Friday, April 24, 2015

Corsair Capital's Q1 Letter & Pitch on Orbital ATK

Jay Petschek and Steven Major's hedge fund firm Corsair Capital is out with its first quarter letter to investors.  In it, they talk about the global macro situation as well as their positions in Ryman Hospitality (RHP), Kindred Healthcare (KND), CommScope (COMM), and Republic Airways (RJET).

Sees IAC Interactive Spin-Off Coming

Additionally, they outline their thoughts on IAC Interactive (IACI).  They feel shares are worth over $100 (currently trading around ~ $72) and see revenue growth via their online dating apps (advertising implementation on Tinder and paid subs on Tinder Plus).  Corsair expects chairman Barry Diller to spin-off the online dating segment (Match Group) in order to unlock value.

Pitch on Orbital ATK

The end of their letter includes a pitch on Orbital ATK (OA).  In summary, Orbital merged with Alliant Techsystems and they see various synergies here.  This, plus increased buybacks and dividends lead them to believe multiple expansion will occur, bringing the company more inline with competitors.  They think shares are worth ~$100 and currently trade around $73. See the letter below for the full pitch.

Corsair's Q1 Letter

Embedded below is Corsair Capital's Q1 2015 letter:

For more from this hedge fund, head to Corsair Capital's recent interview with Graham & Doddsville.

Hedge Fund Links ~ 4/24/15

David Einhorn's presentation from the Grant's conference [ValueWalk]

Hedge fund money going to venture-backed startups is skyrocketing [Yahoo]

Funds and the Freedom of Information Act: the power of the request [ii alpha]

IRS weights rules on hedge fund managers' use of reinsurance [Insurance Journal]

A profile of Ivory's Curtis Macnguyen [Bloomberg]

Eric Schmidt (Google) family office acquires minority stake in D.E. Shaw [PRNewswire]

Hedge funds hawk single-bet deals [WSJ]

A look at Eton Park's latest activity [CNBC]

Orange Capital expresses concern at ACAS [BusinessWire]

There are now more hedge funds than ever [CNBC]

Small hedge funds get bigger share of investors' money [WSJ]

The surprising market response to activist hedge funds [WSJ]

Making sure the hedge fund survives disaster when a general partner is disabled or dies [Forbes]

Carlson Capital Goes Activist on Vitamin Shoppe

Clint Carlson's hedge fund firm Carlson Capital has filed a 13D on their position in Vitamin Shoppe (VSI).  Per the filing, Carlson now owns 5.34% of the company with 1.58 million shares.

Their equity exposure to the name has more than doubled since the end of 2014.  The filing details they've been sporadically buying throughout late March and as late as April 20th.

The 13D also notes they've engaged management in discussions about the business, management, and strategic alternatives/direction.

Per Google Finance, Vitamin Shoppe is "a multi-channel specialty retailer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products (VMS). The Company markets over 900 different brands as well as its own brands, including Vitamin Shoppe, BodyTech, True Athlete, Mytrition and PLNT. It offers varieties of products among VMS retailers with approximately 8,000 stock keeping units (SKUs) offered in its store and approximately 18,000 additional SKUs available through its e-commerce and other direct sales channels. Its product offering enables the Company to provide its customers with a selection of products that is not readily available at other specialty retailers or mass merchants, such as discount stores, supermarkets, drugstores and wholesale clubs. The Company sells its products through two segments: retail and direct. In the Company's direct segment, the Company sells its products directly to consumers through the internet."

Wednesday, April 22, 2015

What We're Reading ~ 4/22/15

The One Hour China Consumer Book [Jeffrey Towson]

A dozen things learned about investing from Lou Simpson [25iq]

3 misconceptions about risk management [Wealth of Common Sense]

15 principles of allocating capital [Beyond Proxy]

Google, Microsoft, stall points and growth [Paul Kedrosky]

Larry Fink's piece "Our Gambling Culture" [McKinsey]

Jeff Gundlach says market hasn't seen full impact of Fed moves [Bloomberg]

Chinese growth is losing altitude, will it be a soft or hard landing? [Economist]

The pricing paradox: when diamonds aren't on tap [Tim Harford]

A look at Sirius XM and the subscription media business [PunchCard]

A pitch on Viacom [BeyondProxy]

Predictions of M&A mania for content companies [Hollywood Reporter]

Time Warner, Viacom back away from Nielsen guarantees for ads [Variety]

The new era of low stock returns [WSJ]

The student loan problem is even worse than figures indicate [WSJ]

Car retailing grabs merger spotlight [WSJ]

Starwood Hotels giving activists reason to check in [Bloomberg]

Tuesday, April 21, 2015

Greenlight Capital Q1 Letter: David Einhorn Cuts Net Exposure In Half

David Einhorn is out with Greenlight Capital's first quarter letter to investors.  Greenlight finished Q1 -1.7% net of fees.  While many investors will care more about Einhorn's equity picks, we think the more noteworthy takeaway is the fact that the hedge fund has cut net exposure in half from 30% down to 14% net long.

Greenlight writes, "Bottom up: short candidates are easy to find ... the opportunity set on the long side is quite constrained.  Top-down: Valuations are on the high side and earnings are in a precarious spot."

Einhorn then touches on the Federal Reserve, noting that, "How fast it tightens should be less important than the fact that it will tighten."

As far as individual equity moves go, Greenlight made the following adjustments: started new positions in AerCap (AER), Chicago Bridge & Iron (CBI), as well as re-entering General Motors (GM) shares.  They sold Aetna (AET), closed shorts in Safeway (SWY), Freescale Semiconductor (FSL), and Lorillard (LO).  However, they started a new short in Reynolds American (which acquired LO.)

Embedded below is Greenlight Capital's Q1 2015 letter with the thesis on their new investments:

Market Strategist Jeff Saut on Activity Versus Inactivity

It's been a long time since we checked in on well known market strategist Jeff Saut.  His latest piece entitled "Activity Versus Inactivity" is a look at a common dilemma for investors.

In it, Saut takes a look at human nature and writes, "Plainly there are times for investors/traders to be active.  But there are also times for them to be inactive, despite the trait of human nature to be 'active;' and, for the past few months inactivity has been the best overall strategy."

Saut then goes on to talk about some market technicals and the latest market datapoints.  They feel crude oil has bottomed and that the stock market, even if it sells off in the near-term, would be doing so "within the construct of a secular bull market that has eight to nine years left on the upside."

Embedded below is Jeff Saut's latest market commentary:

You can download a .pdf copy here.

Ardsley Partners Starts Position in Bluerock Residential Growth REIT

Phil Hempleman's hedge fund Ardsley Partners has filed a 13G with the SEC regarding shares of Bluerock Residential Growth REIT (BRG).  Per the filing, Ardsley has revealed a 5% ownership stake in the company with 625,900 shares.

This is a newly disclosed equity position for the firm and the filing was made due to activity on April 6th.

You can view more recent portfolio activity from Ardsley Partners here.

Per Google Finance, Bluerock Residential Growth REIT is "a real estate investment trust (REIT). The Company is engaged in acquiring and developing a diversified portfolio of real estate. The Company also intends to acquire residential properties. The Company’s operations are managed by Bluerock Multifamily Advisor, LLC."

Farallon Capital Trims Hudson Pacific Properties Stake

Andrew Spokes' hedge fund firm Farallon Capital has filed an amended 13D with the SEC regarding their stake in Hudson Pacific Properties (HPP).  Per the filing, Farallon now owns 4.1% of the company with over 3.63 million shares.

Their most recent filing was required due to activity on April 10th as Farallon Funds "completed an underwritten public offering of 6,037,500 shares."

Back in January of this year, they had disclosed exposure of over 8.7 million shares, so their net position has decreased by around 5 million shares since then.

Per Google Finance, Hudson Pacific Properties is "a full-service, vertically integrated real estate investment trust (REIT), focused on owning, operating and acquiring high-quality office and media and entertainment properties in select growth markets primarily in Northern and Southern California. Its investment strategy is focused on high barrier-to-entry, in-fill locations with favorable, long-term supply demand characteristics."

For more from this hedge fund, head to other recent portfolio activity from Farallon here.

Monday, April 20, 2015

Viking Global Starts Envision Healthcare Position

Andreas Halvorsen's hedge fund firm Viking Global has just filed a 13G with the SEC regarding shares of Envision Healthcare Holdings (EVHC).  Per the filing, Viking now owns 6.3% of the company with over 11.5 million shares.

This is a newly disclosed equity position for the hedge fund and the filing was made due to activity on April 9th.  Other hedge funds that already held positions as of the end of 2014 include Valinor Management and Bridger Capital, among others.

You can view additional recent portfolio activity from Viking Global here.

Per Google Finance, Envision Healthcare is "a provider of physician-led, outsourced medical services in the United States. The Company conducts its business primarily through two operating subsidiaries, EmCare Holdings, Inc. (EmCare) and American Medical Response, Inc. (AMR). The Company markets its services primarily under the EmCare and AMR brands. EmCare is a provider of integrated facility-based physician services, including emergency, anesthesiology, hospitalist/inpatient care, radiology, tele-radiology and surgery. EmCare also offers physician-led care management solutions outside the hospital. AMR is a provider and manager of community-based medical transportation services, including emergency (911), non-emergency, managed transportation, fixed-wing air ambulance and disaster response. The Company, through VISTA Staffing Solutions Inc, provides physician staffing services.."

Stan Druckenmiller on Oil, China, Interest Rates & More: Bloomberg Interview

Legendary investor Stan Druckenmiller, formerly of Soros Fund and Duquese Capital, recently sat down for a fantastic interview with Bloomberg's Stephanie Ruhle.

We highly recommend watching it in its entirety, but here's a few key takeaways:

On interest rates: "My fear is we’re not going to see anything for a year-and-a-half because they set up metrics eight or nine months ago…I have no confidence whatsoever that you’re going to see rate hikes in September or December or whenever because when they lay out metrics and then they change, and then they change again, and then they change again, who knows where -- when they’re going to go."

On oil: "Well, I'm pretty optimistic on crude prices.  I think they’re going to do better than the forward curve.  Well, because as my protégé, Zach Schreiber, said a year ago, the cure for high prices is high prices.  Well, he would also say now the cure for lower prices -- low prices is low prices."

On China:  "The Chinese stock market is up, I don’t know, 140 percent in six months after being in a downtrend for five to seven years, and it’s doing so on record volume with record breadth.  If it was any other stock market or certainly any developed market, I would tell you, being a market observer, there’s a 98 percent chance China will be in a cyclical boom 6 to 12 months from now.  Because it’s China, and we don’t know the nature of what we’re dealing with here relative to normal mature developed markets, I would downgrade that assessment from 95 percent, but I would still hold it over ... I would point out that the H shares in Hong Kong representing China are 10.1 times earnings"

On European stocks he likes:  BMW, Volkswagen, Airbus, Altice

On potential bubbles:  "I think tech valuations, at least in the private market, are kind of crazy."

On market dynamics:  "My first boss asked me a question when I was 22 years old.  Do you know happens to the money when the stock market goes down?  I said, I don’t know.  It goes into the bond market.  He said, no.  It evaporates.  It evaporates.  You know what happens when stock prices go up?  Wealth goes up.  Confidence goes up.  Economic activity generally goes up, so the more, the merrier."

Embedded below is the video of Stan Druckenmiller's interview with Bloomberg:

For more from this investor, we've also previously posted up past thoughts from Druckenmiller.

Julian Robertson Worried About Bubbles Bursting

Tiger Management's Julian Robertson recently was interviewed by Fox Business and touched on bubbles developing, interest rates, the US Dollar and select US equities.

The thing he said he's worried about most are bubbles developing: specifically, the bubble in bonds created by the Federal Reserve's actions.  He notes it's a hard market to save in and an easy market to borrow in, and those things aren't conducive to long-term prosperity.

Robertson thinks the equity rally will be stalled by an increase in interest rates.  He expects a rate increase this year (warranted by the economy).  "I don't think it's at all ridiculous to think an '08 size (decline)."

Tiger Management's founder also sees the US Dollar strength continuing.

As to what stocks Robertson likes, Gilead Sciences (GILD) was mentioned.  He said he likes growth companies and notes that these types of plays (like Apple, Google, Facebook) used to trade for such high multiples back in the day, but nowadays are trading for cheap.

Lastly, he singled out Amazon (AMZN) as a company he finds fascinating because it doesn't have considerable cashflow and it's "wild that it gets this kind of multiple."  He acknowledges it's done well, but he's short, saying AMZN "don't care" about profitability.

Embedded below are the videos of Robertson's appearance on Fox Business:

Video 1

Video 2

JANA Partners Goes Activist on Qualcomm

Barry Rosenstein's hedge fund firm JANA Partners has gone activist on Qualcomm (QCOM).  They're looking for the company to spin off its chip unit from the patent licensing division and for the company to accelerate share repurchases.

Rosenstein was recently interviewed by David Faber at CNBC and said that, "What we think they ought to do is a transparent review of the client businesses, and determine whether or not it makes sense to do either a partial or full split.  So we are not definitely saying that they should split it up."

JANA now owns around $2 billion worth of Qualcomm shares

Embedded below is the video of Rosenstein's interview with CNBC:

For more from this hedge fund, we've highlighted other recent portfolio activity from JANA.