Friday, January 24, 2014

What We're Reading ~ Hedge Fund Links 1/24/14

Where were the best performing hedge funds in 2013? [ai-cio]

JANA Partners targets Juniper, plans to close Nirvana Fund [II Alpha]

Tiger Global snaps up Alibaba shares at lofty valuation [USA Today]

A look at Joshua Resnick's Jericho Capital [II Alpha]

The world's biggest hedge fund had a pretty bad year [NYMag]

Michael Steinhardt is back and he's re-inventing investing again [Forbes]

A look at how Bruce Berkowitz's new hedge fund is doing [CNBC]

Why Bill Fleckenstein is (almost) ready to short stocks [Bloomberg]

For the love of the money [NYTimes]

The 13F spotlight: revealing and concealing hedge fund trades [FINalternatives]

Thursday, January 23, 2014

Corsair Capital's Thesis on Alere (ALR): Q4 Letter

Jay Petschek and Steven Major's hedge fund Corsair Capital pitched Alere (ALR) in their Q4 letter.  They feel that the market still has a negative view toward the company despite numerous changes happening.

The company is involved with medical diagnostics and has a huge market share in 'point-of-care rapid tests used in hospitals, clinics and doctors' offices.'

Over the last ten years, the company went on an acquisition binge and basically failed to integrate them properly.  A proxy contest in 2013 led to changes and the company hired Namal Nawana from Johnson & Johnson as COO to change the culture and reduce costs.

Corsair thinks ALR is worth between $70-80 per share if it trades with a multiple in-line with other competitors.  ALR trades around $37 today.

They also note, "Furthermore, if the market doesn't come around and value this business properly, we wouldn't be surprised if, after restructuring the company, (the CEO) looks to sell the company as he did with IMA back in 2001."

Embedded below is Corsair Capital's Q4 letter with their pitch on Alere (ALR):

If you missed it, we've posted up Corsair's past letters as well.

Carl Icahn Pushes For eBay To Spinoff PayPal; Buys More Apple

Activist investor Carl Icahn has been busy yet again.  Firstly, he has disclosed a new position in eBay (EBAY) and he's pushing for the company to spin-off its fast growing PayPal segment.

This is not a new idea.  Plenty of analysts, sell-siders, and portfolio managers have voiced this sentiment before.  However, this might be the first time that a prominent activist has gotten involved and actually tried to make it happen.

Icahn's New eBay Stake

Icahn only owns 0.82% of the company and it looks like his activist push might already be dead on arrival.

Yesterday during eBay's earnings presentation, the company had one specific slide that highlighted why eBay and PayPal should remain together (seen here).

Then today, eBay's Chairman Pierre Omidyar (who owns 8% of the company) tweeted that he and the board were "fully aligned" that eBay and PayPal are best together.  Marc Andreessen tweeted the same.

As such, if Icahn wants to truly push for change, he'll perhaps need to drastically ramp up his ownership stake.  But as some investors have pointed out, perhaps his campaign has been more about awareness than activism.

Talking to Bloomberg, Icahn said he wants to get the word out to shareholders and if he can maybe get 51% of the shareholders to vote that they want it to happen, then maybe the board will take notice.  He did, however, acknowledge that it would be "difficult to convince management." He's also nominated two of his employees to eBay's board.

The video of Icahn's interview is embedded below:

Icahn Buys More Apple

The corporate activist also disclosed activity in another position of his.  This time, he took to Twitter to disclose that he had purchased $500 million more shares of Apple.  Icahn now owns over $3 billion worth of AAPL.

Icahn says that, "We feel (Apple's) board is doing great disservice to shareholders by not having markedly increased its buyback.  In-depth letter to follow soon."

Lee Cooperman Updates Position in Harbinger Group

Lee Cooperman of Omega Advisors has filed a 13G with the SEC regarding his position in Harbinger Group (HRG).

Omega Advisors previously held a stake in Harbinger Group as of the end of the third quarter.  Back then, they owned 6.5 million shares. 

Omega's 13G filed today seems to be updating that stake.  The filing indicates that as of September 26th, the hedge fund firm actually owned 7.6 million shares, or 5.3% of the company. 

Keep in mind that Harbinger Group's Chairman is fellow hedgie Phil Falcone of Harbinger Capital.

Per Google Finance, Harbinger Group is "a holding company. The Company's operations are conducted through Spectrum Brands, the Company's subsidiary, which provides branded consumer products, such as batteries, personal care products, small household appliances, pet supplies, and home and garden pest control products, and Fidelity & Guaranty Life Holdings, Inc. (FGL), its wholly owned indirect subsidiary, which provides life insurance and annuity products. In addition, Salus Capital Partners, LLC (Salus), the Company's wholly owned indirect subsidiary, is engaged in the business of providing secured asset-based loans across a range of industries, and Front Street Re Ltd (Front Street), its wholly owned indirect subsidiary provide reinsurance to the specialty insurance sector of fixed, deferred and payout annuities. The Company also own 97.9% of Zap.Com Corporation (Zap.Com)."

You can see some of Cooperman's more recent stock picks here from an interview.

Senator Investment Group Discloses Trade Street Residential Stake

Doug Silverman and Alex Klabin's hedge fund Senator Investment Group has filed a 13D and Form 3 with the SEC regarding their position in Trade Street Residential (TSRE).

This is a newly disclosed position for the hedge fund and they now own 25.6% of the company with over 9.3 million shares.  The filing was made due to activity on January 16th.

The fine print of the 13D indicates that Senator entered into a Standby Purchase Agreement (on November 12th, 2013) where they would purchase all of the unsubscribed shares of common stock in the issuer's $100 million rights offering to existing shareholders.

Senator also nominated one of their employees to the board of the company.

Per Google Finance, Trade Street Residential is "a full service, vertically integrated, self-administered and self-managed corporation focused on acquiring, owning, operating and managing garden-style and mid-rise apartment communities in mid-sized cities and suburban submarkets primarily in the southeastern United States, including Texas."

You can view some of Senator's past portfolio activity here.

Wednesday, January 22, 2014

What We're Reading ~ Analytical Links 1/22/14

Trading in the Zone: Maximizing Performance with Focus and Discipline [Ari Kiev]

On the 180 rule and shorting stocks [Dasan]

The bull case on Delta Airlines [SPBaines]

Shinzo Abe on Abenomics 2014 [Reformed Broker]

On why EV/EBITDA is the most effective measure [Greenbackd]

Expert argues now is the time to invest in Europe [FINalternatives]

On the correlation between returns and ridicule [AVC]

Where to find the biggest ideas for your business [Forbes]

Retail store traffic has fallen & may just stay that way [WSJ]

Old Warren Buffett article: the security I like best [Base Hit Investing]

The complete history of Warren Buffett [Dividend]

Report on food and beverage industry in Latin America [ECLAC]

Why Bitcoin matters [Marc Andreessen]

Warren Buffett will give you $1 billion if you fill out a perfect March Madness Bracket [BI]

Greenlight Capital's Q4 Letter: New Positions in Micron, BP, & Anadarko Petroleum

David Einhorn's hedge fund Greenlight Capital returned 19.1% net in 2013.  Greenlight's fourth quarter letter to investors unveils their thesis on new positions in Micron Technology (MU), BP (BP), and Anadarko Petroleum (APC).

Greenlight likes Micron because the industry has started to act a bit more rationally and MU will buyback shares instead of building new factories.

Their BP stake is a play on increasingly shareholder friendly capital allocation policies as well and they think the company is worth $70 per share (it trades around $49 now).  

Additionally, their letter talks about some positions they've closed recently like Airbus Group (formerly EADS), and ThyssenKrupp.

At the end of 2013, Greenlight's largest positions in alphabetical order were: Apple (AAPL), General Motors (GM), Marvell Technology (MRVL), Micron (MU), and Vodafone (VOD).

Thanks to ValueWalk who posted up Greenlight's Q4 letter and you can view it below:

For more on Einhorn, we just yesterday revealed some more of Greenlight's recent portfolio activity.

And for more year-end hedge fund letters, head to Third Point's Q4 letter here.

Lone Pine Capital Starts SBA Communications Position

Steve Mandel's hedge fund firm Lone Pine Capital has disclosed a brand new position in SBA Communications (SBAC).  They filed a 13G with the SEC indicating they own 6.4% of the company with almost 8.2 million shares. The filing was required due to portfolio activity on January 8th.

While this is a new stake, they've had exposure to the wireless tower stock play via their position in Crown Castle International (CCI). 

Their new SBAC position, however, is much larger and it's a bit curious that they would all of a sudden initiate their position now.  The thesis and valuation has largely been unchanged.  

It's also worth highlighting though that SBAC has been a longstanding top position for hedge fund White Elm Capital.  White Elm was founded by Matthew Iorio and before launching his own fund, he worked at Lone Pine.

While the bull case on tower stocks has been a play on the proliferation of wireless data usage, the bear case seemingly hinges on a potential rising interest rate environment and potential consolidation in the wireless carriers.

Per Google Finance, SBA Communications is "an independent owner and operator of wireless communications towers. The Company’s principal operations are in the United States and its territories."

We recently detailed some of Lone Pine's other portfolio activity here.

Tuesday, January 21, 2014

Third Point Q4 Letter: New Positions in Dow Chemical & T-Mobile

Dan Loeb's Third Point Offshore Fund is out with its fourth quarter 2013 letter.  In it, they reveal performance of 25.2% for the year.

Third Point's Q4 letter outlines their thesis on Dow Chemical (DOW), now their largest position.  They want the company to look into potentially spinning off its petrochemical business and to return capital to shareholders via buyback.

They also detail their thoughts on Ally Financial, a position they've been involved with since 2011 via various plays in the capital structure.  They look for the company to complete an IPO after undergoing a massive restructuring.

Lastly, the hedge fund highlights their thesis on Softbank, Sony (SNE) and T-Mobile (TMUS).  The latter is a brand new position they established during the company's secondary offering at $25 in November.

Embedded below is Third Point's year-end investor letter:

For more on this hedgie, we've also highlighted Third Point's other activity here.

Greenlight Capital Adds to Cairn Energy Stake

David Einhorn's hedge fund Greenlight Capital has added to its stake in London-listed oil and gas exploration company Cairn Energy (LON:CNE). 

Due to trading on January 16th, Greenlight increased their stake from 3% to 4.22% of Cairn's voting rights.  Approximately 20% is held via a total return swap, while the rest is held via common stock.

This stock has largely traded sideways since Greenlight first disclosed a holding in Cairn back in March of 2012.

Per Google Finance, Cairn Energy PLC (Cairn) is "an independent oil and gas exploration and production company. It is organized into two business units: Capricorn Group, being Capricorn Oil Limited and its subsidiary undertakings, and the Cairn India Group. There are two operating segments. Cairn India Limited Group’s operations are primarily within India."

For more on this hedge fund, you can view our previous updates on Greenlight Capital here.

Children's Investment Fund Trims Royal Mail Stake

Christopher Hohn's Children's Investment Fund has recently sized down its holdings of Royal Mail.  Previously, they owned 5.8% and now they own just under 4.6%.  They've sold around 12 million shares.

Royal Mail went public late last year and soared higher.  Children's Investment Fund was a big beneficiary as they were the largest shareholder. 

As such, it looks like Hohn's fund has locked in some profits.  According to fund documents, the firm returned well over 40% in 2013, with Royal Mail obviously contributing to those gains.