Friday, March 27, 2015

Balyasny Discloses New Stakes in Basic Energy Services & Tetra Technologies

Dmitry Balyasny's investment firm Balyasny Asset Management has filed two separate 13G's with the SEC.

New Stake in Basic Energy Services

First, Balyasny has revealed a brand new equity stake in Basic Energy Services (BAS).  Per their SEC filing, they now own 5.39% of the company with over 2.25 million shares.  The filing was made due to activity on March 18th.

Per Google Finance, Basic Energy Services is "provides a range of well site services to oil and natural gas drilling and producing companies, including completion and remedial services, fluid services, well servicing and contract drilling. The Company’s operations are managed regionally and are concentrated in the United States onshore oil and natural gas producing regions located in Texas, New Mexico, Oklahoma, Arkansas, Kansas, Louisiana, Wyoming, North Dakota, Colorado, Utah, Montana, West Virginia, Kentucky, Ohio and Pennsylvania. Its operations are focused on liquid rich basins that exhibit drilling and production economics as well as natural gas-focused shale plays characterized by prolific reserves and attractive economics."

New Position in Tetra Technologies

Second, the hedge fund firm has disclosed a new equity position in Tetra Technologies (TTI).  This 13G filing indicates they own 5.39% of the company with over 4.29 million shares of the company.   This was due to portfolio activity on March 18th.

Per Google Finance, Tetra Technologies is "is oil and gas services company, focused on completion fluids and other products, production testing, wellhead compression, and selected offshore services including well plugging and abandonment, decommissioning, and diving. The Company also has limited domestic oil and gas production business. The Company operates under five reporting segments organized into three divisions: Fluids, Production Enhancement, and Offshore. The Fluids Division manufactures and markets clear brine fluids, additives, and associated products and services to the oil and gas industry. The Production Enhancement Division consists of two operating segments: Production Testing and Compressor. The Production Testing segment provides after-frac flow back, production well testing, offshore rig cooling, and other associated services.."

You can view additional recent portfolio activity from Balyasny here.

Corvex Management Adds To Signet Jewelers Stake

Keith Meister's activist hedge fund Corvex Management has filed an amended 13D with the SEC regarding its position in Signet Jewelers (SIG).  Per the filing, Corvex now owns 7.2% of SIG with over 5.74 million shares.

They've increased their position size by 235,000 shares.  They were buying sporadically in January, February and early March at prices between $117.40 and $121.68.

Corvex's filing says they commend Signet "for its new capital allocation policy and look forward to continuing to engage in constructive and collaborative conversations."

You can view additional portfolio activity from Corvex here.

Per Google Finance, Signet Jewelers is "a Bermuda-based specialty retail jeweler by sales in the United States and United Kingdom. The Company also has stores in the Republic of Ireland and Channel Islands. It is engaged in the retailing of jewelry, watches and associated services. The business is managed as two geographical operating divisions: the US division and the UK division."

Hedge Fund Links ~ 3/27/15

How the smart money is set up for a Fed rate hike [CNBC]

New funds blast off with best year since 2004 [HF Intelligence]

Omega Advisors receives federal subpoena [CNBC]

Hedge fund manager: it's a 'truly scary time' [CNBC]

Here are the billionaire hedge fund babies of 2014 [CNBC]

Startups are not hot in the rich hedge fund industry [Forbes]

TigerShark to close down [Bloomberg]

For the Clintons, a hedge fund in the family [NYTimes]

Paul Tudor Jones at TED [TED]

Showtime orders new series 'Billions' about a hedge fund manager [CBS]

Thursday, March 26, 2015

Notes From Charlie Munger's Daily Journal Meeting 2015

Charlie Munger's Daily Journal (DJCO) 2015 meeting recently took place.  Alex Rubalcava (@AlexRubalcava) attended and we've aggregated/posted his notes below with permission.

Notes From Charlie Munger's Daily Journal (DJCO) Meeting 2015

Munger on venture capital versus what he does for a living: "It's a really difficult honest way to make a living.  It's not like shooting fish in a barrel, which is how I've made my living."

Software is now a bigger revenue line for DJCO than print and Munger "thinks of it like Jeff Bezos" with its operating losses as it grows.

On the switch from pompous boards to activist investors: "I like the new system even less ... Carl Icahn is a very able man but that doesn't mean he should be running the world."

"I did not succeed in life by intelligence.  I succeeded because I have a long attention span."

"I think that someone my age has lived through the best and easiest period in the history of the world."

Munger referenced The Better Angels of Our Nature by Steven Pinker

"When things are damn near impossible, maybe you should stop trying."

Munger sang the praises of Posco at the meeting and also said that he thinks the moat of American Express (AXP) is less than it once was.

"I think it's very difficult to be a value investor with $200B AUM."

"Other people are trying to act smarter.  I'm just trying to be non-idiotic."

"If the incentives are wrong, the behavior will be wrong.  I guarantee it."

On 3G Capital: "They're teaching us something about reality."

"I don't spend too much time thinking about what is almost certain never to happen."

"The finance industry is 5% rational people and 95% shamans and faith healers."

"A lot of our respected financial institutions are just casinos in drag."

"I don't think anything that any average person can do easily is likely to be worthwhile."

"Before marriage, keep your eyes wide open.  After marriage, keep them half shut."

On how to compete in a service oriented biz: identify things that annoy customers and go down the list and get rid of them

Question about if there are parallels between what's happening in TV with what's happened with newspapers: "I've been a little surprised at how well television has survived, but I'm a little suspicious about the local incumbents."

Munger talked about the Chinese air pollution documentary, "Under the Dome."  He says the ability of P2P communication like that documentary is a cautionary tale for old media.

"Nobody survives open heart surgery better than the guy who didn't need the procedure in the first place."

"Index funds will be permanent owners who can never sell.  That will give them power they are not likely to use well."

If you put a gun to his head and told him he had to buy a tech stock, Munger would pick Google (GOOG)

"Valeant (VRX) is like ITT and Harold Geneen come back to life, only the guy is worse this time."

Munger talked about how Singleton was born smarter than Buffett but Buffett worked harder to learn about investing.

"The way to get rich is to keep $10 million in your checking account in case a good deal comes along."

If you missed it, you can also check out notes from Charlie Munger's Daily Journal meeting last year as well for more wisdom.  Be sure to also read Charlie's letter in the most recent Berkshire Hathaway annual report.

Howard Marks' New Memo on Liquidity

Oaktree Capital's Chairman Howard Marks is out with his latest memo entitled "Liquidity."

Marks outlines the definition of liquidity as the ability to sell something at a price equal or close to the last price.  He also argues that an asset's liquidity can come and go with what's going on in the market. 

He profoundly writes, "In other words, the liquidity of an asset depends on which way you want to go ... and which way everyone else wants to go."

Oaktree's Chairman goes on to write, "The bottom line is unambiguous.  Liquidity can be transient and paradoxical.  It's plentiful when you don't care about it and scarce when you need it most.  Given the way it waxes and wanes, it's dangerous to assume the liquidity that's available in good times will be there when the tide goes out."

Marks also opines about exchange traded funds (ETFs) and liquid alternatives, in an interesting take on how they should be viewed.

Embedded below is Howard Marks' memo on Liquidity:

You can download a .pdf copy here.

If you haven't already, be sure to check out Marks' acclaimed book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor.

Bill Ackman's Pershing Square Annual Report 2014

Bill Ackman's Pershing Square Holdings has released its annual report for 2014.  In it, Ackman highlights how his firm has evolved.  Additionally, he pulls anecdotes from past Pershing Square letters (from inception to the present) to outline their business model, investment strategy, approach to risk management and more.

Embedded below is Pershing Square's 2014 annual report:

You can download a .pdf copy here.

For more on this hedge fund, we posted up some recent portfolio activity from Pershing Square here.

Tiger Global Reduces Bitauto Stake

Chase Coleman and Feroz Dewan's Tiger Global filed an amended 13G with the SEC regarding its position in Bitauto (BITA).  Per the filing, Tiger Global now owns 9.6% of the company with around 6 million shares.

They've reduced their stake by 479,978 shares since the end of the first quarter.  The filing was made due to activity on March 23rd.

Per Google Finance, Bitauto is "a China-based provider of Internet content and marketing services. The Company also distributes its dealer customers’ automobile pricing and promotional information through approximately 600 Internet service provider partners, including Tencent, Netease and Qihoo 360. It operates in four segments advertising business, which offers automakers and dealers a range of advertising services through its Website, and mobile applications; EP platform business, which provides Web-based and mobile-based digital marketing and sales assistant solutions and customer relationship management applications to new automobile dealers in China; business, whichprovides listing services to used automobile dealers which display used automobile inventory information on the Website, mobile applications and digital marketing solutions business, which provides automakers with digital marketing solutions."

You can view other portfolio activity from Tiger Global here.

Wednesday, March 25, 2015

What We're Reading ~ 3/25/15

The psychology of sitting in cash [Wealth of Common Sense]

Problems with "the long-term" [Pragmatic Capitalism]

Discounted cashflow valuations: academic exercise, sales pitch or investor tool? [AD]

25 things learned from Joel Greenblatt about investing [25iq]

The changing and unchanging structure of TV [Stratechery]

Peak cable [Asymco]

The March Madness theory of investing [Bloomberg View]

The world reshaped [The Economist]

Household debt service ratio near record low [Calculated Risk]

The changing state of American fast food [Quartz]

Inside Pinterest, the coming ad colossus that could dwarf Facebook & Twitter [Forbes]

Why this tech bubble is worse than the tech bubble of 2000 [Mark Cuban]

Glenview Capital Q4 Letter on McDonald's, T-Mobile, Auto Dealers & More

Larry Robbins' hedge fund firm, Glenview Capital, is out with its fourth quarter letter to investors. Glenview's Opportunity Fund returned 25.25% net in 2014. 

In the letter, Robbins outlines his thesis on auto dealers (Group 1 Automotive ~ GPI), Flextronics (FLEX), McDonald's (MCD), PHH (PHH), T-Mobile (TMUS), and pharma roll-up plays like Actavis (ACT) and Endo (ENDP).

Glenview's Q4 Letter Takeaways

On McDonald's (MCD):  This is a new stake for Glenview and they feel there's basically 5 ways to make a 'happy meal' to help the company: operational turnaround, SGA rationalization, refranchising, additional leverage, and real estate.  They feel this could trade as high as $169 (currently trades around $99.)

On MCD, Robbins writes, "Fundamentally, McDonald’s has a number of characteristics that we look for in good businesses. Approximately 75% of EBITDA is driven by royalties and rent, which is a secure, stable earnings stream free of operating leverage. Food, in general, is a defensive end market, and McDonald’s positioning at the value end of the spectrum provides further insulation from material cyclicality as evidenced by positive same store sales in the U.S. and positive consolidated EPS growth in every year throughout the last recession."

On T-Mobile (TMUS): Glenview has owned this company since 2013 but bought more shares in December 2014.  They feel the company has a few positive things going for it to continue its growth: aggressively going after new subscribers, deploying spectrum to address new customers, and seeing positive FCF generation this year. 

They also like that the company is a "key strategic asset" and that their parent company Deutsche Telekom is looking to sell.  Glenview feels TMUS could either: try to tie-up with Dish Network and their spectrum, seek a sale to a foreign buyer, or again try to merge with Sprint once a new political administration takes office in 2016.

Embedded below is Glenview's Q4 letter:

For more from this hedge fund, yesterday we posted up some more of Glenview's recent portfolio activity.

Pershing Square Reveals Size of Valeant Investment

Bill Ackman's hedge fund firm Pershing Square Capital Management has filed a 13D with the SEC regarding shares of Valeant Pharmaceuticals (VRX).  Per the filing, Pershing now owns 5.7% of the company with over 19.47 million shares.  The position was assembled via buying common stock and selling put options between February 9th and March 17th.

This is a brand new position for the hedge fund and the filing was made due to activity on March 17th.  We highlighted yesterday how Pershing Square would be participating in VRX's latest offering.  Their ownership percentage above is based on the post-offering amount of shares outstanding.  You can view all of Pershing's recent VRX-related trading activity here.

Based on the number of shares owned, Pershing would be the second largest holder of VRX, behind Ruane Cunniff & Goldfarb (Sequoia Fund) and would hold just slightly more shares than Jeff Ubben's ValueAct Capital.

Pershing's 13D filing also contained the following statement under 'purpose of transaction':

"The Reporting Persons think highly of the Issuer’s management team, strategy, and track record. While the Reporting Persons hold their stake for investment purposes, representatives of the Reporting Persons may continue to conduct discussions from time to time with management of the Issuer, and may conduct discussions with other stockholders of the Issuer or other relevant parties, in each case, relating to matters that may include the strategic plans, strategy, assets, business, financial condition, operations, and capital structure of the Issuer. The Reporting Persons may engage the Issuer, other stockholders of the Issuer or other relevant parties in discussions that may include one or more of the other actions described in subsections (a) through (j) of Item 4 of Schedule 13D. In addition to the foregoing, the Reporting Persons expect to conduct discussions with the Issuer and other relevant parties regarding strategic acquisitions by or joint ventures with the Issuer, or other similar arrangements. These discussions would be exploratory in nature and there is no assurance that they would lead to a definitive transaction."

Per Google Finance, Valeant Pharmaceuticals is "a multinational, specialty pharmaceutical company that develops, manufactures and markets a range of pharmaceutical products."

Farallon Capital Discloses Sky Solar Stake, Adds Board Members At Town Sports

Andrew Spokes' hedge fund firm Farallon Capital has submitted two filings with the SEC recently.

Discloses Sky Solar Stake

First, Farallon filed a 13G regarding shares of Sky Solar (SKYS).  Per the filing, Farallon has disclosed a 7.7% ownership stake in SKYS with 30 million shares.

This is a newly disclosed equity position for the firm and the filing was made due to activity on March 13th.  Sky Solar went public in November 2014.

Per Google Finance, Sky Solar is "independent power producer (IPP) that develops owns and operates solar parks around the world. The Company focuses on the downstream photovoltaic segment of the market."

Adds Board Members At Town Sports International Holdings

Second, Farallon filed an amended 13D with the SEC regarding its stake in Town Sports International Holdings (CLUB).  Per the filing, Farallon now has 2 of the 8 board seats at the company.  Farallon's ownership stake remains unchanged at 16.7% of the company with over 4 million shares.

Per Google Finance, Town Sports is "an owner and operator of fitness clubs in the Northeast and Mid-Atlantic regions of the United States and a fitness club owner and operator in the United States in each case based on the number of clubs. The Company operates 162 fitness clubs under its four regional brand names; New York Sports Clubs (NYSC), Boston Sports Clubs (BSC), Philadelphia Sports Clubs (PSC) and Washington Sports Clubs (WSC)."

Tuesday, March 24, 2015

Glenview Capital Starts Manitowoc Position, Adds To Brookdale Senior Living

Larry Robbins' hedge fund firm Glenview Capital has filed two separate 13G's with the SEC recently:

Starts New Manitowoc Position

First, Glenview has revealed a 6.34% ownership stake in Manitowoc (MTW) with over 8.6 million shares.  This is a brand new position for the firm and the filing was made due to activity on March 11th.

Readers will recall that activist investor Carl Icahn has pushed Manitowoc to split up.

Per Google Finance, Manitowoc is "a multi-industry, capital goods manufacturer. MTW operates in two markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice). Crane is a provider of engineered lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. Foodservice is a manufacturer of commercial foodservice equipment serving the ice, beverage, refrigeration, food-preparation, and cooking needs of restaurants, convenience stores, hotels, healthcare, and institutional applications. Its Crane products are marketed under the Manitowoc, Grove, Potain, National, Shuttlelift, Dongyue, and Crane Care brand names."

Adds To Brookdale Senior Living Stake

Second, Robbins' firm has disclosed a 6.32% ownership stake in Brookdale Senior Living (BKD).  Per the SEC filing, Glenview now owns over 11.59 million shares.

This marks an increase in their position size of over 2.83 million shares since the end of the first quarter.  This filing was made due to portfolio activity on March 12th.

You can view some of Glenview's other recent portfolio activity here.

Per Google Finance, Brookdale Senior Living is "an owner and operator of senior living communities throughout the United States. The Company owns, leases and operates retirement centers, assisted living and dementia-care communities and continuing care retirement centers (CCRCs). The Company has six reportable segments: retirement centers; assisted living; CCRCs – rental; CCRCs – entry fee; Brookdale Ancillary Services; and management services."

Carl Icahn Increases Chesapeake Energy Stake

Activist Investor Carl Icahn has filed an amended 13D with the SEC regarding his stake in Chesapeake Energy (CHK).  Per the filing, Icahn now owns 10.98% of the company with over 73 million shares.

He's increased his position size by 6.6 million shares since the end of the first quarter.  The filing indicates that Icahn was out buying on March 11th at a price of $14.15.

Per Google Finance, Chesapeake Energy is "a producer of natural gas and liquids. The Company’s exploration and production segment is responsible for finding and producing natural gas, oil and natural gas liquids (NGL). The marketing, gathering and compression segment is responsible for marketing, gathering and compression of natural gas, oil and NGL."

You can view some of Icahn's prior portfolio activity here.

Maverick Capital & Odey Out Buying AO World Shares

Lee Ainslie's hedge fund firm, Maverick Capital, has disclosed a holding in London listed online retailer AO World (LON:AO).  Due to trading on March 16th, Maverick hold the equivalent of 3.31% of AO's voting rights via a total return swap.

AO World recently traded around 330p / share and now trades at 182p.  Maverick first disclosed an interest in AO in November 2014 but sold enough shares to go below the 3% disclosure threshold a few weeks later.  You can view other past portfolio activity from Maverick here.

Crispin Odey's firm Odey Asset Management have held AO stock for over a year but due to trading on March 13th, 2015 increased their stake substantially from 5.03% to 10.09%.  About 40% of Odey's holding is held via derivatives.

Per Google Finance, AO World is "an online retailer of domestic appliances. The Company sources, sells and delivers domestic appliances, including washing machines, washer dryers, tumble dryers, dishwashers, refrigerators, freezers, ovens, range cookers and microwaves, as well as a range of small domestic appliances, including vacuums, floor cleaners, coffee machines, mixers and food processors. The Company’s sales activities are focused primarily on sales of appliances through the Company’s branded Websites, principally The Company also offers ancillary services to its AO Website and third-party branded Website customers, including delivery, installation, removal and recycling services and sales of third-party product protection plans."

Bill Ackman Set To Increase Valeant Pharmaceuticals Position

Bill Ackman's hedge fund firm Pershing Square took a passive 4.9% stake in Valeant Pharmaceuticals (VRX) according to a statement on March 9th.  And in more recent news, it looks like Ackman is set to increase that stake further.

Valeant recently announced it would sell around $1.45 billion in new shares to fund its takeover of Salix Pharmaceuticals (SLXP).  On the heels of that news, the Wall Street Journal reported the following: 

"Pershing Square Capital Management LP is buying 3 million shares in the offering worth about $600 million, according to a person familiar with the matter.  That would boost Pershing Square's stake in Valeant to above 5%."

Ackman previously worked with VRX to try and takeover Allergan (AGN).  That bid ultimately failed, and Actavis (ACT) scooped up AGN instead. 

In his effort to combine VRX and AGN, Ackman expressed that Pershing was looking to convert its AGN stake into VRX shares if that acquisition happened.  Since it didn't, Ackman simply went out and bought VRX shares instead, as he clearly likes their roll-up business model.

Pershing Square now joins a long list of other hedge funds as large holders of VRX.  As of the end of 2014, top VRX holders included: Ruane Cunniff & Goldfarb (Sequoia Fund), ValueAct Capital, Viking Global, Lone Pine Capital, Brave Warrior, JANA Partners, Maverick Capital, and Hound Partners, among many others.