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

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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.

Cyber Monday Sale: 33% Off!

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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: (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.