Tuesday, December 30, 2014

Corvex Management Takes American Realty Capital Stake

Keith Meister's activist hedge fund Corvex Management has filed a 13D with the SEC regarding American Realty Capital (ARCP).  Per the filing, Corvex now owns 7.1% of the company with over 64.7 million shares (with 56.77 million of those shares underlying call options).  This is a new position for the hedge fund.

The activist filing indicates that Corvex has met with company management and want to add members to the board.  The filing was required due to activity on December 18th.

We've highlighted additional recent portfolio activity from Corvex here.

Per Google Finance, American Realty Capital is "a real estate investment trust (REIT). The Company owns and acquires single-tenant, freestanding commercial real estate primarily subject to medium-term net leases with credit quality tenants."

Tiger Global Discloses On Deck Capital Position

Chase Coleman and Feroz Dewan's hedge fund Tiger Global has filed a 13G with the SEC regarding On Deck Capital (ONDK).  Per the filing, Tiger Global now owns 9.2% of the company with over 6,333,004 shares.

This is a newly disclosed equity stake and the filing was made due to activity on December 17th as the company recently completed its initial public offering (IPO).  It priced at $20 and now trades around $22.

Per Google Finance, On Deck Capital is "an online platform for small business lending. Enabled by its technology and analytics, the Company aggregates and analyzes data points from dynamic, disparate data sources to assess the creditworthiness of small businesses. Small businesses can apply for a term loan or line of credit on its Website and, using its OnDeck Score, it can make a funding decision immediately and transfer funds the same day."

You can view other Tiger Global portfolio activity here.

Eminence Capital Reveals Darling Ingredients Stake

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Darling Ingredients (DAR).  Per the filing, Eminence now owns 5% of the company with over 8.26 million shares.

This is a newly disclosed equity position for the fund and the filing was made due to activity on December 17th.

Per Google Finance, Darling Ingredients is "a provider of rendering, cooking oil and bakery waste recycling and recovery solutions. The Company collects and recycles animal by-products, bakery residual and used cooking oil from poultry and meat processors, commercial bakeries, grocery stores, butcher shops, and food service establishments and provides grease trap cleaning services to many of the same establishments."

We've recently highlighted other portfolio activity from Eminence Capital as well.

Monday, December 29, 2014

Viking Global Starts Avis Budget Group Position

Andreas Halvorsen's hedge fund firm Viking Global has started a new position in Avis Budget Group (CAR).  Per a 13G just filed with the SEC, Viking now owns 5% of the company with over 5.34 million shares.

They did not report owning a stake at the end of the third quarter.  The filing was made due to activity on December 17th.  This is now the second major hedge fund to file with the SEC regarding CAR shares.  We highlighted last week that Glenview Capital also was buying Avis Budget shares.

Per Google Finance, Avis Budget Group is "a provider of vehicle rental and car sharing services. The Company operates under brands Avis, Budget and Zipcar. The Company’s other brands include Budget Truck, Payless and Apex."

Carl Icahn Discloses Manitowoc Stake, Pushes For Company to Split Up

Activist investor Carl Icahn today filed a new 13D with the SEC concerning shares of Manitowoc (MTW).  Per the filing, Icahn now owns 7.77% of the company with over 10.5 million shares (including shares underlying call options).

This is a brand new position for him and the filing was required due to activity on December 17th.  The filing notes that Icahn wants the company to separate its Crane and Foodservice segments into two separate companies.

Per the 13D, Icahn was out buying MTW common stock in the middle of December at prices ranging from $16.83 to $19.30, along with August 2016 call options with an $18 strike.

We've recently covered some additional portfolio activity from Icahn as well.

Per Google Finance, Manitowoc is "a multi-industry, capital goods manufacturer. MTW operates in two markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice). Crane is a provider of engineered lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. Foodservice is a manufacturer of commercial foodservice equipment serving the ice, beverage, refrigeration, food-preparation, and cooking needs of restaurants, convenience stores, hotels, healthcare, and institutional applications."

Horizon Kinetics on Owner Operators

This presentation on owner operators from Horizon Kinetics is a few years old (2011) but still very much worth a read.  These types of investments have long drawn the attention of various investors and this takes a look at the history, definition, and more.

Embedded below is Horizon Kinetics' research piece on owner operators:

Tuesday, December 23, 2014

Glenview Capital Increases Avis Budget, Lithia Motors & PVH Corp Positions

Larry Robbins' hedge fund firm Glenview Capital has been active recently in shares of three of their holdings.

Increases Avis Budget Group Stake

Readers of the site won't be surprised by this move because we highlighted an interview with Robbins where he pointed out his fondness for car rental companies a few months ago.  Glenview has revealed they now own 5.2% of Avis Budget Group (CAR) with 5.44 million shares per a 13G filed with the SEC.

This means they've increased their stake by over 1.49 million shares since the end of the third quarter. The filing was required due to activity on December 10th.

Per Google Finance, Avis Budget Group is "a provider of vehicle rental and car sharing services. The Company operates under brands Avis, Budget and Zipcar. The Company’s other brands include Budget Truck, Payless and Apex. The Company operates in three segments: North America, which operates provides car rentals in the United States and vehicle rentals in Canada, as well as ancillary products and services, and operates the Company’s Zipcar car sharing business; International that provides and licenses its brands to third parties for vehicle rentals and ancillary products and services primarily in Europe, the Middle East, Africa, Asia, South America, Central America, the Caribbean, Australia and New Zealand; and Truck Rental, which provides truck rentals and ancillary products and in the United States."

Boosts Lithia Motors Position

Second, Glenview Capital has also revealed a 5.92% ownership stake in Lithia Motors (LAD) with over 1.4 million shares.  They've boosted their position size by 237,364 shares since the end of the third quarter.

Per Google Finance, Lithia Motors is "an operator of automotive franchises and a retailer of new and used vehicles and services. The Company sells new and used cars and light trucks and replacement parts; provides vehicle maintenance, warranty, paint and repair services; and arranges related financing, service contracts, protection products and credit insurance."

Adds To PVH Corp Holdings

Lastly, Larry Robbins' hedge fund firm also filed a 13G with the SEC regarding their PVH Corp (PVH) stake.  They now own 5.5% of the company with over 4.53 million shares.

This is an increase of 427,071 shares since the end of the third quarter and the filing was required due to activity on December 10th.

Per Google Finance, PVH is "an apparel company. The Company’s portfolio of brands includes Calvin Klein, Tommy Hilfiger brands, Van Heusen, IZOD, Bass, ARROW and Eagle, which are owned brands, and Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, JOE Joseph Abboud, MICHAEL Michael Kors, Michael Kors Collection, CHAPS, Donald J. Trump Signature Collection, DKNY, Elie Tahari, Nautica, Ted Baker, J. Garcia, Claiborne, Robert Graham, U.S. POLO ASSN., Axcess and Jones New York, which are licensed, as well as various other licensed and private label brands. It designs and markets branded dress shirts, neckwear, sportswear and, to a lesser extent, footwear and other related products. Additionally, it licenses its owned brands over a range of products."

This isn't the only activity out of Glenview recently either.  Robbins' firm also bought shares of two more companies.

ValueAct Capital Trims Adobe Systems Stake

Jeff Ubben's activist hedge fund firm ValueAct Capital has filed a Form 4 with the SEC regarding their stake in Adobe Systems (ADBE).

Per the filing, they've sold over 5 million shares of ADBE since the end of the third quarter.  These sales came at prices of $75.02, $74.72, and $74.57 on December 18th, 19th, and 22nd respectively.

After these recent sales, they're left with 16,700,000 shares.

Per Google Finance, Adobe Systems is "a diversified software company. The Company offers a line of software and services used by professionals, marketers, knowledge workers, application developers, enterprises and consumers for creating, managing, delivering, measuring and engaging with content and experiences across multiple operating systems, devices and media."

For more from this manager, be sure to check out Ubben's presentation from the Sohn Conference San Francisco.

Eminence Capital Adds To Xoom, Men's Wearhouse Stakes

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G and a 13D with the SEC regarding two of their positions.

Adds To Xoom Stake

First, Eminence has revealed a 6.4% ownership stake in Xoom (XOOM) with over 2.44 million shares. 

This means they've boosted their stake by over 1.57 million shares since the end of the second quarter.  The filing was required due to activity on December 9th.

Per Google Finance, Xoom is "engaged in online international money transfer service. Its customers use Xoom to send money to family and friends in 30 countries. The Company generates revenue from transaction fees charged to customers and from foreign exchange spreads on transactions where the payout currency is other than United States dollars."

Increases Men's Wearhouse Position

Second, Sandler's hedge fund also disclosed a 11.9% ownership stake in Men's Wearhouse (MW) with over 5.7 million shares in an amended 13D filing with the SEC.

Their position size is now larger to the tune of 1.15 million more shares.  The filing was required due to activity on December 16th.

The filing also notes that Eminence's standstill clause (which capped their ownership at 10%) has been amended to 12%.

Per Google Finance, Men's Wearhouse is "a specialty retailer of men's suits and a provider of tuxedo rental product in the United States and Canada. It operates in two segments: retail and corporate apparel."

For more from this manager, you can see what stocks Sandler recommended at the Robin Hood Investors Conference.

Friday, December 19, 2014

Howard Marks' Latest Memo: The Lessons of Oil

Oaktree Capital's chairman Howard Marks is out with his latest memo.  His commentary is considered some of the best out there and even Warren Buffett reads it.  Marks' latest missive is entitled "The Lessons of Oil" and it is embedded below.

You can download a .pdf copy here.

For more from Marks, we'd highly recommend also checking out his book, The Most Important Thing.

NYU Stern Evaluation Investment Newsletter: December 2014 Edition

The latest issue of NYU Stern's newsletter Evaluation is now available.  It highlights public finance and infrastructure investing.  Additionally, it features student investment pitches including  long Polaris Industries (PII), long RPX Corp (RPXC), long LVMH, short Alliant Techsystems (ATK), and long the Indian Rupee.

The December 2014 Evaluation newsletter is embedded below:

If you missed it, be sure to check out a past issue of Evaluation featuring an interview with Avenue Capital's Marc Lasry.

What We're Reading ~ Hedge Fund Links 12/19/14

Year of man versus machine for hedge funds [FT]

Ray Dalio at the Dealbook Conference: it's a good environment, but... [CNBC]

Paul Singer at the Dealbook Conference : the 'unfair' recovery is the Fed's fault [CNBC]

What some hedge fund professionals are betting on in 2015 [FINalternatives]

No wonder they call hedge funds 'smart money' [Business Insider]

Greenwich's rise as a hedge fund capital [CTPost]

Big hedge funds win again on PetSmart, Riverbed [CNBC]

Thursday, December 18, 2014

Greenlight Capital Adds To Cairn Energy Holdings

David Einhorn's hedge fund Greenlight Capital has added to its stake in London listed Cairn Energy (LON:CNE).  Due to trading on December 12th, Einhorn's fund increased its holding from 4.2% to 6.2% of voting rights. 

Most of the position is via common stock but around 12% is held via a total return swap.  Their latest shares were bought around the 160p mark.

Greenlight first disclosed a 3% in Cairn back in Mach 2012 when shares traded at around 350p.  Since then, they have gone above and below the 3% disclosure threshold a few times and then in January of this year they added shares that cost around 260p each to take the stake to 4.2%. 

For more from this manager, head to David Einhorn's most recent interview.

Per Google Finance, Cairn Energy is "an independent oil and gas exploration and development company. The Company’s operations are organised based on geographical regions. Its geographical segments include North West Europe- North Sea, Atlantic Margin-Greenland, Atlantic Margin-Morocco and the Mediterranean. The Cairn Energy Group’s operations focuses on new exploration activities in Greenland and the Mediterranean. The Company’s operating subsidiaries include Capricorn Oil Limited, Cairn UK Holdings Limited, Capricorn Energy Limited, Cairn Energy Dhangari Limited, Cairn Energy Karnali Limited, Cairn Energy Lumbini Limited, Cairn Energy Malangawa Limited, Cairn Energy Birganj Limited, Capricorn Albania Limited, Capricorn Spain Limited, Capricorn Greenland Exploration 1 Limited and Capricorn Lady Franklin Limited."

Balyasny Starts Laredo Petroleum Position, Boosts Penn National Gaming Stake

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has just filed two separate 13G's with the SEC today. 

Starts Laredo Petroleum Position

First, Balyasny has filed on shares of Laredo Petroleum (LPI).  Per the filing, Balyasny now owns 5.31% of the company with over 7.62 million shares.

This is a newly disclosed equity position for the firm as they did not hold a position at the end of the third quarter.  The filing was made due to activity on December 16th.

Balyasny has been actively buying shares of KBR as well as Oasis Petroleum recently too.

Per Google Finance, Laredo Petroleum is "focused on the exploration, development and acquisition of oil and natural gas properties primarily in the Permian region of the United States. The Company’s primary exploration and production fairway in the Permian Basin is centered on the eastern side of the basin 35 miles east of Midland, Texas and extends 20 miles wide (east/west) and 85 miles long (north/south) in Glasscock, Howard, Reagan, Sterling and Tom Green counties, and is referred to as the Permian-Garden City area."

Boosts Penn National Gaming Stake

Second, Balyasny Asset Management has disclosed a 5.74% ownership stake in Penn National Gaming (PENN) with over 4.52 million shares.

This means they've increased their position size by around 840,000 shares since the end of the third quarter. The filing was made due to activity on December 12th.

Per Google Finance, Penn National Gaming is "a diversified owner and manager of gaming and pari-mutuel properties."

Carl Icahn Raises Hertz Global and Navistar Stakes

Activist investor Carl Icahn has filed two separate amended 13D's with the SEC.

Increases Hertz Global Stake Again

The corporate rabblerouser has continued to buy shares of Hertz Global (HTZ).  Per the SEC filing, he now owns 11.34% of the company with over 51.9 million shares.

He's increased his position size by 13.1 million more shares since the end of November and the filing was required due to portfolio activity on December 15th.

So Icahn has been very active buying HTZ shares over the past few weeks.  Hertz is analyzed in the latest issue of our Hedge Fund Wisdom newsletter if you want to read the full bull and bear cases on the name.

Per Google Finance, Hertz Global "operates in two segments: rental and leasing of cars, crossovers and light trucks (car rental), and rental of industrial, construction and material handling equipment (equipment rental).."

Adds To Navistar International Position

Icahn also filed a 13D on Navistar and disclosed he now owns 19.99% of the company with over 16.27 million shares.

This means he's boosted his position size by over 1.9 million shares since the end of the third quarter.  This filing was required due to activity on December 17th.

Per Google Finance, Navistar International is "a manufacturer of International brand commercial and military trucks, IC Bus (IC) brand buses, MaxxForce brand diesel engines, Workhorse Custom Chassis (WCC) brand chassis for motor homes and step vans, and Monaco RV (Monaco) recreational vehicles (RV), as well as a provider of service parts for all makes of trucks and trailers. In addition, it is a private-label designer and manufacturer of diesel engines for the pickup truck, van and sport utility vehicle (SUV) markets. It also provides retail, wholesale, and lease financing of trucks and parts. NIC operates in four segments: Truck, Engine, Parts and Financial Services."

TPG-Axon Capital Files 13D & 13G on SandRidge Energy Stake

Dinakar Singh's hedge fund firm TPG-Axon Capital has filed a 13D and then 13G with the SEC regarding their stake in SandRidge Energy (SD).

Per the 13G filing, the firm owns about 32 million shares, or 6.5% of the company: 4.1% via common stock and 2.4% economic on basket swap.  The firm executed a swap to realize certain gains/losses for tax planning.

This is a reduction in their position size, as they previously disclosed ownership of over 39 million shares at the end of the third quarter (via their last 13F filing with the SEC).

Per Google Finance, SandRidge Energy is "an independent oil and natural gas company. The Company is engaged in development and production activities in the Mid-Continent, Gulf of Mexico and Permian Basin in west Texas. Its primary area of focus is the Mississippian formation, a shallow hydrocarbon system in the Mid-Continent area of northern Oklahoma and Kansas. The Company also operates businesses that are complementary to its primary development and production activities, including gas gathering and processing facilities, an oil and natural gas marketing business and an oil field services business, including its wholly owned drilling rig business, Lariat Services, Inc. (Lariat)."

Wednesday, December 17, 2014

What We're Reading ~ Analytical Links 12/17/14

Good interview with Amazon's Jeff Bezos [BusinessInsider]

122 things everyone should know about investing and the economy [Morgan Housel]

On castles and moats [Sova Group]

Global market sentiment survey 2015 [CFA Institute]

How the rising dollar could trigger the next global financial crisis [WSJ]

Berkshire director offers rare peek into Buffett's boardroom [BizJournals]

On the importance of "knowing the why" re: stock price fluctuations [Micro Fundy]

On how to have fun investing [Value and Opportunity]

Homebuilder sentiment diverges from reality [WSJ]

Inside Facebook's plan to wire the world [Time]

The hole in Google's mobile strategy [The Information]

Why Windows 10 is so important to Microsoft's future [TheStreet]

A look at Tropicana Entertainment [Clark Street Value]

More signs that software is eating investment management [Abnormal Returns]

Throwing money at start-ups in frenzy to find the next Uber [Dealbook]

8 secrets of success [TED]

Lee Cooperman Adds To Caesars Entertainment Stake

Lee Cooperman's hedge fund firm Omega Advisors has just filed a 13G with the SEC regarding their position in Caesars Entertainment (CZR).  Per the filing, Cooperman has revealed a 5.41% ownership stake in CZR with over 7.81 million shares.

He's boosted his stake by 824,967 since the end of the third quarter and the filing was required due to activity on December 12th.

Per Google Finance, Caesars Entertainment is "a diversified casino-entertainment provider.."

Balyasny Asset Management Increases KBR Position

Dmitry Balyasny's hedge fund Balyasny Asset Management has filed a 13G with the SEC regarding its position in KBR (KBR).  Per the filing, Balyasny now owns 5.57% of KBR with over 8 million shares.

They've increased their position size by over 6.97 million shares since the end of the second quarter and the filing was required due to portfolio activity on December 11th.

Just yesterday, we posted up about another stock Balyasny has been buying.

Per Google Finance, KBR is "a global engineering, construction and services company supporting the energy, hydrocarbons, Government services, minerals, civil infrastructure, power, industrial and commercial markets."

Tuesday, December 16, 2014

12 West Capital Boosts Advanced Drainage Systems Stake

Joel Ramin's hedge fund firm 12 West Capital has filed a 13G with the SEC regarding its stake in Advanced Drainage Systems (WMS).  Per the filing, 12 West now owns 6.1% of the company with over 3.24 million shares.

They've increased their position size by over 1.73 million shares since the end of the third quarter.  The filing was required due to portfolio activity on December 4th.

For more from this hedge fund, we posted up some other recent portfolio activity from 12 West here.

Per Google Finance, Advanced Drainage Systems is "a manufacturer of thermoplastic corrugated pipe, providing a comprehensive suite of water management products and superior drainage solutions for use in the construction and infrastructure marketplace. The Company’s products are used across a range of end markets and applications, including non-residential, residential, agriculture and infrastructure applications."

Balyasny Asset Management Discloses Oasis Petroleum Position

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has filed a 13G with the SEC regarding shares of Oasis Petroleum (OAS).   Per the filing, Balyasny now owns 5.24% of the company with over 5.31 million shares.

This is a newly disclosed equity stake for the firm, as they did not report ownership as of the end of the third quarter.  The filing was required due to portfolio activity on December 9th.

Like many energy stocks, Oasis has plunged from a high of $56.50 this year, down to current levels of around $12 per share.

We've posted previous portfolio activity from Balyasny here.

Per Google Finance, Oasis Petroleum is "an exploration and production company. The Company focuses on the acquisition and development of unconventional oil and natural gas resources in the Montana and North Dakota regions of the Williston Basin."

Ardsley Partners Ramps Up Independence Realty Trust Stake

Phil Hempleman's investment firm Ardsley Partners has filed a 13G with the SEC regarding their position in Independence Realty Trust (IRT).  Per the filing, they now own 5.4% of the company with over 1.73 million shares.

They've increased their stake by over 1 million shares since the end of the third quarter and the filing was required due to portfolio activity on November 20th.

Per Google Finance, Independence Realty Trust is "is a real estate investment trust (REIT). The Company holds a portfolio of multifamily properties and intends to invest in a diversified portfolio of multifamily properties."

Friday, December 12, 2014

Last Chance: 33% Off Sale Ends Tonight For Hedge Fund Wisdom Newsletter

This is your last chance to take advantage of the discount on our premium Hedge Fund Wisdom newsletter.  The 33% off sale ends tonight at midnight in your local timezone.

Free Sample Issue:  To see what you've been missing, check out a full past issue: click here to download (.pdf)

33% Discount Ends Tonight: Take Advantage Before It's Gone

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What We're Reading ~ Hedge Fund Links 12/12/14

Aligning interests: side pockets, side letters and central issues [All About Alpha]

Hedge funds betting big on Uber, see IPO ahead [CNBC]

Hedge funds then and now [Finansakrobat]

Is your hedge fund really worth it? [ValueWalk]

How computer hackers could destroy a hedge fund [ii alpha]

How Tiger Global anonymously shorted UK-listed shares [FT]

The emergence of hedge fund branding [FINalternatives]

How the super rich raise capital from the super rich [Forbes]

The star system is still shining at hedge funds [pi online]

KKR seeks stakes in hedge funds [Bloomberg]

South Africa emerging as growing hedge fund market [HedgeThink]

Learning from mistakes made by pension funds [ETFTrends]

Baupost Group Discloses Paratek Pharmaceuticals Stake

Seth Klarman's hedge fund firm Baupost Group has filed a 13G with the SEC regarding shares of Paratek Pharmaceuticals (PRTK).  Per the filing, Baupost now owns 12.04% of the company with over 1.7 million shares.

This is a newly disclosed equity position for the firm and the filing was required due to activity on October 31st.

The firm has been active in that sector recently.  Back in early November, Baupost also disclosed new positions in Atara Biotherapeutics (ATRA) and Forward Pharma (FWP), per 13G's filed with the SEC.

Per Google Finance, Paratek Pharmaceuticals is "a specialty pharmaceutical company focused on the development and commercialization of products that address therapeutic needs in the field of neuroscience."

Thursday, December 11, 2014

Holiday Gift Ideas For Investors & Financial Professionals

Every year we like to feature relevant gift ideas for investors/financial professionals besides the typical money/gift cards, liquor, dinners, etc.  Whether you need ideas for clients, staff, service providers, bosses, colleagues, or even ideas for yourself, here's the 2014 edition:

Discounts on Publications

33% Discount on our Hedge Fund Wisdom newsletter - The sale ends tomorrow night, so take advantage before it's too late.

Wall Street Journal: $12 for 12 weeks - Save on a subscription to one of the necessary publications in finance (includes online access & print).

Barrons: $1 a week for 26 weeks - Another classic option (includes digital & print).

The Economist - Yet another worthwhile publication.

Good Books

The Art of Value Investing: How the World's Best Investors Beat the Market by John Heins & Whitney Tilson:  This is a compilation of a ton of quotes from various top hedge fund managers that are often featured on MarketFolly.  Highly recommended.

Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel: Written by a top entrepreneur/investor.

Thinking Fast and Slow by Daniel Kahneman: A great read that looks at the 2 systems that drive the way we think; applicable to the behavioral/psychological side of investing. 

The Education of a Value Investor by Guy Spier: A look at a fund manager's evolution as well as lessons from his mistakes and from the successes of others.

The Art of Short Selling by Kathryn Staley:  Recommended by hedge funds like Third Point and Blue Ridge Capital, this is probably *the* book on the subject.

You Can Be a Stock Market Genius by Joel Greenblatt: Cheesy title, but in reality one of the best books on investing; recommended by Seth Klarman, Dan Loeb & many other top investors.


The Wolf of Wall Street (DVD/Bluray/Digital HD) - Directed by Martin Scorsese and featuring Leonardo DiCaprio.  An entertaining movie, but probably not one to send people who don't understand what you do for a living.  They'll get the wrong impression.

Jiro Dreams of Sushi (DVD) - There are a lot of investing parallels in this documentary about one of the world's top sushi chefs and his dedication to his craft and pursuit of perfection. 

Margin Call (DVD) - Featuring Kevin Spacey and Zachary Quinto, among many other well known actors.  Labeled by one publication as "the best Wall Street movie ever made."

Floored (DVD) - A look at a financial profession that is pretty rare these days: floor traders.


iPad Air 2 - An even lighter and thinner tablet. For reading SEC filings, investing books, sending scathing emails to CEOs, and more.

Amazon Fire HD 7 - Another tablet option.  Alternatively, a good gag gift to send someone who's short AMZN.

Google Chromecast - HDMI Streaming media player.


Cards Against Humanity - A ridiculous party game to play with others (preferably after alcohol is consumed).

30 Pack of K-Cups for Keurig Brewers - For the caffeine addicts you know.  Or you can copy an unnamed hedge fund's prank and send these to someone you know who is or was short GMCR shares.

Happy Holidays!

Wednesday, December 10, 2014

What We're Reading ~ Analytical Links 12/10/14

The Focused Few: Taking a Multidisciplinary Approach to Focus Investing [Richard Rockwood]

On paying up for quality stocks [Clear Eyes Investing]

A look at Interactive Brokers (IBKR) [Punch Card Blog]

On the behavior of individual investors [UC Berkeley]

Old but still good: a checklist for investors [Jason Zweig]

Latest interview with Mohnish Pabrai [Barrons]

William Blair's top stock picks for 2015 [StreetInsider]

On Tracy Britt Cool, the education of Warren Buffett's protege [Fortune]

Peak Google [Stratechery]

Why activist investors are getting even more active [Fortune]

Fallen arches: can McDonald's get its mojo back? [Fortune]

The world reshaped: end of the population pyramid [Economist]

A global explosion in ultra high net worth individuals [Reformed Broker]

Cash is for losers [BusinessWeek]

Are a lot of millennials not investing at all? [GetRichSlowly]

How do people get new ideas? [Farnam Street]

Advertisers pay billions for bogus web traffic [Nasdaq]

Friday, December 5, 2014

33% Discount on Hedge Fund Wisdom Expires Next Week

Just a head's up that our holiday sale is almost over!  The 33% discount to our Hedge Fund Wisdom newsletter expires next Friday (12/12).   If you were thinking about joining, do so before prices go from $199.99 back up to $299.99 for a 1-year subscription.

The Q3 issue was just released and features equity analysis of Hertz Global (HTZ) and RetailMeNot (SALE).  Hedge funds have been active in shares of both companies, so catch up on these names quickly by reading about the companies' history, business model, potential catalysts, and the bull/bear cases.

Also included in the new issue: the latest 13F portfolios of 25 top managers, consensus buy/sell lists, and commentary on each fund's moves.  To see a sample of the newsletter: download a free past issue here.

Take Advantage of the 33% Discount Before It Expires Next Week

1-year Subscription (4 issues): $299.99  Sale Price: $199.99 / year

Quarterly Subscription: $89.99  Sale Price: $59.99 / quarter

If you would like to pay via check or soft dollar account, please email us at info@hedgefundwisdom.com and we'd be happy to set that up for you!

Ray Dalio & Larry Summers: An Examination of How the Economic Machine Works

This is a slightly older video from this summer, but it's still worth watching.  Larry Summers sat down with Bridgewater Associates' founder Ray Dalio at Harvard in a presentation entitled: An Examination of How the Economic Machine Works.

Embedded below is the video of the conversation between Summers and Dalio:

For more from Bridgewater, we've previously posted up lessons from Ray Dalio as well as Bridgewater on economic principles.

What We're Reading ~ Hedge Fund Links 12/5/14

The growing problem of calculating performance fees [All About Alpha]

The best hedge fund bet of 2014 is India? [CNBC]

David Einhorn's thesis on Piraeus bank warrants [ValueWalk]

Hedge funds shut down as managers struggle in year of 2% returns [Bloomberg]

Hedge vs mutual funds and the timing of information acquisition [All About Alpha]

Hedge funds seek to tie up money for longer [WSJ]

Starboard's Jeff Smith: the investor CEO's fear most [Fortune]

Appaloosa to return billions to clients [ii alpha]

Carl Icahn's latest piece: "An activist manifesto" [Economist]

Profile of Bill Ackman [NYTimes]

Summary of Kyle Bass' recent comments [Newswise]

Paulson & Co rebrands Recovery Fund [Bloomberg]

Nehal Chopra's secret to finding alpha: A-plus CEOs [ii alpha]

Tiger Global to launch internet funds [ii alpha]

Hedge funds playing buy-and-hold, and losing [CNBC]

How pensions make investing too complex [Roger Lowenstein]

In defense of hedge funds [Barrons]

US institutions' devotion to hedge funds wanes [FT]

Emerging manager series: Advantage Capital [Distressed Debt Investing]

Big investors buying stakes for hedge fund fees [Barrons]

How hedge fund managers lower their tax bills [Forbes]

Thursday, December 4, 2014

Julian Robertson On What Stocks He Likes Now: Interview

Tiger Management's Julian Robertson has been making his rare yearly media tour and this time he sat down with Fox Business to talk about the markets.

On the Markets & Global Economy

On the global economy, Robertson said that: "Europe is in serious trouble and not improving much.  Japan has had a little bit of revival but at the cost of doing a lot of things that are questionable.  And I think the US is doing better than anybody.  China's got some serious problems, too."

On What Stocks He Likes

As has been the case in his other recent interviews, Robertson was again bullish on Google (GOOG / GOOGL) and Apple (AAPL).

He said that, "Apple's below the market multiple and that's true of Google."  Robertson has bought AAPL within the past 2-3 weeks and thinks it's "an extremely reasonably priced stock."  He also labeled GOOG as the "premier technology company of them all."

The Tiger man also admitted he's owned Alibaba (BABA) for four years now, long before the company came public.

He's also liked airlines, saying Delta Airlines (DAL) is the class of the industry and that they've all obviously benefited from lower oil prices.  Robertson also said he likes Netflix (NFLX).

One company he bought up that he hasn't mentioned previously was Naspers, traded in South Africa.  This has been somewhat of a Tiger Cub / Tiger Seed favorite and the company owns Tencent and various stakes in Chinese companies.  The company is basically trading at the value of these investments, but they also have television assets and a bunch of other stakes as well.

On the Hedge Fund Industry

He says the problem is that the industry has expanded so rapidly and that competition among funds has really ramped up.  Back in the day not as many people were shorting, but now it's really prevalent.  He also said that it's difficult to run a hedged portfolio in a market that seemingly only wants to go up.

For more from this investing legend, head to Julian Robertson's 3 most important things to look for in a stock.

Embedded below is Robertson's interview with Fox Business:

And here's the second video of his interview:

And here's the third video:

Joel Greenblatt's Wealthtrack Interview

Gotham Capital's Joel Greenblatt recently sat down with Consuelo Mack on Wealthtrack where he talked about his change of strategy from a highly concentrated portfolio focused on special situations to a widely diversified one.

Greenblatt is also the author of numerous books on the various strategies he's run.  One of the best books on investing (don't let the silly title fool you) is his book on special situations: You Can Be a Stock Market Genius.

He has also authored The Little Book That Still Beats the Market, a book that details his formula-following approach to investing.

Embedded below is Joel Greenblatt's interview on Wealthtrack:

York Capital Cuts Gilat Satellite Stake

Jamie Dinan's hedge fund York Capital has filed an amended 13D with the SEC regarding their position in Gilat Satellite Network (GILT).  Per the filing, York now owns 2.9% of the company with 1.23 million shares.

This means they've reduced their position size by over 3.9 million shares since the end of the third quarter.  The filing was required due to activity on November 29th and notes that they tendered their shares into FIMI's tender offer.

For more on this fund, we recently posted up Jamie Dinan's stock picks from Capitalize For Kids Sohn Canada conference.

Per Google Finance, Gilat Satellite Network is "a provider of Internet protocol (IP)-based digital satellite communication and networking products and services. Gilat designs, produces and markets very small aperture terminals (VSATs) and related network equipment, such as power amplifiers and antennas."

Be sure to also check out Dinan's rules of investing.

Wednesday, December 3, 2014

What We're Reading ~ Analytical Links 12/3/14

The best advice in business: 40 execs reveal their secrets to success [Fortune]

How the markets tempt us into making mistakes [A Wealth of Common Sense]

When should you sell a good stock? [Clear Eyes Investing]

The value of cash [CFO]

The art of variant perception from Michael Steinhardt [FirstAdopter]

Citizens Financial Group: another interesting forced IPO? [Value and Opportunity]

Henry Schein: your dentist's biggest supplier [Fortune]

Mohnish Pabrai's advice for a 12-year old investor [Forbes]

The bull case for European equities [FT]

China's corruption crackdown pummels Macau casinos [NPR]

No longer business as usual in China [NYTimes]

Looking at possible future winners in internet TV [GlennChan]

A plumbing problem for the internet (and the stock market) [NYTimes]

The man who taught Warren Buffett to manage a company [Quartz]

The return of the US Dollar [Mauldin]

The wall of worry, illustrated [Bason]

Behavioral explanations make sense of oil's plunge [Reuters]

Why America's housing disaster is back [Salon]

A house is not a credit card [NYTimes]

Fall of the bond king: How Gross lost empire as PIMCO cracked [Bloomberg]

Regrets, I've had a few [Epicurean Dealmaker]

Tuesday, December 2, 2014

Glenview Capital Increases PHH & Teradyne Stakes

Larry Robbins' hedge fund Glenview Capital has filed two 13G's with the SEC recently.

Increases PHH Corp (PHH) Stake

First, Glenview has disclosed a 7.59% ownership stake in PHH Corp (PHH) with over 3.85 million shares.  This means that Robbins boosted his position by 1 million shares since the end of the third quarter.  The filing was made due to activity on November 21st.

The company has a large share buyback program in place, a common link in many of Robbins' investments these days.

Per Google Finance, PHH is "an outsource provider of mortgage and fleet management services. PHH operates in three segments: Mortgage Production, Mortgage Servicing and Fleet Management Services. The Company provides mortgage banking services to a range of clients, including financial institutions and real estate brokers, throughout the United States. The Company’s mortgage banking activities include originating, purchasing, selling and servicing mortgage loans through its wholly owned subsidiary, PHH Mortgage Corporation and its subsidiaries (collectively PHH Mortgage). It provides commercial fleet management services to corporate clients and government agencies throughout the United States and Canada through its wholly owned subsidiary."

Boosts Teradyne (TER) Position

Second, Glenview has revealed a 5.53% ownership stake in Teradyne (TER) with over 11.9 million shares.  They've boosted their holdings in the company by over 4 million shares since the end of Q3.  The 13G filed with the SEC was required due to portfolio activity on November 6th.

Robbins recently pitched TER at the Invest For Kids Chicago conference.

Per Google Finance, Teradyne is "a supplier of automatic test equipment. The Company designs, develops, manufactures and sells automatic test systems and solutions used to test semiconductors, wireless products, hard disk drives and circuit boards in the consumer electronics, wireless, automotive, industrial, computing, communications and aerospace and defense industries. The Company's automatic test equipment products and services include semiconductor test systems, wireless test systems, and military or aerospace test instrumentation and systems, storage test systems, and circuit-board test and inspection systems. The Company’s customer base includes integrated device manufacturers, outsourced semiconductor assembly and test providers, wafer foundries, fabless companies, developers of wireless devices and consumer electronics, manufacturers of circuit boards, automotive suppliers, wireless product manufacturers, storage device manufacturers, and aerospace and military contractors."

For more from this hedge fund manager, head to Larry Robbins' presentation at Capitalize For Kids Sohn Canada.

Mohnish Pabrai's Presentation at Boston College on Value Investing

Value investor Mohnish Pabrai of Pabrai Investment Funds recently spoke at Boston College on the topic of value investing.  He visited Professor Arvind Navaratnam's class on Applied Fundamental Analysis & Behavioral Value Investing.

In it, he addresses valuing businesses, talks about a bank in India, answers questions and more.

Embedded below is the video of Mohnish Pabrai's presentation:

For more from this investor, head to our post on Mohnish Pabrai on checklist investing: learning from mistakes.

Corvex Management & Soroban Capital Add To Williams Position

Keith Meister's hedge fund firm Corvex Management filed an amended 13D in conjunction with Eric Mandelblatt's Soroban Capital regarding their joint position in Williams Companies (WMB). 

Per the filing, the hedge funds now own 8.39% of the company with over 62.68 million shares (though if you add in the options, they'd own 9.11% with around 68 million shares).

This would indicate that the hedge funds have increased their exposure by around 21 million more shares since the end of the third quarter.  The filing was made due to activity on November 18th.

Per Google Finance, Williams is "an energy infrastructure company focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGLs), and olefins. The Company’s operations span from the deepwater Gulf of Mexico to the Canadian oil sands. It operates in three segments: Williams Partners, Midstream Canada & Olefins and Other."

For more on Corvex in particular, we recently posted up Meister's presentation on Crown Castle International.

Monday, December 1, 2014

Cyber Monday Sale: 33% Off Our Hedge Fund Wisdom Newsletter

For a limited time, we're having a 33% off sale on our premium newsletter, Hedge Fund Wisdom.  A 1-year subscription normally costs $299.99 but now it's only $199.99.  A brand new 95-page issue was just released, so now's the perfect time to subscribe.

See what top hedge funds have been buying, selling and why.  We've been tracking these funds for 7+ years and summarize the latest 13F filings of prominent managers like David Tepper, Seth Klarman, Dan Loeb, David Einhorn and 21 other managers.

Also included in each issue:  consensus buy/sell lists and equity analysis of 2 stocks funds have been buying.

Want to see what an issue looks like before buying?  To download a full past issue, click here.

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Boston Investment Conference Notes 2014: Summary of Stock Picks

Today we're posting notes from the 2014 Boston Investment Conference that recently took place.  The event features hedge fund managers pitching their latest ideas to benefit the Boston Children's Hospital. 

This event follows "Chatham House Rules" which means unfortunately that the pitches will not be linked to any particular speaker.  That said, if you look at some 13F filings, you might be able to guess who pitched what.

Speakers (In No Particular Order)

David Abrams, Abrams Capital
Will Danoff, Fidelity Investments
Jason Capello, Merchants' Gate Capital
William Duhamel, Route One Investment
James Grant, Grant's Interest Rate Observer
Jeremy Grantham, GMO
Jonathon Jacobson, Highfields Capital
Alex Klabin, Senator Investment Group
Seth Klarman, Baupost Group
Beeneet Kothari, Tekne Capital
James Litinsky, JHL Capital Group
Michael Lowenstein, Kensico Capital
Joshua Resnick, Jericho Capital
Barry Sternlicht, Starwood Capital

Notes From The Boston Investment Conference 2014

First Pitch: Brookdale Senior Living (BKD):  EV/EBITDA (2015) about 11.5.  $33-34 stock price: 6B market cap, 6B debt with 12B EV.  He likes the services businesses they are developing.  They offer a premium product.  There is limited supply and strengthening demand and demographics.  They recently purchased #2 operator and believes there are cost synergies.  They own 40% of their real estate and have option to buy more. 

They have 10% market share in their industry and are 4X bigger than #2.  The industry has years of consolidation in front of it.  Lack of current supply a result of over-building in the late 1990s and it took about 15 years to absorb this.  Supply shortage is driven by demographics.  He compared FFO multiple to multi-family housing operators: 10.6   c/w 20.2 

Their services business includes home health care, hospice care, car/transportation services and physical therapy, speech therapy and occupational therapy.  “They have a captive customer base of 100,000 high net worth individuals.”  They can institute group purchasing and get bulk discounts.  He believes their real estate is worth $27-35 share.  In a few years their operating business can produce   $750M EBITDA and 8X this gives you a stock price in the 50s.  They can potentially spin out their operating company.  He talked about a proxy statement filed in June that had some interesting information.

Second Pitch: Ctrip.com (CTRP):  Could be a double in 2-3 years.  $9B market cap.  50% market share.  15% growth.  Tourism is the new luxury in China vs. branded goods.  Online travel penetration is 17% vs. 45% in US.  Company can grow with both secular growth and increased online penetration.  C-trip is synonymous with travel in China.  Because of competition, they were spending heavily on IT, sales, engineers and to recruit more hotels.  This has affected their margins.  Compared their gross margins and (I believe) their operating margins to other companies:

PCLN  EXPE  CTRP('14)  CTRP('08)
84        78        70               73
44        25        12.5            38.2

So the company still has high gross margins and their increased spending is affecting SGA.  According to the investor, 2014 is their last big year of investment spending and the 'heavy lifting' will have been done.

CTRP has bought stakes in multiple travel related businesses that are marked at cost on their balance  sheet.  Investor values those stakes at $2B giving company an adjusted market value of $7B.  PCLN is the 800 lb. gorilla in online travel space and they are partnering with CTRP and purchased a 10% stake   They are expecting an IPO of E-HI (phonetic spelling), one of their travel related companies, in early 2015. They expect earnings to go from $2 to $4 in the next 3 years.  They value $4 at 25X (a smaller multiple than current one) plus $20/share in investment stakes representing $120/share or about double current share price.  He considers it a high growth business.  He notes that in 2009, PCLN had a $7B market cap and now-5 years later-has a $60B market cap.

Third Pitch: Western Union (WU):  They will earn about $1.50 this year and since they have some excess depreciation FCF will be higher.  Next year will be better.  Have about a 3% yield.  They had problems in the past by pricing their product too high.  They took a price cut.  But this mess creates the current opportunity.  A similar thing happened to MO many years ago.  They cut prices which freaked out the market but did well from there.  Talked about a competitor XOOM but they have a narrow market.  Thinks WU can use technology to their advantage.  Their expenses are high because of compliance costs but he feels this can ultimately deepen their competitive moat.  Their volumes are growing and so should their earnings. 

Fourth Pitch: Sberbank.  This is a Russian bank.  Investing is simple but not easy.  They have NIM of over 5%.  They compare favorably to WFC on most metrics.  He says they have terrific management.  They have a 4.1% yield (but it may be cancelled).  They have over 100 million accounts.  Competitors are Alpha Bank and Bank of St. Petersburg.  He thinks situation with Russia should straighten out next year.  The sanctions will be under vote to be renewed on 7/31/15.  He feels there is no point for them to make concessions well before this.  “Everyone is a value investor until prices get really cheap.”  They have an unfair funding advantage.  They have 46% deposit share.  They don’t have to take high risk to get high returns (like Geico).  They can pick and choose among customers.  There is risk from falling oil and from the ruble.

Fifth Pitch: Cogent (CCOI):  It has a $2B EV and is involved with Internet connectivity.  It has corporate customers ($700/month) and net-centric content providers like Netflix (NFLX).  They have a high quality network.  Apparently $14B of invested capital with the lowest cost network.  20-25% demand growth.  The industry is consolidating with higher pricing and profitability and more efficient cap-ex.  Should be strong revenue growth with capex going down. 

Talked about net neutrality debate.  ISPs are backing away from pay prioritization since alternative is regulation from FCC.  In worst case, sees Cogent losing 4% of revenues.  Mentioned “take or pay agreements”.  He thinks that pay prioritization will likely be banned.  He sees company returning about $2.70 in capital: ½ in dividends and ½ in buybacks (total 8.1%).  He thinks the stock can trade into the low $60s (currently $34 ~ not sure when or what assumptions he has made). 

Sixth Pitch: Ophthotech (OPHT):  A speculative biotech play.  Drug in pipeline is Fovista.  I believe it is a platelet development growth factor inhibitor used in conjuction with anti-VEGF (vascular endothelial  growth factor) drug to treat wet AMD, which is some type of macular degeneration. 

Says leading cause of blindness in 55 and older population in US and EU.  Has market cap of $1.5B and EV of $1B (about $500M cash)  Has another drug called Zimura, which is in phase 2.  Cheap because no near term catalyst.  Feels probability of approval is mispriced.  Novartis made a deal with company for their ex-USA licensing rights with possible $1B milestone   payments.  He feels this has de-risked the investment.  A launch could occur 2017-2019.

Seventh Pitch: China Mobile (CHL): Largest mobile company and has over 800 million subscribers.  Trades at 4.3x 2015 EBITDA and 3.4% dividend yield.  75% owned by China; 25% publicly traded.  Has $73b in cash.

Has the world's leading 4G network.  They previously had TD-SCDMA network that was disappointing.  Now 4G with global standard TD-LTE.  China Mobile has one year head start over competitors China Telecom and China Unicom.  He expects data usage to "explode" and expects capex to decline materially.  National Tower Co is a separate company that may be spun out that will be very valuable. 

He expects ARPU, 4G and data revenues to ramp up making up for compression in voice and SMS.  Margins should improve.

Eighth Pitch: HDFC Bank (HDB):  This is a bank in India and he likes the country overall.  Thinks it is a high quality bank at 16x earnings and notes that Modi is pro-business.

Winning Student Presentation: Short Diamond Resorts (DRII).  (Very short presentation and did not catch gist of the thesis)

This concludes notes from the 2014 Boston Investment Conference.  If you missed it, we've also posted notes from the following recent hedge fund conferences:

- Invest For Kids Chicago Notes: Ackman, Robbins, Zell & more

- Sohn San Francisco Notes: Ubben, Billick, McGuire & more

- Capitalize For Kids Sohn Canada Notes: Ainslie, Dinan, Robbins

- Summary of Stock Picks From Robin Hood Investors' Conference

- Great Investors' Best Ideas Dallas Notes: Einhorn, Perry, Ackman & more

- InvestPitch 2014: Stock Picks From Emerging Hedge Fund Managers

Bill Ackman's Pershing Square Q3 Letter: Zoetis, Allergan & More

Bill Ackman is out with Pershing Square Capital's third quarter letter to investors.  Pershing is up 35% net for the year as of the end of October.  The Q3 letter outlines Ackman's thesis on his newest holding: Zoetis (ZTS). 

ZTS is a spin-off from Pfizer and is an animal health company.  Ackman took this position alongside Sachem Head Capital, another activist hedge fund run by Scott Ferguson (who previously worked at Pershing).

He likes that Zoetis has a durable product portfolio and is involved in markets with secular growth. Ackman writes, "We believe Zoetis is a scarce asset."

Additionally, Ackman outlines the Allergan (AGN) saga and also gives updates on his positions in Canadian Pacific (CP), Howard Hughes (HHC), Platform Specialty Products (PAH), Fannie & Freddie, Air Products (APD), as well as his Herbalife (HLF) short.

Embedded below is Pershing Square's Q3 letter:

For more from Ackman, check out some of his recent conference appearances: Ackman's fireside chat at Invest For Kids Chicago as well as Ackman's talk at Great Investors' Best Ideas Dallas.

Carl Icahn Raises Hertz Global Stake

Corporate activist Carl Icahn has filed an amended 13D with the SEC regarding his position in Hertz Global (HTZ).  Per the filing, Icahn now owns 10.77% of the company with over 49.2 million shares of HTZ.

This means he's recently purchased over 10.4 million shares and did the bulk of his buying on November 24th and 25th at around $24.xx per share.  Icahn's nominee for CEO, John Tague, was recently appointed to the position as Icahn looks to get the turnaround at the company started.

HTZ has been a popular stock among hedge funds.  Not to mention, another activist investor is involved too: JANA Partners.

Hertz is featured in the equity analysis section of the brand new issue of our Hedge Fund Wisdom newsletter that was just released.  For a limited time, we're having a 33% off sale and you can read the investment thesis on Hertz by signing up here.

Saturday, November 22, 2014

New Q3 Hedge Fund Wisdom Issue Just Released: 33% Off Sale Starts Now!

The brand new Q3 issue of our premium Hedge Fund Wisdom newsletter was just released.  This quarter we've added a new fund as well: ValueAct Capital.  Subscribers please login at www.hedgefundwisdom.com to download it.

Included In The New Q3 Issue:

- Consensus Buy/Sell Lists:  See which stocks are most popular among hedge funds
- Equity Analysis Section:  Read the investment thesis on 2 stocks funds bought recently
- Latest Portfolios of 25 Top Hedge Funds: Baupost, Lone Pine, Appaloosa, Greenlight & more
- Fund Commentary: Quick explanations on why they've invested in certain stocks

The new 95-page issue has summarized all the latest 13F filings and hedge fund portfolio activity for you in one convenient document.  Sign up below to read it immediately.   

Sample Issue:  If you want to what the newsletter's like, please click here to download a full past issue.

33% Off Sale Starts Today: Discount Available Below

For a limited time, we're having a holiday sale!  Here's your chance to save 33% off our normal prices.  Instead of $299.99 for a 1-year subscription, now it's only $199.99.  Take advantage of this discount before it's too late.  If you're already a subscriber, use this to extend your subscription at lower prices.

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Saturday, November 8, 2014

Q&A With Guy Spier About His New Book: The Education of a Value Investor

A MarketFolly reader recently reached out to Aquamarine Capital's Guy Spier about his new book, The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment.  Guy graciously agreed to answer the reader's questions and to host it on MarketFolly so everyone can learn from his experiences.

Simply put, this book is Guy's look at his life and his investing evolution.  He candidly showcases his shortcomings and highlights the great attributes of other investors he's met with and learned from, such as Warren Buffett and Mohnish Pabrai.

One of our favorite sayings is that investing is a continual education.  The Education of a Value Investor exemplifies just that.  As you ride alongside Guy on his journey, you'll learn from his experiences and undoubtedly reflect on your own path and how you can further improve yourself.

Video: Q&A With Guy Spier About His New Book

Embedded below is the video of Guy's responses (email subscribers will need to come to the site to view it):

Here are the questions Guy answered along with a brief summary of his responses.  Be sure to watch the video for his full, in-depth answers to each topic.

1. Going Out of Your Comfort Zone (at 0:12 in the video) What other activities do you participate in that would have once been out of your comfort zone? What lessons have you learned from those and how have they shaped you as a person and an investor?  Guy did an Ironman triathlon and has looked into meditation.  He says listen to your gut instinct and if it's pushing you towards something, go for it.

2. On Mentors (at 3:35) Mentorship played a key role in your success. How do you suggest young people seek out mentors? And since mentees often have little to offer in return, how do you think the mentee can show appreciation and/or give back in the relationship?  Guy says, "Don't seek the masters, but seek what they sought."  The key here is since you're probably not going to get access to the likes of Warren Buffett, instead look at who those people have learned from and seek out their mistakes/successes.  If you do have the opportunity to meet with someone influential, send them a handwritten note expressing your gratitude.

3. Avoiding Bad Influences (at 7:38)  What advice would you pass on for people looking to create healthy, encouraging environments?  Guy says it's important to make decisions that make you happy and not necessarily what's expected of you.  He says to give your children choices/control early on to pursue interests.

4. Buying When the Market is Crashing (at 12:50)  How do you decide the right time to buy and who are the worthy candidates?  Guy found this difficult at first (especially due to not having longer-term lockups at his fund).  He says, "I think that the nature of one's liabilities is inextricably linked with one's ability to buy.  And the answer is I don't know how to run my emotions very well, but I do know how to modify my environment."

5. Advice on Selling (at 15:26)  When do you decide to sell? Have you received any advice on this from your mentors?  Guy admits that he doesn't have a great answer to this, but shared wisdom he received from Li Lu, who manages money for Charlie Munger.  Li Lu said that the time to sell is when you no longer want to buy it.  There is no 'hold', it's either buy or sell.

6. His Relationship With Mohnish Pabrai (at 18:21)  Has being close friends with Mohnish Pabrai slowly made you less risk averse in investing?  Guy says there's a distinction between risk and uncertainty.   Uncertainty is where you don't know the outcome while risk is that there's potential it goes to zero.  Everyone has their own tolerance level for dealing with 'hairy' situations so you have to find out what you're comfortable with.

7. Gaining an Edge on the Competition (at 20:40)  How do you think you gain an edge in a world filled with intelligent, driven individuals all looking to generate alpha?  Guy says to get a structural advantage (permanent capital or as close to it as possible, which allows you to act while others are handcuffed).  He also says to build a network of smart individuals over time.

8. On Macro (at 24:06)  How do macroeconomic considerations factor into your investment analysis?  Guy says that he doesn't think his brain is big enough to do both top-down and bottom-up investing at the same time but different investors have different approaches.  While some investors may provide commentary on the macro environment, it might not ultimately influence their investment decisions directly.

9. Sectors & Geographies For Value Investors (at 25:55)  Are there any sectors or geographies that fundamentally do not work with value investing? Guy thinks the most important thing is having an idea where the business will be in 5, 10, or 15 years; he wants predictability.  He highlights the tech sector as one rife with change and avoids countries where he doesn't understand the rules (specifically mentioning Russia and the natural resources sector).  He also notes that he's made money in the Philippines before.

10. On Activism (at 31:07)  Why do you think more value fund managers do not become activist investors?  Guy doesn't have any intention of being an activist and says you always hear about the successes but there's also failures you don't necessarily hear of.   

11. Evaluating Management Teams (at 35:15)  How do you learn about the character of management teams without sitting down to lunch with them? Guy says the best way to evaluate a management team is to look at their actions based on publicly available information.  Look at their capital allocation, what kind of debt they've issued, etc.  Every decision reveals something about the people making those decisions.  He avoids meeting with management because it can lead to biases.

12. Executive Compensation (at 37:22)  What's your take on executive remuneration?  Are most CEOs overpaid?  Guy says there are some 'superstars' out there that should be paid what they're worth.  At the same time, some are overpaid, some are underpaid.  He says the real question is: what to do about it?         

13. Analyst vs. Portfolio Manager (at 42:10)  How does an analyst know whether they'd make a good portfolio manager? Guy says you'll never know until you go ahead and do it.  In the mean time, he says to obviously manage your PA (personal account) or start one if you haven't already.  They are really two separate skillsets.


Our thanks to a reader for organizing this and thanks to Mr. Spier for taking the time out to further comment on his experiences.  

Be sure to check out Guy Spier's book, The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and EnlightenmentEveryone in the investment world takes their own path that defines who they are as an investor.  And more often than not, learning from others' journeys is an integral part of the process.  This book is a fantastic opportunity to do just that.

P.S.  As an added bonus, the book is a quick read so you can easily absorb it without taking a ton of time out of your schedule.

Friday, November 7, 2014

Notes From Invest For Kids Chicago 2014: Ackman, Zell, Robbins & More

The sixth annual Invest For Kids Chicago just took place and featured hedge fund managers sharing their latest investment ideas to benefit local children's charities (100% of the money raised goes directly to the charities).  Below are links to notes from each speaker's presentation.  Enjoy!

Invest For Kids Chicago 2014 Notes

- Fireside Chat with Bill Ackman (Pershing Square)

- Larry Robbins (Glenview Capital): 4 long ideas

- Sam Zell's Fireside Chat 

- Mason Hawkins (Southeastern Asset Management): long Level 3 Communications 

- Wally Weitz (Weitz Investment Management): long Liberty Media

- Steve Kuhn (Pine River Capital): On Japan

- Nehal Chopra (Tiger Ratan Capital): long Actavis and Charter Communications

- Jonathan Kolatch (Redwood Capital): Puerto Rico Power Authority

- Mike Wilkins (Kingsford Capital): On Short Selling

- Emerging Managers: Nancy Prial (Essex) long iCAD

- Emerging Managers: Tim Hurd (Blue Spruce) long BlackRock 

Bill Ackman's Fireside Chat at Invest For Kids Chicago

We're posting up notes from Invest For Kids Chicago 2014.  Next up is a fireside chat that Mick McGuire of Marcato Capital had with Bill Ackman of Pershing Square.  McGuire worked at Pershing before launching his own fund.

Bill Ackman's Fireside Chat at Invest For Kids Chicago

•    Pershing Square up over 30% this year. Benefiting from a Jim Bean sale, Platform Specialty, Air Products, Burger King, Herbalife continue to play out, Pershing Square Holdings and other newsworthy items.

•    Allergan (AGN) – revised their disclosure to include they are in active merger discussions with what Bill thinks is Actavis.
•    Ackman believes VRX can offer the most value versus Actavis. VRX has demonstrated track record for material acquisitions. More comfort with VRX vs. Acatvis. Actavis could be the white knight perhaps.
•    Either party will have to offer stock in the deal. Allergan has put themselves up for sale.
•    Thinks the best thing is that AGN asks for bids from VRX/Actavis and take the best/highest bid. December meeting is relevant. Co did everything they can to stop shareholders from voicing their views.
•    Incentive to negotiate before directors get thrown off.
•    AGN – essentially a management change with many synergies if VRX acquires.

•    Fannie and Freddie (FNMA / FMCC) now. They were short when Mick was at Pershing. Increased exposure in light of the case.
•    Fannie/Freddie two of the best businesses in the world.
•    Very safe business. Allows banks to sell/offload 30 yr mortgage which isn’t a good instrument for banks yet is very helpful to homeowners.
•    They di-worisified their business by buying fixed income securities (subprime, etc.). That is why Pershing was originally short before the US government recapitalized the company.
•    Became profitable in late FY11, when housing markets recovered. Over-reserved during the crisis. Heading back to their core mission/business. Bought them on that basis.
•    USA government took 100% of future profits of both entities, excuse was that they could never pay the government back. That was false, on their way to pay back the government.
•    Largest taking of a private asset by the government. Thankfully, it’s illegal. 5th amendment.
•    Judge Lamberth decision wasn’t about the takings claim which matters the most.
•    His best argument (for a hostile judge) is that shareholders can still trade the stock and make a profit. This could ultimately go to the Supreme Court.
•    Maybe Republicans want to get this solved and recapitalized. Very interesting risk reward, stock went from a dollar on the lost. Think it’s worth $40 - $50.
•    Reminds him of GGP when it was bankrupt.
•    “Always bet on America”
•    How do you size an opportunity on Fannie/Freddie? AGN hard to lose money but make 2x, make it bigger. Fannie could lose a lot but make a ton, hence for Pershing its 2% position.

•    Canadian Pacific (CP) next topic. Started buying September 2011. June 2012 gained control. One of the best industrial turnarounds.
•    Canadian Pacific approached CSX about a potential transaction, was rebuffed.
 •    Investment business – learned a lot over time. Started out buying cheap companies, now really emphasizes quality of business. Didn’t emphasize management at first, but Hunter at Canadian Pacific really shows the power of a strong management team.

•    Air Products (APD): Thinks the company could improve with the new CEO.

•    Howard Hughes (HHC) – brought on a strong management team that developed the assets and created a lot of value.

•    Platform Specialty Products (PAH) was a cash shell, great example of management. Raised $900MM, Pershing brought $300MM. Martin the CEO made an acquisition, the stock doubled. Bought a business in an auction. Starting to consolidate the specialty chemical industry.

•    On Executive Compensation: When you are going into these situations how do you think about the ideal CEO compensation structure? Bill’s response: S&P 500 co usually pays $10MM - $12MM, mix of cash options, restricted stock. Doesn’t align mgmt as they continually want lower priced options, especially if an acquisition occurs (more upside to them ~ not exact wording)
•    Sold a warrant of 4% of the outstanding shares with sale restriction at FMV to the CEO (did this for Howard Hughes).  Warrant went from $15MM to $250MM, 6 yr holding period, alignment and good upside for the CEO.
•    With Hunter who was 67, his incentives was also reputational. Gave him options upfront.

•    Thinking of Philanthropy: Always viewed as business as a way to make money in order to do good.  A lot of good is created by capitalism.
•    One philanthropy investment in Mexico giving iPads to store owners to run their stores better. Pepsi/ Nestle tracking data and the small store owners become more profitable through better management.
•    No cure – medical device to solve certain cancers. Prefers to invest in for profit to solve good as people are economically incentivized.
•    For things that there is no for profit solution, will do big grants (cultural, etc.). Never invest in a not for profit if there is a for profit competitor/solution.

For more from Ackman, he recently talked at the Great Investors' Best Ideas Dallas conference as well.

Be sure to check out the rest of the hedge fund presentations from Invest For Kids Chicago here.