Friday, August 8, 2014

What We're Reading ~ Hedge Fund Links 8/8/14

Marcato adds to pressure on InterContinental Hotels [Dealbook]

Soros no longer holds shares of SodaStream [Bloomberg]

Loeb sees decisive economic data spurring Fed action [Bloomberg]

Miura Global closes to new investors [II Alpha]

Once flashy, hedge funds now seen as staid but consistent [Dealbook]

Summertime loving isn't easy for macro funds [WSJ]

Dan Och's hedge fund is getting really big [Forbes]

Hedge funds amass short positions in private equity-backed IPOs [FT]

Building a sustainable hedge fund model [CSen]

Renaissance drops with Paulson in July [Bloomberg]

Obama versus hedge funds - a real fight or professional wrestling? [Forbes]

Viking Global Reveals Newfield Exploration Position

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G on shares of Newfield Exploration (NFX).  The hedge fund now owns 5.7% of the company with over 7.78 million shares.

This is a brand new position for Viking and the filing was required due to activity on July 28th.

Per Google Finance, Newfield Exploration is "an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. The Company’s domestic areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas. Internationally, it focuses on offshore oil developments in Malaysia and China."

Thursday, August 7, 2014

What We're Reading ~ Analytical Links 8/7/14

The World's 99 Greatest Investors: The Secret of Success [Magnus Angenfelt]

Interview with Michael Mauboussin [Bloomberg]

On finding large gaps between price and value [Base Hit Investing]

In search of the world's best investment advice [AFR]

A look at Lancashire Holdings [WertArt Capital]

Is TJ Maxx the best retail store in the land? [Fortune]

Shoppers are fleeing physical stores for the web [WSJ]

Does Valeant's cost cutting go too far? [Pro Publica]

How AMC Networks could benefit from the urge to merge in TV [QZ]

Sprint drops bid to buy T-Mobile after regulatory resistance [Reuters]

Dish chairman says bid for T-Mobile possible now that Sprint backs off [Reuters]

ValueAct Capital Discloses Armstrong World Industries Position

Jeff Ubben's hedge fund firm ValueAct Capital has filed a Form 4 with the SEC regarding shares of Armstrong World Industries (AWI).  Per the filing, ValueAct has revealed they own 9,2000,000 shares of AWI.

The filing indicates that between July 29th and July 31st, ValueAct bought cumulatively 1 million shares at prices ranging from $48.73 to $49.28.  Shares of AWI were not listed on ValueAct's last 13F filing which detailed holdings as of the first quarter of 2014.  As such, it appears this is a newly disclosed position.

ValueAct is now one of the largest holders of AWI shares.  For more from this hedge fund, head to Jeff Ubben on activist investing.

Per Google Finance, Armstrong World Industries is "a global producer of flooring products and ceiling systems for use in the construction and renovation of residential, commercial and institutional buildings. The Company designs, manufactures and sells flooring products (resilient and wood) and ceiling systems (mineral fiber, fiberglass and metal) globally. The Company segments includes: Building Products, Resilient Flooring and Wood Flooring. The Company’s Building Products, Resilient Flooring, Wood Flooring and Cabinets segments sell products for use in the home. Its products are used in new home construction and existing home renovation work. Its products, primarily ceilings and Resilient Flooring, are used in commercial and institutional buildings."

Paulson & Co Boosts Mallinckrodt Stake Again

John Paulson's hedge fund firm Paulson & Co has filed a Form 4 with the SEC regarding their stake in Mallinckrodt (MNK).  Per the filing, Paulson bought 200,000 MNK shares at $69.6507 on July 31st and 75,000 shares at $69.4541 on August 1st.

After these buys, Paulson & Co now owns 6,999,800 shares of Mallinckrodt. As we've detailed previously, Paulson has been buying MNK repeatedly after they received an option to increase their stake to 20% of the company.

Mallinckrodt has announced an agreement to acquire the controversial Questcor Pharma (QCOR), which has been a favorite short play of many hedge funds.  While Barry Rosenstein's JANA Partners has owned MNK as well, David Einhorn's Greenlight Capital recently revealed in their Q2 letter that they would like to be short the combined entity, primarily due to QCOR.

Per Google Finance, Mallinckrodt is "a global specialty pharmaceuticals company. The Company develops, manufactures, markets and distributes both branded and generic specialty pharmaceuticals, active pharmaceutical ingredients (API) and diagnostic imaging agents. The Company uses its API products in the manufacture of its generic pharmaceuticals and also sells them to other pharmaceutical companies. The Company operates through two segments: Specialty Pharmaceuticals and Global Medical Imaging."

Second Curve Capital Raises Regional Management Stake

Tom Brown's hedge fund firm Second Curve Capital has filed an amended 13G with the SEC regarding their position in Regional Management (RM).  Per the filing, Second Curve now owns 10% of the company with 1,273,960 shares.

This marks an increase of 188,000 shares since the end of the first quarter.  The filing was made due to activity on July 7th.

Per Google Finance, Regional Management is "a diversified specialty consumer finance company providing a range of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders. The Company has a branch network throughout the Southeast and Southwestern United States. Each of its loan products is secured, structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional’s loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, furniture and appliance retailers and its consumer Website."

Monday, August 4, 2014

Berkshire Hathaway Increases Verisign Position

Warren Buffett's Berkshire Hathaway has filed an amended 13G with the SEC.  Per the filing, Berkshire Hathaway no owns 10.4% of the company with 12,985,000 shares.

This marks an increase of over 1.29 million shares since the end of the first quarter.  The filing was made due to activity on July 31st.

This investment was likely originally made by Buffett's newest portfolio managers: Todd Combs and Ted Weschler.  Since they've joined, Berkshire has accumulated shares.  Thus far this year, VRSN has slipped from $62.95 down to a low of $46.45 before rebounding slightly to current levels of $54.84.

Verisign has been hit with a bit of uncertainty as news came out earlier in the year that the US Department of Commerce will relinquish control of ICANN.

Per Google Finance, Verisign "is a provider of Internet infrastructure services. The Company provides network confidence and availability for mission-critical Internet services, such as domain name registry services and infrastructure assurance services. Its service capabilities enable real-time name resolution for a number of global top level domains (TLDs), enable domain name registration through registrars, and provide security intelligence and cloud-based network availability services to enterprise customers. It has one reportable segment is Naming Services, which consists of Registry Services and Network Intelligence and Availability (NIA) Services. It has operations inside as well as outside the United States (U.S.). Registry Services operates the authoritative directory of all .com, .net, .cc, .tv, and .name domain names and the back-end systems for all .gov, .jobs and .edu domain names."

For more, check out notes from Berkshire Hathaway's annual meeting as well as Warren Buffett's annual letter.

Bridger Capital Discloses ChannelAdvisor Stake

Roberto Mignone's hedge fund Bridger Capital has filed a 13G with the SEC regarding shares of ChannelAdvisor (ECOM). Per the filing, Bridger has disclosed they own 6.8% of the company with 1,670,993 shares.

This is a newly disclosed equity stake and the filing was made due to activity on July 22nd.  You can view other portfolio activity from Bridger this year here.

Per Google Finance, ChannelAdvisor is "a provider of software-as-a-service, or SaaS, solutions that enables retailers and manufacturer customers to integrate, manage and optimize their merchandise sales across hundreds of online channels. Through the Company’s platform, the Company enables its customers to connect with new and existing sources of demand for their products, including e-commerce marketplaces, such as eBay, Amazon and Newegg, search engines and comparison shopping websites, such as Google, Microsoft’s Bing, and Nextag, and emerging channels, such as Facebook and Groupon."

JANA Partners Again Calls For PetSmart To Explore A Sale

Barry Rosenstein's hedge fund JANA Partners has filed an amended 13D with the SEC regarding their activist position in PetSmart (PETM).  Per the filing, JANA has sent an additional letter to the board, urging them to explore a sale of the company.  You can view the first letter JANA sent here

Below is the second letter Rosenstein has sent:

"August 4, 2014  
Board of Directors
PetSmart, Inc.
19601 North 27th Avenue
Phoenix, Arizona 85027
Attention: David K. Lenhardt, President and Chief Executive Officer  

Ladies and Gentlemen,  

As you know, JANA Partners LLC (“we” or “us”) and other shareholders have called upon PetSmart, Inc. (“PetSmart” or the “Company”) to conduct a review of all strategic alternatives including a sale of the Company. Given PetSmart’s chronic operational underperformance and failure to generate shareholder value, and given significant interest in an acquisition of the Company, it is very likely that such a sale offers the best risk-adjusted return for shareholders. It is becoming clear, however, that rather than fully exploring all potential opportunities, the board of directors (the “Board”) is attempting to prejudice the ultimate outcome of any such strategic review by steering it away from the most likely path to maximum value creation for shareholders.  

First, it appears that PetSmart has sought to create the patently false impression that there is a shortage of interested acquirers. In fact, we are aware that there are multiple interested potential acquirers, all of whom could pay shareholders a meaningful premium. This interest is not surprising given the highly attractive fundamentals of the pet store industry, the turnaround opportunity for skilled operators, the robust financing market available to acquirers, and the successful acquisition of Petco Animal Supplies Inc., whose private equity owners have already earned back more than 1.5x their original investment through dividend recapitalizations and seen the value of their investment climb as Petco continues to take share from PetSmart.  

Second, we have learned that the Board continues to float new proposals for alternate transactions, despite publicly conceding last week that it has not yet engaged with potential acquirers. As shareholders have made quite clear, given the magnitude and certainty of value creation that a sale likely offers, any standalone path must be measured against a potential sale, which the Board cannot do without first fully engaging with potential buyers. Should the Board need any reminders of the risks for an underperforming company that turns a blind eye to interested buyers, it need only look at the example of Borders Book Group, which was the subject of acquisition interest during current PetSmart Board Chairman Gregory P. Josefowicz’s tenure as its Chairman and CEO, yet pursued an ultimately value-destroying standalone path instead.            

In short, we warn the Board not to compound the damage that has resulted from years of underperformance by now ruling out the path that likely represents its single highest and most certain value maximization opportunity. We can assure you that shareholders will hold each and every director responsible, including supporting significant change at the next annual meeting, should the Board conduct anything less than a fulsome review of all options including a sale. Should you wish to discuss this matter further, you may reach us at (212) 455-0900.  


/s/ Barry Rosenstein  
Barry Rosenstein
Managing Partner
JANA Partners LLC"