Friday, January 17, 2014

Howard Marks on the Role of Luck in Investing: Latest Letter

Oaktree Capital's chairman Howard Marks is out with his latest memo entitled, "Getting Lucky."  It's an interesting missive in which he delves into the role of luck in investing.

Marks writes, "Investment success isn't just a question of whether the investor put together the 'right' portfolio, but also whether it encountered a beneficial environment.  Thus being successful requires a significant degree of luck.  No one gets it right every time.  (That's why even the best investors diversify, hedge and/or limit their use of leverage.)  But the skillful investor is right more often, over a long period of time, than an assumption of randomness would permit.  We say about such investors, 'it can't be luck.'"

Remember, this is a letter that even Warren Buffett regularly reads so you're in good company.

Embedded below is Howard Marks' "Getting Lucky" memo:

You can download a .pdf copy here.

If you missed it, be sure to check out Marks' memo from last month: The Race Is On.

Greenood Investors' Thesis on Fiat (FIATY): Video Presentation

Steven Wood and Greenwood Investors have put together a video detailing their thesis on Fiat (FIATY).  Entitled "The Two Year Honeymoon," they outline why they think Fiat is still one of the best investments they've found.

Four reasons for their bullishness include: a bearish consensus (so they have a variant perception), the product cycle, exceptional management, and valuation at the cycle low.

Rather than type out all the details of their work, we'll let them walk you through their thoughts.  Embedded below is the video of GreenWood's Fiat thesis:

If you missed it, we previously posted Greenwood's thesis on Exor SpA & Fiat as well.

What We're Reading ~ Hedge Fund Links 1/17/14

2014 investor outlook from some top capital allocators [HF Intelligence]

Why invest in hedge funds anymore? [FINalternatives]

Some Tiger Cub performance numbers [II Alpha]

Hedge funds gain over $225 billion in 2013 [ValueWalk]

The extraordinary progress of the hedge fund industry [WorldFinance]

Crispin Odey: this is year for hedge funds not long only [Citywire]

Women hedge fund managers made more money than men in 2013 [IBTimes]

BlueCrest builds a hedge fund empire [BusinessWeek]

A few brave investors scored huge, market-beating wins in 2013 [WSJ]

The most successful strategy for hedgies in 2013: picking right stocks [WSJ]

Former LTCM exec to launch hedge fund industry tracker [FT]

Wednesday, January 15, 2014

What We're Reading ~ Analytical Links 1/15/14

Investment checklists catch fire [Abnormal Returns]

99% of long-term investing is doing nothing, the other 1% changes your life [Fool]

Research report on LKQ Corp [Prescience Point]

Lessons from short selling [Bronte Capital]

10 predictions for 2014 [FirstAdopter]

5 common investing mistakes you should avoid [Old School Value]

How to become a better investor [Oddball Stocks]

When does a bubble spell trouble? [WSJ]

Fiat's lone poker player needs to find another deal [FT]

After Beam deal, few big liquor mergers left [Dealbook]

Is Google about to make a push into online travel? [Marketwatch]

Time to admit Apple knows exactly what it's doing with its iPhone business [BusinessInsider]

RIA top industry blogs [RIAbiz]

An old profile: the best investor you've never heard of [CNN Money]

Profile of Uber's Travis Kalanick [BusinessInsider]

Tuesday, January 14, 2014

Farallon Capital Discloses Sycamore Networks Stake

Andrew Spokes' hedge fund Farallon Capital has disclosed a new stake in Sycamore Networks (SCMR). 

Per a 13G filed with the SEC, the hedge fund now owns 9.5% of SCMR with 2.745 million shares.  The filing was made due to portfolio activity on December 31st.

Per Google Finance, Sycamore Networks is "develops and markets intelligent bandwidth management solutions for fixed line and mobile network operators worldwide and provides services associated with such products. The Company’s customers include domestic and international wireline and wireless network service providers, utility companies, enterprises, and government entities. Sycamore’s bandwidth management portfolio of optical switches, multiservice cross-connects and multiservice access platforms serve applications across the network infrastructure, from multiservice access and regional backhaul to the optical core. It also develops and markets a mobile broadband optimization solution for mobile operators to reduce congestion in mobile access networks. The Company’s products serve two market areas within the networking industry, bandwidth management and mobile broadband optimization."

Corvex & Soroban Add To Williams Companies Position

Keith Meister's activist hedge fund Corvex Management and Eric Mandelblatt's Soroban Capital have filed an amended 13D with the SEC regarding their position in Williams Companies (WMB).  Per the filing, the hedge funds have disclosed they now own 6.74% of WMB with over 46 million shares.

The filing indicates their latest activity was on January 9th, 2014 and this stake is up from the previous 5% of the company they owned.  We initially highlighted when these hedge funds went activist on Williams last month.

Keep in mind, however, that their position disclosure is not inclusive of cash-settled swaps and options which reference an additional 21.3 million shares.  If you add in this exposure, they would own 9.86% of the company.

Per Google Finance, Williams Companies 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. Its 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. Its interstate gas pipeline and domestic midstream interests are held through its investment in Williams Partners L.P. (WPZ). It owns the general-partner interest and a 70% limited-partner interest in WPZ. Williams also owns a Canadian midstream and domestic olefins production business, which processes oil sands off-gas and produces olefins for petrochemical feedstocks."

Avenue Capital Discloses Punch Taverns Position

Marc Lasry's Avenue European Management hedge fund has been building a stake in London listed pub company Punch Taverns (LON:PUB). 

Due to trading on the 6th and 10th of January, Avenue now own the equivalent of 8.29% of Punch Taverns' voting rights, all via contracts for difference/derivatives.

Avenue know the company well as Lasry mentioned in an NYT interview in 2012 that they held a position in Punch's debt.

Larry Robbins' Glenview Capital Management are Punch Taverns' largest shareholder with an 18.77% stake which they have held for over five years.

Per Google Finance – “Punch Taverns plc is a United Kingdom-based pub company. The Company is  engaged in the operation of public houses under either the leased model or as directly managed by   the Company. The Company operates in two business segments: punch partnerships, a leased estate   and punch pub company, a managed estate. Punch Partnerships is the Company’s leased division,   comprising 5,967 pubs nationwide. Punch Pub Company is its managed division, comprising 803   pubs nationwide. The leased model involves the granting of leases to tenants who operate the pub   as their own business, paying rent to the Company, purchasing beer and other drinks from it and   entering into profit sharing arrangements for income from leisure machines. Pubs that are directly   managed involve the employment of a manager to operate each managed pub.

Lone Pine Capital Adds to Wyndham Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding their position in Wyndham Worldwide (WYN).  Per the filing, Lone Pine now owns 5.2% of WYN with over 6.77 million shares.

The filing indicates they've purchased over 1.06 million shares since the end of the third quarter and the 13G was filed due to portfolio activity on January 2nd, 2014.

Per Google Finance, Wyndham Worldwide is "a hospitality company. The Company offers individual consumers and business customers an array of hospitality services and products across various accommodation alternatives and price ranges through its portfolio of brands. It operates in three segments of the hospitality industry: lodging, vacation exchange and rentals and vacation ownership. Its brands include Wyndham Hotels and Resorts, Tryp by Wyndham, Ramada, Days Inn, Super 8, Landal GreenParks, Novasol, Hoseasons, cottages4you, James Villa Holidays, ResortQuest by Wyndham Vacation Rentals, The Resort Company by Wyndham Vacation Rentals, Wyndham Vacation Resorts and WorldMark by Wyndham."

For more portfolio activity from Lone Pine, click here.

Monday, January 13, 2014

NYU Stern Evaluation Investment Newsletter: Roderick Wong, Aswath Damodaran, James Rosenwald & More

Today we wanted to share the inaugural issue of NYU Stern's student-run investment newsletter: Evaluation.  It features interviews with Professor Aswath Damodaran (whose work we've linked to many times), James Rosenwald of Dalton Investments, as well as Roderick Wong of RTW Investments, among others.

This newsletter differs from others in that it is geared toward those early on in their careers or those looking to get into investing/research.

The interviews in this first issue take you inside the lives of established portfolio managers, young buyside alumnus, young sell-side alumnus, and academics. 

Lastly, it also features two investment pitches from students: long Charter Communcations (CHTR) and short Peugeot (ENXTPA:UG).

Embedded below is NYU Stern's inaugural student newsletter:


Baupost Group Starts Kindred Biosciences Stake, Trims Enzon Pharmaceuticals Position

Seth Klarman's investment firm Baupost Group has filed 2 separate 13G's with the SEC.

Discloses New Position in Kindred Biosciences (KIN)

Baupost has disclosed a brand new stake in Kindred Biosciences (KIN).  Per the SEC filing, the firm now owns 17.93% of the company with 2.9 million shares.  The filing was required due to portfolio activity on December 31st.  Shares of KIN just started trading in December.

Per Google Finance, Kindred Biosciences is "a development-stage biopharmaceutical company. The Company focused on pets. In addition, it has seven other product candidates, including several biologics, in various stages of development. The Company’s product candidates are CereKin for the treatment of osteoarthritis pain and inflammation in dogs, AtoKin for the treatment of atopic dermatitis in dogs, and SentiKin for the treatment of post-operative pain in dogs. All of these product candidates, if approved, would be first-in-class drugs in the pet therapeutic market. The Company’s product pipeline consists of small molecules and biologics in various stages of development for a range of indications in dogs, cats and horses. Small molecules are generally chemical compounds administered orally and biologics are generally proteins and vaccines administered by injection."

Trims Enzon Pharmaceuticals (ENZN) Stake

The hedge fund also filed an amended 13G on Enzon Pharmaceuticals (ENZN) and disclosed they've sold over 3.35 million shares recently.  The filing was required due to activity on December 31st.  After these sales, Baupost still owns 9.84% of ENZN with over 4.33 million shares.

Per Google Finance, Enzon Pharmaceuticals is "a biotechnology company. The Company’s drug development programs utilize two platforms: Customized PEGylation Linker Technology (Customized Linker Technology) and third-generation messenger ribonucleic acid (mRNA) antagonists utilizing the Locked Nucleic Acid (LNA) technology. The Company has four compounds in human clinical development, a PEGylated version of the active metabolite of the cancer drug, irinotecan, PEG-SN38, and mRNA antagonists Survivin and the Androgen Receptor (AR). In addition, it has mRNA antagonist targets in various stages of preclinical research. The Company receives royalty revenues from licensing arrangements with other companies related to sales of products developed using its Customized Linker Technology-PEGINTRON. It is also using LNA technology to develop mRNA antagonists against oncology targets."

While it's always interesting to monitor Baupost's equity activities, keep in mind that their long equity book is only a small portion of their large overall assets under management (AUM).  For more on this hedge fund, we've posted up some of Baupost's other portfolio activity here.