Friday, March 6, 2015

What We're Reading ~ Hedge Fund Links 3/6/15

Baupost Group on risk management and hedging [ValueWalk]

Hedge funds failing to meet investor expectations, report finds [WSJ]

Which hedge funds investors love - and hate [CNBC]

With correlations so high, why are hedge funds underperforming? [ValueWalk]

Hurdle rate should apply to hedge fund industry as it does in private equity [FT]

Activist investors' success owes much to wider bull run [FT]

Biggest hedge fund run by a woman emerges after Braga spinoff [SwissInfo]

Latest hedge fund strategy to seek higher returns has hit speed bumps [NYTimes]

Hedge funds betting billions on corporate marriages [Forbes]

The strange death of fund of hedge funds [Citywire]

Dan Loeb bets on future Geico of Greece [CNBC]

Loeb sees disappointment for funds seeking energy distress [Bloomberg]

Some stock picks from Locust Wood's Errico [Bloomberg]

Following your boss to his new hedge fund? Think twice [eFinancialCareers]

Hedge funds monetizing by selling stakes to institutional investors [ValueWalk]

Marriage hurts a hedge fund manager more than divorce [CNNMoney]

Wednesday, March 4, 2015

What We're Reading ~ Analytical Links 3/4/15

12 things learned about investing from Howard Marks [25iq]

Feeling certain and other mistakes that trip up investors [WSJ]

What mistakes investors make and what they learned from it [EndlessriseInvestor]

Why don't we make good investment decisions? [Irrelevant Investor]

Warren Buffett on his early mistakes [Business Insider]

A look at Constellation Software [Value Venture]

A pitch on Cable and Wireless Communications [Scribd]

When will the US have its next recession? [Wealth of Common Sense]

Yahoo's incredible shrinking profitability in its core business [Forbes]

Altice's savvy playbook fuels rapid growth [FT]

Netflix and Google's plan to break out of Equinix's gilded cages [Data Center Knowledge]

Viewers don't add up to profit for YouTube [WSJ]

Is innovation more about people or process? [HBR]

Tuesday, March 3, 2015

Discount to the London Value Investor Conference 2015


Market Folly has secured a limited number of discounted tickets to the forthcoming London Value Investor Conference 2015, which takes place on 20th May.  This Conference is the largest gathering of Value Investors in Europe and has some of the world's leading investors speaking, including such well-known names as Neil Woodford, Charles Brandes, Jonathan Ruffer, and Dato' Cheah Cheng Hye.  It is also a showcase for less well known and smaller firms.

The speakers will provide valuable insights into the methods and approaches that have made them successful, comment on the current investment climate and offer specific investment ideas.  A key feature of the conference is the 10-15 minutes dedicated to audience Q&A for each speaker, led by Richard Oldfield and David Shapiro.

As part of their presentation, the speakers will give a current investment idea.

In order to claim your special £120 discount on this conference, please use the code "MARKETFOLLY-MARCH-DISCOUNT"

Offer expires March 31st, 2015

Lessons From a Dozen Years of Short Selling

Many investors have called short selling one of the most difficult things to do in finance.  There's potential for unlimited losses, the position sizes get smaller if you're right, and you're constantly going against the crowd and battling waves of optimism.

Kase Capital's Whitney Tilson has put together a presentation entitled, "Lessons From a Dozen Years of Short Selling" that he delivered at Columbia Business School.

In it, he presents both sides of the argument, listing 12 reasons not to short and then 10 reasons to short.

In a recent interview, Tiger Management's Julian Robertson said that it's hard to run a hedged portfolio in a market that seemingly only wants to go up.  But even in an ever-rising market, there will always be frauds and fads, and more often than not, that's what short sellers target.

Embedded below is the full presentation on shorting.

You can download a .pdf copy here

For more on the subject, we've also posted up another hedge fund manager's take on short selling.

Jeff Vinik Says Market Not In A Bubble

Jeff Vinik, formerly the portfolio manager of Fidelity's Magellan Fund, recently appeared on CNBC to talk markets.

In the interview, he said that the market's not in a bubble right now, but did acknowledge there's pockets of overvaluation (though nothing like the 1990s.)

Vinik said that, "The economy looks just fine going forward.  It's a good time to be invested ... The economy is cyclical.  The stock market is cyclical.  There will be downturns ... But if you have good companies with strong managements, earnings will grow over time and stock prices will grow."

He said he's a big believer in buy and hold for the long-term.

He also noted his bullishness on the city of Tampa as he lives there now and is working on real estate development and he's the owner of the NHL's Tampa Bay Lightning.  He invited hedge funds to join him down there.

Monday, March 2, 2015

Stan Druckenmiller on Markets, The Fed, & Which Investors He Admires Most

Stanley Druckenmiller, a legendary hedge fund manager (formerly of Duquesne Capital), was interviewed by Kelly Evans on CNBC today and shared his thoughts on the markets and other topics.  Here's some of the key takeaways: 

On the current US markets:  "By historic, fundamental measures, we are extremely high.  Stock market to GDP, which I know is one of Mr. Buffett's favorite measures is probably the highest its been in the last hundred years with an eight month exception around the 1999-2000 period."

He also points to the strong dollar as a headwind for earnings.  He thinks stocks are high by historical measures, but the monetary policy has been so aggressive that they should be high.  He says you should short bonds, not stocks if you think interest rates are going up.

Lastly, he mentioned, "I have positions in the United States, but net-net because of the valuations we talked about and because I'm encouraged by what I'm hearing out of the Fed in terms of them tightening, I'm not all that excited about the U.S."

On the Fed:  He thinks it'd be great if the Fed acts now because he believes there's higher risk in the US economy by acting later.

On which investors he admires most:  He singled out "three lions" he thinks that are talented younger investors who will be considered great one day:  Zach Schreiber at Point State Capital (used to work with Druckenmiller at Duquesne), Chase Coleman at Tiger Global, and Eric Mandelblatt at Soroban Capital (all of which Market Folly covers.) 

On his thoughts on IBM:  He disagrees with Warren Buffett and quoted him saying, "An investor should never let someone else's opinion drive their decision in stocks."  Buffett thinks IBM's problem is cyclical, whereas Druckenmiller thinks its secular.

On foreign markets & positions:  "I just think Europe and Japan are much, much more attractive ... The majority of my long exposure is in Japan and Europe, not in the United States ... You know, a few months ago we started buying the-- I would say global consumer brands who are primarily stable in nature like-- Unilever or Pernod Ricard or L'OrĂ©al. But recently we've shifted into more cyclical names like Volkswagen, BMW, Airbus. When you get the-- you get the tailwind of-- the euro having gone from 140 to 120, which will give them an earnings push in addition at a lower energy. And they are great consumer brand names in and of themselves."

You can read the full transcript of the interview here.

Warren Buffett's Annual Letter: 2014 Berkshire Hathaway Report

Over the weekend, Warren Buffett released his annual letter in Berkshire Hathaway's 2014 annual report.  This is often labeled a 'must read' by investors. 

This letter is somewhat of a 'special edition' in that both Buffett and Charlie Munger give their thoughts on Berkshire over its 50 year history.

It should also be pointed out that Buffett mentions Fred Schwed's book, Where Are The Customers' Yachts: or a Good Hard Look at Wall Street in this letter, so that's probably worth checking out as well.  (You can find the rest of Buffett's recommended reads here.)

Embedded below is Warren Buffett's annual letter for 2014:

You can download a .pdf copy here.

JANA Partners Increases Computer Sciences Stake

Barry Rosenstein's activist hedge fund JANA Partners has filed a 13D on shares of Computer Sciences (CSC).  Per the filing, JANA now owns 5.9% of the company with 8.37 million shares.

JANA has increased its position size by over 5.6 million shares since the end of 2014.  The filing was made due to activity on February 11th.

The filing also notes that JANA has talked with the company about its strategic alternatives.  Over the past six months, various media outlets have suggested the company could be in talks to sell itself to either private equity and/or a foreign company.

We've detailed additional recent portfolio activity from JANA Partners here.

Per Google Finance, Computer Sciences is "a provider of information technology (IT) and professional services and solutions. The Company’s clients include commercial enterprises and the United States federal government, as well as state, local and non-United States government agencies. It has operations throughout North America, Europe, Asia and Australia. The Company operates in three business segments: Global Business Services (GBS), Global Infrastructure Services (GIS), and North American Public Sector (NPS). GBS provides technology solutions including consulting, applications services, and software. GIS provides managed and virtual desktop solutions, unified communications and collaboration services, data center management, cyber security, compute and managed storage solutions. NPS delivers IT, mission, and operations-related services to the Department of Defense, civil agencies of the United States federal government, as well as other foreign, state and local government agencies."