Friday, September 11, 2015

Hedge Fund Links ~ 9/11/15

Some August hedge fund performance numbers [ZeroHedge]

Everyone's asking the wrong question about hedge fund performance [Business Insider]

Some hedge funds prosper in market tumult [NYTimes]

Pennant Capital shuttering Broadway Gate fund [FINalternatives]

Viking Global's CFO departs [Reuters]

Greenlight Capital down 14% for year [NYTimes]

Kyle Bass' post-crash returns small caliber [NYPost]

Bass loses challenge to pharma patents [Reuters]

How investors source and select hedge funds [Preqin]

In chaos, small hedge funds fare better [eFinancial News]

Hedge fund standards board to unveil cybersecurity memorandum [HedgeWeek]

KKR takes stake in Marshall Wace [NYTimes]

Obscure hedge fund buys billions of dollars worth of US Treasurys [WSJ]

Hedge funds' wobbles bolster argument against high fees [NYTimes]

Hf managers ditch Alibaba for rival JD [Bloomberg]

China hedge funds face worst month in 16 years after carnage [Bloomberg]

On hedge fund managers' tax rates [Fact Check]

Chieftain Capital Trims Tempur Sealy Stake

John Shapiro's investment firm Chieftain Capital recently filed an amended 13G with the SEC regarding its position in Tempur Sealy (TPX).  Per the filing, Chieftain now owns 5.21% of the company with over 3.22 million shares.

This is a decrease from the 3.55 million shares Chieftain owned at the end of the second quarter.  The latest filing was required due to portfolio activity on September 10th.

Chieftain has owned this stake since 2010 but has slowly been trimming the stake since the end of 2014.

Per Google Finance, Tempur Sealy is "a bedding provider. The Company develops, manufactures, markets, and distributes bedding products, which it sells globally. The Company operates in three segments: Tempur North America, Tempur International and Sealy. The Company’s brand portfolio includes TEMPUR, Tempur-Pedic, Sealy, Sealy Posturepedic, Optimum, and Stearns & Foster."

Howard Marks Lunch Auction ~ Capitalize For Kids

Oaktree Capital's Howard Marks has generously agreed to host a lunch for the benefit of the field of children's brain and mental health.  A high-end travel package to NYC will be provided for the auction winner alongside an opportunity to sit down with one of the greatest investors of our time.

Price is what you pay.  Value is what you get.  For additional information and to pre-register a bid, please contact:

About Howard Marks

Mr. Marks co-founded Oaktree Capital in 1995.  From 1985 until 1995, Mr. Marks led the groups at The TCW Group, Inc. that were responsible for investments in distressed debt, high yield bonds, and convertible securities.  He was also CIO for Domestic Fixed Income at TCW.  Previously, Mr. Marks was with Citicorp Investment Management, where from 1978 to 1985 he was VP and senior portfolio manager in charge of convertible and high yield securities.  Between 1969 and 1978, he was an equity research analyst and, subsequently, Citicorp's Director of Research.

Thursday, September 10, 2015

David Tepper "Not as Bullish as I Could Be": Interview

David Tepper of hedge fund Appaloosa Management appeared on CNBC today to share his thoughts on markets.

In the interview, Tepper talked about the concept of flows and if all the money is flowing one way, then you have to buy the dips.  But if all the money starts flowing the other way, then you've got to sell the rips.

Tepper said, "I'm not probably as bullish as I could be because I have problems with earnings growth, I have problems with multiples... so I can't really call myself a bull.  However, I will say this, if you invest today in the stock market if earnings grow 5.5% per year you will make money at the end of five years."

He also noted that if you're fully invested now, it's not a bad time to take some money off the table.  Tepper also went on to say that if we had a 15-20% correction, "I would buy."

He says that valuations are adjusting to new realities and before "jumping back in the water" he wants to see big stocks with emerging markets components have their P/E's come down and mutual funds with higher cash levels.

Tepper notes that the US is fine with low unemployment and that it's an individual stockpicking moment.  But he also says that you "don't have that cushion of safety" in the stock market right now.

When you have lower global growth, you'll see lower P/E's, Tepper says.  The Appaloosa manager said that Apple (AAPL) has a low multiple and he owns it (though it's only around a 0.75% position for them now that they're just maintaining).  He says it will always have a low multiple because it's a device company with technological risk.  But it has China exposure, which the market dislikes these days. 

He mentioned he no longer owns Alibaba (BABA) as well.  He said he read the Chinese situation wrong and got out in early July.  "They just keep making policy mistake after policy mistake over there," Tepper notes.

Tepper also says that he thinks it's going to be hard to hit earnings estimates next year.  He argued that "flat is not a bad place to be" right now, referring to his exposure levels in equities.  He says he's not a great short seller and doesn't think levels are high enough right now.  But if the Federal Reserve doesn't tighten and the market gets excited about that, then he might bring himself to short.

He again reiterated that, "We don't have a huge equity book" right now.

Tepper then noted: "I have a saying in my office: 'There's a time to make money, and there's a time not to lose money.' What time is this? Not to lose money."

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Summary of Warren Buffett's Recent Media Appearances

Berkshire Hathaway's Warren Buffett recently made the media rounds so here's a quick summary.

In his interview with Fox Business, Buffett said that his brick business isn't doing as well as his carpet business.  He also noted that furniture retailing is doing well.  He also said, "The insurance business (GEICO) has been quite good to us over the years, and continues to be."

Regarding oil, Buffett points out a common misperception that his railroad (Burlington Northern Santa Fe) is not as affected as people might think.

When asked if he would raise rates in September if he was on the Federal Reserve, he said he probably wouldn't.

Embedded below is the video of Buffett's interview on Fox Business:

Buffett also talked with CNBC.  There, he said that he bought more IBM (IBM) thus far in the third quarter.

Interestingly, Buffett said that "I'll never go below $20 billion in cash."  This pertains to Berkshire's upcoming purchase of Precision Castparts (PCP) where he'll opt to finance part of the deal with debt in order to maintain that certain cash level.

Buffett also said that on big down days with higher volume in the stock market, Berkshire will be out buying more than usual of certain stocks if for instance they were buying 20% of the volume for that day.  He likes to stay around that level so that he doesn't affect the price too much.

He re-emphasized his focus on 5-10 years from now as he thinks markets will be higher then and that's all that really matters to him.  He isn't concerned with short-term gyrations and isn't about to predict what will happen in the near-term.

On why he bought a bunch of Phillips 66 (PSX), Buffett said, "I had always intended that we would come back in, assuming the price is right.  PSX has no upstream production.  PSX is not a pure refiner, they've got a big chemical division.  We're buying it because we like the company and we like the management very much."

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

Lastly, Buffett also chatted with Bloomberg.  There, he revealed that he doesn't see local TV broadcasting as a growth business.

On the global economy, he noted that, "I think it's unlikely that the world has some great slowdown, but it always can."

He also noted he's bullish on China over its long-term potential.

Embedded below is the video of Buffett's talk with Bloomberg:

Jim Chanos Short Cheniere Energy, Caterpillar, Solar City & More: Interview

Noted short seller Jim Chanos, founder of Kynikos Associates recently appeared on CNBC to share his thoughts.

During the interview, he revealed a new short position: Cheniere Energy (LNG).  We've highlighted how Carl Icahn went long LNG recently.  There are also numerous other prominent hedge funds long.

Chanos, on the other hand, has been negative on the liquefied natural gas space over the past six months, thinking it's a "looming disaster" because it's tied into Asia and that LNG demand isn't growing anymore.

He went on to say, "LNG has been seen as a unique animal because it's going to be U.S. based, they're opening its Sabine Pass later this year.  With the stock at 30 times 2020 earnings, with the upside coming from a glutted market, we think the risk/reward in this, given where other LNG plays are in Australia and elsewhere, is just completely out of whack."

Chanos noted he's still short Caterpillar (CAT) but has covered his Joy Global (JOYG) short.  He argues CAT is trading at a rich multiple relative to its peers and that the company isn't letting on just how bad things are out there.

Chanos is also negative on pretty much everything in the PC chain.  He argues that "the value in the hardware chain gets competed away" as the products are commoditized.  He's short Hewlett Packard (HPQ) and some PC manufacturers in Asia.  He's hedged this by being long Apple (AAPL) with better growth and products.

He called Tesla (TSLA) "silly" as it trades on 2025 earnings that's become a momentum and concept stock. Regarding other Elon Musk companies, he thinks Solar City (SCTY) is the most problematic.

On China, Chanos continues to be concerned.  He says that "one of the worries we've always had was they were going to lose control of their currency ... that's why I think the markets took a real shudder in August."  That said, he argued that the US is the country "least affected by what's happening in China."

Lastly, Chanos also said cybersecurity is one of the few areas of growth.

Embedded below are videos from Chanos' interview:

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For more from this short seller, be sure to also check out another recent Jim Chanos interview.

Wednesday, September 9, 2015

What We're Reading ~ 9/9/15

The long road of proving yourself as an investor [Morgan Housel]

On the importance of journaling your investment thoughts [Safal Niveshak]

Prices have changed, not much else has changed [Aleph Blog]

Charts summarizing recent economic activity [Calafia Beach Pundit]

China to face tough economic conditions for up to 10 years [Nikkei Asian Review]

The case for keeping US interest rates low [FT]

A play on the student loan bubble: short Navient [SumZero]

Charter: John Malone's return to the US cable industry [Punch Card Blog]

Patrick Drahi positions himself to be a player in US cable [NYTimes]

Cable box rentals: a needless $19 billion industry [The Atlantic]

Is the high cost of live sports a tipping point? [Bloomberg]

James Tisch lecture on value investing [ValueWalk]

How the average US consumer spends their paycheck [CreditLoan]

Coming soon: Millennials married with children [WSJ]

Senator Investment Group Increases Realogy Position

Alex Klabin and Doug Silverman's hedge fund Senator Investment Group has filed a 13G with the SEC regarding shares of Realogy (RLGY).  Senator now owns 5.12% of the company with 7.5 million shares.

This is a sizable increase from the 4 million shares they owned at the end of the second quarter.  The filing was made due to activity on August 27th.

As of the end of Q2, some of the largest holders of RLGY shares included other prominent hedge funds such as Lone Pine Capital, Paulson & Co, Glenview Capital, Pennant Capital, and Valinor Management, among others.

For more from this fund, be sure to check out Alex Klabin on the intangibles of building a great hedge fund.

Per Google Finance, Realogy is "a franchisor of residential real estate brokerages and a provider of outsourced employee relocation, and title and settlement services in the United States. The Company has four operating segments: Real Estate Franchise Services (RFG), Company Owned Real Estate Brokerage Services (NRT), Relocation Services (Cartus), and Title and Settlement Services (TRG). The RFG segment is a franchisor of residential real estate brokerage services. The NRT segment owns and operates a residential real estate brokerage business in the United States. The Cartus segment provides outsourced employee relocation services. The TRG segment provides full-service title and settlement services to its clients. The Company's portfolio of brokerage brands includes Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA, Sotheby's International Realty, Better Homes and Gardens Real Estate, The Corcoran Group, ZipRealty and Citi Habitats."

Falcon Edge Capital Boosts Pandora Stake

Rick Gerson's hedge fund firm Falcon Edge Capital has filed a 13G with the SEC regarding shares of Pandora (P).  Per the filing, Falcon Edge now owns 5.5% of the company with 11.62 million shares (including 6.95 million shares issuable upon exercise of options).

This is an increase from the 4.67 million shares of exposure the firm had at the end of the second quarter.  The filing was made due to activity on August 27th.

You can view other portfolio activity from Falcon Edge here.  Prior to founding Falcon Edge, Gerson was at Blue Ridge Capital since its inception.

Per Google Finance, Pandora is "a provider of Internet radio services. The Company offers personalized experience for each of its listeners wherever and whenever they want to listen to radio on a range of smartphones, tablets, computers and car audio systems, as well as a range of other Internet-connected devices. In addition, Pandora offers local and national advertisers to provide targeted messages to its listeners using a combination of audio, display and video advertisements."

Tuesday, September 8, 2015

Jim Simons Rare Interview: TED Talk With the Mathematician Who Cracked Wall Street

Jim Simons, founder of quantitative investment firm Renaissance Technologies (commonly referred to as Rentec) this year made a rare appearance at one of the TED talks.  The conversation was entitled "A rare interview with the mathematician who cracked Wall Street."

As we've highlighted in the past, Rentec's internal Medallion Fund has generated outstanding performance numbers.  While many hedge funds charge 2% management and 20% performance fees, Medallion was said to charge 5% and 44% at one time.  While this fund is only available internally, Rentec also runs two other funds available to outside investors, known as RIFF and RIEF.

His talk touches on topics of mathematics, code breaking, and patterns in the world of finance.

He attributes his success to assembling a great team.  Rentec famously employs scientists, mathematicians, astronomers, and physicists.  Their approach focuses on assembling a lot of data and looking at patterns.

Simons said that, "We take in terabytes of data a day and store it away and massage it and get it ready for analysis and you're looking for anomalies."

He also noted that hedge funds as a whole have not fared that well over the last 3-4 years.

Embedded below is the video of Jim Simons' TED talk:

For more from this legend, we've also previously posted Jim Simons on mathematics, common sense, good luck & his career.

Miura Global Increases Zoe's Kitchen Position

Pasco Alfaro's hedge fund Miura Global has filed a 13G with the SEC regarding shares of Zoe's Kitchen (ZOES).  Per the filing, Miura now owns 5.51% of the company with 1,067,000 shares.

This is up from the 960,000 shares Miura owned at the end of the second quarter.  The new filing was made due to activity on August 31st.

Per Google Finance, Zoe's Kitchen "primarily develops and operates fast-casual restaurants serving a range of Mediterranean dishes."

Glenview Capital Raises Hertz Stake

Larry Robbins' hedge fund firm Glenview Capital has filed a 13G with the SEC regarding its position in Hertz (HTZ).  According to the filing, Glenview now owns 5.2% of the company with over 23.74 million shares.

This is up from the 17.6 million shares Glenview owned at the end of the second quarter.  The latest filing was made due to activity on August 25th.

We've highlighted other recent portfolio activity from Glenview here.

Hertz is also a position in activist Carl Icahn's portfolio as he has representation on the board as well.  The company's shares have been under pressure over the past year as they had to restate various financials in addition to worries about the ability to raise prices and potential competition from services like Uber.  HTZ also has a potential catalyst coming up with the spin-off of its equipment rental business.

Per Google Finance, Hertz "operates car rental business through its Hertz, Dollar, Thrifty and Firefly brands. The Company's operating segments are U.S. Car Rental, International Car Rental, Worldwide Equipment Rental and All Other Operations."