Friday, July 17, 2015

ValueAct Capital Trims Adobe Systems Stake Again

Jeff Ubben's activist investment firm ValueAct Capital has filed a Form 4 with the SEC regarding its position in Adobe Systems (ADBE).  Per the filing, ValueAct trimmed its ADBE position on July 14th-16th.

In total, ValueAct sold 1.693 million shares at prices of $82.11, $82.06, and $82.45.  After these sales, ValueAct still owns just over 14 million shares of Adobe. 

This is the second time ValueAct has trimmed its Adobe stake in recent months.  In fact, they've been cutting their exposure to the name gradually since 2013 when they owned as much as 25 million shares.

Per Google Finance, Adobe Systems is "a software company. The Company offers products and services for professionals, marketers, application developers, enterprises and consumers for creating, managing, delivering, optimizing and engaging with content. Adobe markets and licenses its products and services through app stores and its Website The Company's operates in three segments: Digital Marketing, Digital Media, and Print and Publishing. In Digital Media, the Company is engaged in providing tools, services and solutions that enable to create, publish and promote their content. In Digital Marketing, the Company is engaged in providing solutions and services for creating, managing, executing, measuring and optimizing digital advertising and marketing campaigns. Adobe's Print and Publishing segment addresses various market opportunities, including eLearning solutions, technical document publishing, Web application development and high-end printing.."

You can view additional recent portfolio activity from ValueAct here.

Fairholme Capital Shows Seritage Growth Properties Position

Bruce Berkowitz's investment firm Fairholme Capital has filed a 13G with the SEC regarding shares of Seritage Growth Properties (SRG).  Per the filing, Fairholme now owns 13.2% of Seritage with over 3.25 million shares.

This is a newly disclosed position for Berkowitz as Sears (SHLD), one of his top holdings, recently formed a REIT (Seritage) to hold 254 stores.  The filing was made due to activity on July 6th.  Seritage recently announced expiration and oversubscription of its rights offering.

Hedge Fund Links ~ 7/17/15

Alpha or Beta in the eye of the beholder: what drives hedge fund flows [SSRN]

Hedge funds reassess China after market free fall [NYTimes]

Marketing your hedge fund: change or die [HF Intelligence]

Investors focus on activism [Global Investor Magazine]

Thursday, July 16, 2015

Lone Pine Capital Almost Doubles Charter Communications Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding its position in Charter Communications (CHTR).  Per the filing, Lone Pine now owns 5.7% of the company with over 6.33 million shares.

This is a sizable increase from the around 3.3 million CHTR shares they owned at the end of Q1.  The filing was made due to activity on July 6th.

Charter has announced a takeover of Time Warner Cable (TWC) and Bright House.  They swooped in for the assets once it became clear that Comcast's (CMCSA) previous bid for TWC wasn't going to be approved by regulators and was called off.  Many investors seem to think, however, that CHTR's deal will go through.

As such, arbitrageurs have been going long TWC and shorting the corresponding amount of CHTR, driving down the price.  The deal spread on this was around 9% at one point but recently is closer to 6-7%.  Lone Pine saw this as an opportunity and almost doubled its stake. This stock been a consensus buy among hedge funds we track in our Hedge Fund Wisdom newsletter and has been flagged numerous times in past issues.

Per Google Finance, Charter Communications is "a provider of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers. The Company sells its video, Internet and voice services primarily on a subscription basis, often in a bundle of two or more services. The Company provides broadband communications solutions to business and carrier organizations, such as video entertainment services, Internet access, business telephone services, data networking and fiber connectivity to cellular towers and office buildings. Through its hybrid fiber and coaxial cable network, the Company offers its customers traditional cable video services, as well as advanced video services, Internet services and voice services. The Company’s voice services are primarily provided using voice over Internet protocol (VoIP) technology, to transmit digital voice signals over the Company’s systems."

Wednesday, July 15, 2015

Delivering Alpha Conference Notes: Richard Perry, Eric Mindich, Bill Ackman, Nelson Peltz, Jeff Smith & More

The 2015 Delivering Alpha Conference hosted by Institutional Investor and CNBC is currently taking place and we wanted to highlight some of the thoughts from top investment managers on the best ideas panel and other panels.  Here's a brief summary of what each manager said:

Delivering Alpha Conference 2015 Notes

Richard Perry (Perry Capital): He feels Puerto Rico could possibly be the 51st state and thinks it's an interesting place to invest; he said GO bonds are safe and will trade at par. Perry argued that Greek bonds trading at 50 cents on the dollar could eventually return to par as there's a 'meaningful possibility' that a Greek bailout would actually be followed through.

Eric Mindich (Eton Park Capital):  He said that it's mostly individual investors in the turbulent Chinese A shares market.  He called the H shares more interesting.  He's a bit troubled by the future of the euro due to the situation in Greece.

Nelson Peltz (Trian Fund):  Peltz talked about his activist investment in DuPont (DD) and noted that he'd "rather be rich than right."  He continues to like PepsiCo (PEP) and thinks the company can deliver earnings growth each quarter but could do better.  Commenting on McDonald's (MCD), he said that the culture needs to be flipped on its head and it could take years.  Peltz feels Pentair (PNR) has the potential to become a platform company.  He said he has two new positions, one industrial and one he's not naming which account for 1/3 of his capital.  We recently highlighted some of Trian Fund's portfolio activity here.

Bill Ackman (Pershing Square): Ackman likes businesses that will withstand the test of time and he avoids tech since it's 'too dynamic.'  He mentioned that a lot of people haven't been talking about one of his newest investments: Fannie Mae and Freddie Mac and he really likes these.  Peltz chimed in that he doesn't know anything about the company but thinks Fannie is his favorite of Ackman's investments.  While some investors like Bruce Berkowitz (Fairholme Fund) have played the preferred shares, Ackman has a large position in common stock.  He says it offers the most upside but also conceded that it has the most downside too.  Ackman also voiced concerns on China, citing leverage and lack of transparency.  He says that almost every company he owns today is some sort of 'platform company' and we've highlighted this concept via Ackman's presentation at the Sohn Investment Conference.

Jamie Dinan (York Capital):  He keeps a lower media profile so it's always good to get his thoughts.  He avoids leverage since he lost a lot on margin in 1987 which was a very valuable lesson for him.  His keys to success?  Go where the action is and respect risk parameters.  Dinan notes that if you're in a position and the rules change, that's when bad trades happen.  York has more than half its base in illiquid credit.  He likes Japan, noting that "The Bank of Japan is your friend" and valuations are good with possible corporate governance changes coming.  He compared Japan now to the US in the 1980s in an economic sense.  He noted they've invested $700 million in Indiana toll roads.  Dinan also said he likes Puerto Rico but not the GO bonds.  He prefers complex infrastructure plays.

Jeff Smith (Starboard Value):  He mentioned a new idea of his, Macy's (M).  He thinks you get the company 'for free' when you take out the EV of its real estate.  He values the real estate at around $21 billion and hopes to work with management as he thinks M is worth $125 per share.

Bill Miller (Legg Mason):  He continues to like airlines stocks, saying they're in a long-term uptrend.  He likes Delta (DAL).  Commenting on bonds, he said that there's a benign bond market.  He also loves (AMZN) which is his biggest position at 6%.  He also likes builders and they're a big part of his portfolio as well, as he thinks they'll earn around 20% a year.

Jeff Gundlach (DoubleLine Capital):  He doesn't think the Fed will raise rates in 2015.  He said he's fond of emerging market debt (dollar denominated) and some high yield bonds (a shorter-term view on the latter).  He thinks high yield bonds will be a 'debacle' in 3-4 years.  Regarding bond rates, he notes they're rising secularly and went on to say that this is a good thing which most people don't realize.  Bond portfolios want rates to rise since you can reinvest at higher rates.  Looking extremely long term, he thinks India is a great place to put cash for the next 50 years.  Lastly, he also mentioned that he's allergic to companies that don't make money (AMZN).  He mentioned he bought Annaly Capital (NLY) recently and is out of his Apple (AAPL) position.  You can hear more from Gundlach in his recent Wall Street Week interview.

Keith Meister (Corvex Capital): He pitched American Realty Capital Properties (ARCP), a name he's presented at previous conferences as well (he owns 8% of the company).  He thinks you're taking 'bond like' risk for 'equity like' returns with this one and that the stock will pop once they reinstate the dividend and sees 25-50% upside.  Our Hedge Fund Wisdom newsletter analyzed the company if you want to play catch up quickly.

Tom Sandell (Sandell Asset Management):  His best idea was Ethan Allen (ETH), a furniture retailer.  He notes the company has practically zero debt and could be an ideal private equity candidate for a takeover.

Paul Singer (Elliott Management):  He likened the situation in China to potentially worse than the subprime crisis.  He thinks that perception of securities there has been impaired and it's just 'wild.'  Authorities there are trying to sustain the market with all kinds of moves but confidence is damaged by some of these rules.  He said the 70% haircut that Argentina forced on bondholders was the most severe he's seen in a large economy.  Singer said his firm essentially manages risk by putting in a lot of effort, a hands-on approach (basically activism).


Check back for more updates later.

What We're Reading ~ 7/15/15

The Devil's Financial Dictionary [Jason Zweig]

Discovery Communications and the uncertain future of pay TV [Punch Card]

Charlie Munger's favorite life hack [Business Insider]

Profile of Pat Dorsey [Barrons]

The single most important element to successful investing [The Felder Report]

Single sentence investing philosophies [Morgan Housel]

In defense of corn, the world's most important crop [Washington Post]

A pitch on Cimpress (CMPR) [ValueConferences]

Decoding China's swoon and its impacts [Going Long]

Little known French billionaire circles US cable market [WSJ]

Drahi's American cable dream faces harsh reality [WSJ]

Netflix and the conservation of attractive profits [Stratechery]

Aldi and Lidl are ready to invade the US, beware Walmart & Target [Forbes]

Leon Black's sell-everything call has been heard by his rivals [Bloomberg]

Lee Cooperman's Masters In Business Interview

Barry Ritholtz's podcast on Bloomberg Radio called Masters in Business recently featured an interview with Omega Advisors' Lee Cooperman.

You can listen to the full interview here but we wanted to offer a few quick takeaways:

- He attributes his success to a combination of hard work, education, and luck.

- The only place he feels is a bubble currently is fixed income and interest rates are going higher

- Ritholtz mentioned research he's done on stock market returns when rates are rising. He noted that the only time stocks didn't do so well was when you're raising rates from already high levels and with inflation.  He says that when you're starting from a low base (like we are now), that returns tend to be favorable and Cooperman agreed.

- Cooperman looks at a top down macro level to survey the land and then drills down to specific companies.  He looks for "more growth at a lower multiple."

- He loves what he does and consumes content all the time.  He's always reading about companies, industries, macro stats, and meeting with other investors or companies trying to get a feel for how things are going and what will happen going forward.

- Cooperman is long Japan via the indexes rather than individual stocks because he doesn't have individual expertise there, but he has a macro view on the country and has expressed it as such.

- When a stock moves against him, sometimes he doubles down, sometimes he sits tight, and sometimes he sells.  It really depends on the specific situation.  If something has tangibly changed, you've got to make a different decision. 

-  "What is your sell discipline?"  1.  If it hits our price objective, even without circumstances changing, they sell.  2.  Not everything unfolds the way you anticipated, so get out.  3.  If you find a better idea, switch the capital there.  4.  If they change their view on the market and want to reduce exposure.

- On hedging: "We tend to be long-oriented.  Our short positions tend to be 5-15% of the fund.  We don't run a big gross book and a small net book, I find that very difficult."

- Average holding period:  Half our asset base is taxable, so we try to focus long-term.  75% of our investments have a horizon of over a year.

- For people looking into the business, his advice:  get a good education, don't go into a field just for the money, go to work for someone you respect and admire to build a good foundation.

- On what he knows today that he wished he knew when he first started: He wish he would have started his hedge fund earlier.

We've highlighted some of Cooperman's recent portfolio activity here.

Tuesday, July 14, 2015

Greenlight Capital Q2 Letter: New Positions in Applied Materials, Bank of New York Mellon

David Einhorn's hedge fund Greenlight Capital is out with its second quarter letter.  Greenlight returned (1.5)% in Q2 and year-to-date is (3.3)%.  Their average exposure was 103% long and 86% short, leaving them net long only 17%.  The letter details numerous recent portfolio moves:

New long positions: Applied Materials (AMAT), Bank of New York Mellon (BK), CNX Coal Resources (CNXC)

Sold long positions: Altice (AMS:ATC), Conn's (CONN), EMC (EMC), Marvell Technology (MRVL), Nokia (NOK), Playtech (LON:PTEC)

Covered shorts: Intuitive Surgical (ISRG), Vale (VALE)

Einhorn talks about all of the positions in the letter and also gives commentary on Micron (MU), one of his biggest positions that has sold-off recently.

At the end of Q2, Greenlight's largest positions in alphabetical order were: Apple (AAPL), CONSOL Energy (CNX), General Motors (GM), gold, Micron Technology (MU), and SunEdison (SUNE).

Embedded below is Greenlight's Q2 letter:

ValueWalk first posted the letter.

Viking Global Starts Whiting Petroleum Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of Whiting Petroleum (WLL).  Per the filing, Viking now owns 5% of Whiting with over 10.26 million shares.

This is a new equity position for Viking as they did not show a stake as of the end of the first quarter.  The filing was made due to portfolio activity on July 2nd.

After shares plummeted from $90 down to $25 in 2014, shares of WLL have largely traded sideways throughout 2015.

We've also highlighted other recent portfolio activity from Viking Global here.

Per Google Finance, Whiting Petroleum is "an independent oil and gas company. The Company is engaged in exploration, development, acquisition and production of crude oil, NGLs and natural gas in the Rocky Mountains and Permian Basin regions of the United States. The Company's Rocky Mountains operations include assets in the states of Colorado, Montana, North Dakota, Utah and Wyoming. The Company's Permian Basin operations include assets in Texas and New Mexico. The Company's other operations primarily include its assets in Arkansas, Michigan, Oklahoma and Texas."

Balyasny Shows Stake in Green Plains Partners; Adds To ChemoCentryx

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

Discloses New Stake in Green Plains Partners

First, Balyasny now owns 6.29% of Green Plains Partners (GPP) with 1 million shares. 

This is a newly disclosed position as Green Plains Partners shares recently started trading at the end of June.  GPP was spun-off from Green Plains (GPRE).

Balyasny previously owned a stake in parent company GPRE but their Q1 13F filing indicates that they exited that position in Q1.

Per Google Finance, Green Plains Partners "owns, operates, develops and acquires ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. The Company operates through four segments: production of ethanol and distillers grains (ethanol production); corn oil production; grain handling and storage and cattle feedlot operations (agribusiness), and marketing, merchant trading and logistics services for self-produced and third-party ethanol, distillers grains, corn oil and other commodities (marketing and distribution). The Company's parent company is Green Plains Inc. The Company owns and operates approximately 27 ethanol storage tanks. Its ethanol storage assets are engaged in storing and loading the ethanol that its parent produces at its ethanol production plants. It provides terminal services and logistics solutions through its fuel terminal facilities. Its transportation assets include a leased railcar fleet of approximately 2,200 railcars."

Balyasny Adds To ChemoCentryx Stake

Second, Balyasny indicates that they own 5.02% of ChemoCentryx (CCXI) with over 2.19 million shares.

This is an increase from the 1.86 million shares they owned at the end of Q1.  The latest filing was made due to activity on June 24th.

Per Google Finance, ChemoCentryx is "a biopharmaceutical company. The Company is focused on discovering, developing and commercializing orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders and cancer. It targets the chemoattractant system, which is a network of molecules, including chemokine ligands and their associated receptors, as well as related chemoattractant receptors. Each of its drug candidates is a small molecule designed to target a specific chemokine or chemoattractant receptor, thereby blocking the inflammatory response driven by that particular chemokine while leaving the rest of the immune system unaffected. The Company's product portfolio includes CCX140, CCX872, CCX168, Vercirnon (Traficet-EN or CCX282) and CCX507."

Monday, July 13, 2015

Byron Wien's Interview on Wall Street Week

Anthony Scaramucci and Gary Kaminsky this week interviewed Wall Street legend Byron Wien on their rebooted Wall Street Week.

We've also previously highlighted Byron Wien's 20 lessons learned throughout his investing career.

Embedded below is the video of Byron Wien on Wall Street Week:

If you missed it, be sure to check out Bruce Richards' Wall Street Week interview.

Carl Icahn Files 13D's on Tegna, Gannett After Split

Activist investor Carl Icahn has filed a 13D on Gannett (GCI) as well as Tegna (TGNA).  The company recently split into two, with the publishing assets becoming Gannett and the rest of the company listing as Tegna.

Per Google Finance, Tegna is "a media and marketing solutions company. The Company is engaged in providing local content on a range of platforms in the United States. The Company operates through business segments: Broadcasting and Digital. It also provides digital marketing services and Internet-based human resource solutions. Its digital media products and services include search, social media and Website development, among others. The Company offers its services in a range of geographies, demographics and content areas. It provides consumers with the information and entertainment, and connects them to their communities through the platforms, including television stations, desktop, smartphone and tablet products. Its Broadcasting segment includes an independent station group of network affiliates. The Company's Digital business segment includes, CareerBuilder, PointRoll and Shoplocal."

Per his 13D filing, Icahn shows a 6.51% ownership stake in Gannett (GCI) with 7,483,683 shares.  Icahn acquired additional shares in connection with the separation.

You can view additional recent portfolio activity from Icahn here.

Pleasant Lake Partners' Presentation on Magnachip; Discloses Del Taco Stake

Jonathan Lennon's hedge fund firm Pleasant Lake Partners has filed an amended 13D with the SEC regarding its stake in Magnachip (MX).  Per the filing, Pleasant Lake owns 9.95% of the company and is one of the largest shareholders.  This is an increase from the 7.7% they owned when we highlighted their original 13D filing on Magnachip.

Pleasant Lake's Presentation on Magnachip

Included in its filing is a letter to Magnachip's chairman, as well as a presentation with their thoughts on the company.

Embedded below is Pleasant Lake's slideshow presentation on Magnachip:

Discloses Del Taco (TACO) Stake

Second, Pleasant Lake Partners has filed a 13G with the SEC regarding shares of Del Taco Restaurants (TACO).  Per the filing, Pleasant Lake now owns 11.5% of the company with over 4.46 million shares.

This is a newly disclosed position as they did not report ownership at the end of Q1.  The filing was made due to activity on June 30th.

Per Google Finance, Del Taco is "a food service company. The Company operates quick service restaurant (QSR) chain under Del Taco in the United States. The Company offers Mexican- cuisine and American classics menu. Its menu includes various categories, such as tacos, burritos, Fresca bowls, American grill, quesadillas and nachos, desserts and shakes, sides and salads, combos and fiesta pack, kid's meals, drinks, breakfast, and Buck & Under. In addition, its menu includes Double Beef Classic Taco, Del Combo Burrito, Del Beef Burrito, MACHO Combo Burrito, Double Del Cheeseburger, Bacon Double Del Cheeseburger, Deluxe Chili Cheddar Fries, MACHO Nachos, Caramel Cheesecake Bites, Chocolate Chip Cookies, CrunchTada Tostada and Turkey CrunchTada Tostada, among others. The Company and its franchisees operate approximately 550 restaurants in 16 states."