they now own 6.6% of the company with 820,236 shares.

The filing was required due to activity on October 3rd.

Per Google Finance, Perion Network is "a digital media company. The Company's products include: IncrediMail, a communication client; Smilebox, a photo sharing and social expression product and service; and Sweet IM, an instant messaging application. The Company generates revenues primarily through search, the sale of products and services, and advertising. IncrediMail is its communication client, available over the Internet it its basic version free of charge, used for managing email messages and Facebook feeds, with many graphic and personalizing capabilities. Smilebox is an Internet photo sharing service available for the desktop and smart-phone. Its product is available in seven languages in addition to English."

For more on this hedge fund, head to Corsair Capital's thesis on American Realty Capital Properties.

JANA Partners Exercises Calls on Oil States International

Barry Rosenstein's hedge fund JANA Partners has filed a Form 4 with the SEC regarding shares of Oil States International (OIS).  Per the filing, JANA has exercised 10,000 call options and converted those into 1 million shares of OIS. 

After the transaction, JANA now owns over 6.4 million shares of OIS.  The options had a exercise price of $80 with an expiration date of October 11th.

David Einhorn's Greenlight Capital is also involved in this company as it's one of his largest positions.  Earlier this year, our Hedge Fund Wisdom newsletter analyzed OIS and outlined the investment thesis.  You can subscribe here to read it.

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. In September 2013, Oil States International Inc sold Sooner, Inc. and its subsidiaries (Sooner) to Marubeni-Itochu Tubulars America, Inc."

For more on this hedge fund, we posted Barry Rosenstein's recent interview.

Eminence Capital Adds to Group 1 Automotive Position

Ricky Sandler's hedge fund Eminence Capital has filed a 13G with the SEC regarding Group 1 Automotive (GPI).  Per the filing, Eminence has revealed a 5.4% ownership stake in GPI with 1,312,745 shares.

This marks a 77% increase in the number of shares they own since the end of the second quarter.  The SEC filing was required due to portfolio activity on October 4th.

Eminence has been involved in other auto-related names and we've highlighted Sandler's position in Sonic Automotive recently as well.

Per Google Finance, Sonic Automotive is "an operator in the automotive retailing industry. Through its operating subsidiaries, it markets and sells a range of automotive products and services, including new and used cars and light trucks; arrange related vehicle financing; service and insurance contracts; provide automotive maintenance and repair services, and sell vehicle part. In June 2013, Group 1 Automotive Inc acquired Rountree Ford Lincoln. In October 2013, the Company acquired Joe Marina Honda in Tulsa, Oklahoma."

Tuesday, October 15, 2013

David Einhorn Shorts More Green Mountain Coffee: Q3 Letter

David Einhorn is out with his Greenlight Capital Q3 letter.  In it, Einhorn discloses that they've shorted more Green Mountain Coffee Roasters (GMCR).  They write,

"Although the company again missed the consensus estimate for sales, bullish analysts scrambled to lower forward revenue forecasts while insisting that all is well in mudville."  Their updated take on GMCR is below and we've previously posted Einhorn's original short case on GMCR.

He also talks about his long positions in Apple (AAPL) and Vodafone (VOD), both of which were quite profitable in the quarter.

Einhorn also discloses that Greenlight built a 'medium-sized long' in Osram Licht AG (Germany: OSR).  Additionally, they exited Gjensidige Forsikring (Norway: GJF) and Oaktree Capital (OAK).

At the end of Q3, Greenlight's largest positions in alphabetical order were:  Apple, General Motors, gold, Marvell Technology, Oil States International, and Vodafone.

Embedded below is David Einhorn's Q3 2013 letter:

For more on this hedge fund, we also posted a recent interview with Einhorn talking about his positions.

David Tepper: Markets Could See a 18-20x Multiple (Interview)

Appaloosa Management founder David Tepper appeared on CNBC today and gave his market thoughts.

Tepper thinks an 18-20x market multiple could be the 'new normal' while Lee Cooperman said earlier today he sees a 16x multiple.  Regardless, Tepper thinks stocks will be up next year and feels we'll see a higher multiple on the markets.

Regarding tapering, he feels that they're not going to taper for some time.  "My basic belief has been when you have this large QE, markets go up."  Generally speaking, despite the near-term uncertainty, he expects the markets to go up. 

The videos of Tepper's interview are embedded below:

Video 1 on tapering

Video 2 on interest rates

Video 3

For more hedge fund interviews, head to Lee Cooperman on the 3 stages of a bull market from earlier today.

Lee Cooperman on 3 Stages of a Bull Market: Interview

Omega Advisors' Lee Cooperman spoke with CNBC this morning.  He thinks markets are fairly valued and he thinks a 15-16x multiple is about right.  He doesn't think it's a bargain anymore.

Cooperman on the 3 Stages of a Bull Market

Phase 1: "Wow we survived."  As the market bottoms and pessimism slowly starts to fade.
Phase 2: "Reflecting that which is perspective."  4-5 years of rising economic activity.
Phase 3: "Exuberance phase, the silliness phase where people forget about the mistakes."  He doesn't think we're quite there yet, but there are pockets of silly valuation like Potbelly (PBPB) and Telsa (TSLA).

His Stock Picks Now

"What we're looking for is to find more growth at a lower valuation."  He said he's looking at 'red chips' instead of 'blue chip' stocks and specifically touched on Sprint Nextel (S).   He also likes Motorola Solutions (MSI), Swatch Group (UHR), Sandridge Energy (SD), and Qualcomm (QCOM).

Embedded below are the videos of Cooperman's interview:

Video 1 on bull market stages

Video 2 on Sprint (S)

Video 3

Video 4 on Qualcomm (QCOM)

For more hedge fund thoughts, we also posted up David Tepper's interview from today.

Julian Robertson Calls Environment 'Precarious,' Likes Ulta Salon, Delta & Others

Tiger Management's Julian Robertson was on CNBC last week and we wanted to highlight some of his comments from the transcript.  Stocks Robertson mentioned in the interview that he likes include Ulta Salon (ULTA), Delta Airlines (DAL), WuXi Pharma (WX), DigitalGlobe (DGI) and Norwegian company Schibsted,

On the economic landscape: "Well, I would-- characterize it as precarious. And-- I think everyone knows that. And-- I think that-- rather than just sitting back and-- saying, "What if this happens or that happens"-- we go ahead and find good companies and invest in them and-- bad companies and-- them."

On Ulta Salon (ULTA): "But I do see sweet stocks that I really love and like and-- think are going to do well. And-- one is-- a company that-- probably makes that beautiful toenail polish you've got on. A company called Ulta. And it has just beautiful beauty salons all over the country.  And it sells all the great products. And it's growing-- probably at 25%-- or so, will grow that way over the next three or four years. This year won't be quite that good. But-- it is just amazing what's happened. And-- how well they've caught this great movement. And-- we've interviewed a lot of women and Ulta is where they're going."

On what he looks for when picking stocks:  "Well, I-- one of the things that I'm particularly interested in is-- stocks and who's already picked them. And-- we've had some really good people here who have excelled in certain fields and-- I love to see really what they had bought recently. And-- Ulta is one of those stocks. And-- I think it's going to be a real good one for next year, so."

On the market: "That's really the way I'm looking at stocks primarily now. I think we're in the middle of a kind of a bubble market, where it's going to take something-- bubble-like to happen. And-- prick the bubble and we'll probably have pretty bad-- reactions to the breaking of the bubble. But-- probably not right now. And somehow I think we'll wallow through the political and fiscal crisis we have in front of us. And then we'll sort of see what happens ... I think the market is reasonably -- yes, is fully valued."

On DigitalGlobe (DGI):  "Digital Globe is I think a really great company. And it's had its virtual monopoly in the area where it is. And-- I think they're really these satellites that are up flying around are-- it's a great business to be in."

On WuXi Pharma (WX): "This year one of our best stocks has been-- a Chinese company which-- disintermediates-- PhDs. In other words, instead of getting a U.S. PhD for maybe-- $20,000 a month, you get a Chinese PhD for-- $3,000 a month.  And-- it's a company that's named Wuxi that supplies the really good Chinese researchers. And-- I've been in that stock for several years and it's just been lately that it's started to do anything. And I don't know why that is or was or anything. But it's been a really good performer of late-- Wuxi.  you're buying-- something at a fifth the price you were paying before. And-- you figure that's going to work at some time. And these Chinese PhDs are really well-trained and very, very good and-- Wuxi is able to come up with good ones."

On Twitter's IPO: "I don't plan to be (a buyer of the IPO).  That isn't to say that I won't.  But I don't expect to at this point.  I think social media is very long-lasting.  I just don't know the particular thing with Twitter."

On the airlines:  "Well, we're beginning to put some money in the airlines. And-- I mean, Delta airline, the airlines have been weeded down. And-- Delta Airlines (DAL) a very good story. I mean, it's at a very reasonable price and it's a good airline. I've talked to you about Ryanair (RYAAY), which is a low-cost producer in the world. I think that-- area is something to look at. And there-- they-- there have been-- I think some really interesting moves made in that industry.  Seems so much (consolidation) that I think it will slow down from here."

On Europe:"I think a lot of smart Europeans think that Europe has bottomed. And I-- I've been hearing that increasingly. And-- I-- I'm not completely sure of that. But-- it's certainly better than it was."

On Schibsted: "Schibsted is a very interesting company. We came upon-- Schibsted-- it was-- we had-- a model we were setting up on-- newspaper stocks. And Schibsted had come out as being wildly overpriced. And then we went into it in thorough detail and-- although it's true that-- Schibsted had still had its papers, it had gone tremendously into internet products.  And-- it is really an internet-- producer-- media producer of internet products-- throughout the world now and-- is going to grow at very rapid rates for the next several years. And-- so I think Schibsted is quite a terrific-- Norwegian company."

On his success: "(What) I've done is-- hired really good people and never been self-conscious of hiring people that were smarter than I am. And-- it's been fun for me to work with them and-- to play with them in all that we've had together. And-- so that's the secret sauce."

On being long or short this market:  "Well, I think you have to have kind of-- a little more--sort of lean towards-- being conservative in a market like this. It's just-- gotten a little too -- I would say raising cash or going short."