Friday, May 13, 2016

Mauboussin's Talk at Google: The Success Equation: Untangling Skill & Luck

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is Michael Mauboussin who talked about his book The Success Equation: Untangling Skill and Luck in Business, Sports and Investing.

Mauboussin is well known for his work on the more psychological/behavioral aspects of investing.  We've previously featured his talk about developing an investment process.

His talk touches on the concepts of the roles luck and skill play in success and failure and how you can provide a framework to analyze their contributions.

Embedded below is the video of Mauboussin's talk at Google:

Be sure to check out Mauboussin's book The Success Equation as well as his past work, Think Twice: Harnessing the Power of Counterintuition.

Jason Zweig's Talk at Google: The Intelligent Investor & The Devil's Financial Dictionary

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is Jason Zweig who talked about The Intelligent Investor and his latest book, The Devil's Financial Dictionary.

The latter basically sums up his learnings across three decades as an investment journalist.  Yale professor Robert Shiller said of the book: "This is the most amusing presentation of the principles of finance that I have ever seen."

Embedded below is the video of Jason Zweig's Talk at Google:

If you haven't read his newest book yet, check it out: The Devil's Financial Dictionary.  And don't forget the instant classic as well: The Intelligent Investor.

Thursday, May 12, 2016

SALT Conference Notes 2016: Griffin, Cooperman, Burbank, Chanos & More

The Skybridge Alternatives Conference, better known as the SALT Conference, is taking place in Las Vegas this week.  It's a multi-day affair with many speakers on a broad range of subjects.  We've condensed notes into primarily finance/investing thoughts from various hedge fund managers and investors below.

2016 SALT Conference Notes

Ken Griffin (Citadel):  Talked about how he built Citadel and the importance of culture at an organization.  'Avoid marrying a strategy' and instead focus on building a platform with the best people.  Business really taught him how to delegate and manage people.  On finding good talent: you've gotta be able to sell them on why they should leave and come to you.  You have to go out and find that talent instead of waiting for them to come to you.  The ones that 'knock on your door' aren't the best.  One interesting quote:  "Who is the number five manufacturer of personal computers?  Who cares?  We're in a more and more winner take all world."

Leon Cooperman (Omega Advisors):  He talked about a trend of investors moving from active to passive strategies and says that hedge fund performance can't really justify the fees these days, so fees need to come down.  He said that long-term (i.e. 'permanent') capital is doing good because they don't have to worry about lockups (citing Warren Buffett).  The other winner has been quant strategies.  Pitched the stock First Data (FDC) which recently IPO'd.  Says he's got around ~20% of his fund in structured credit at the moment.  Reiterated his belief that conditions for a recession are not present (a concept he's talked about for a while now).  Thinks the bubble is in fixed income.  Government bonds are a bad idea.  Likes Tetragon Financial, yields 7%, dividend coverage of 4x.  Buying a stock trading at half of book.

Kyle Bass (Hayman Capital):  Implied that investors need to lower their return expectations over the next few decades (5% global real return expectation).  Also agreed that fees for funds need to come down.  Says it's much harder to maintain investors than it is conviction.  Thinks we're in the early part of '07 in terms of credit/equity markets.  Says a hard landing in China is happening as we speak. Argues that China credit system is one of the biggest macro imbalances, something has to give sooner rather than later.  Hong Kong real estate is collapsing.

Roslyn Zhang (China Investment Corp):  Sovereign Wealth Fund.  Disappointed with hedge fund performance.  Compared Chinese retail investors to hedge fund herding.  Criticized those betting against the Chinese Yuan.  Argued that China's economy is still strong and that all of the building is due to the massive population; supply can be absorbed.

Sam Zell (Equity Group Investments):  Cost of regulation has gone up around 5x over the last decade.  Have been big investors in Brazil, Far East, Mexico. 

Ty Wallach (Paulson & Co):  Thinks specialty pharma stocks are oversold.  Specifically pointed out Valeant Pharmaceuticals (VRX) bonds.  Bought at 80cents on the dollar and says the co still has $10bn in equity value.  Could sell one of the many companies they've acquired if they need to cover debt payments.

Jeff Smith (Starboard Value): Activist investor.  Says settled with Yahoo (YHOO), put four new members on the board.  Notes the parts of the company are worth more than where its trading.  Core biz with $4bn in revenue, huge stake in Alibaba, Yahoo Japan, add it all up and it's more than the current market cap.  Said 'we're friendly but no one describes us as passive.'

Scott Ferguson (Sachem Head Capital):  Sold out of Zoetis (ZTS).  We noted how Pershing Square was also selling ZTS recently.  Ferguson was the one that brought the idea to Ackman to begin with (he used to work at Pershing).  Talked about how to change leadership and achieve things on behalf of investors: "Money's a great way to effectuate things" i.e. severance for getting rid of a CEO.  Says things are easier for activists these days and companies are more likely to engage. 

Clifton Robbins (Blue Harbour Group):  Activist investor.  Owns 10% of Investors Bancorp (ISBC), says it's trading at a discount to peers.  Also talked about Xilinx (XLNX), a net-cash semiconductor play; says they have some ideas as to how to utilize the balance sheet.

Michael Lewis (Author of Flash Boys and The Big Short):  Said he was surprised that both Moneyball and The Big Short were made into movies.  Said Christian Bale was dead-on with his interpretation of Michael Burry after just spending some hours with him.

Richard Chilton (Chilton Investments): Sherwin Williams (SHW): makes premium paint and coatings.  Says the company's purchase of Valspar was years in the making and they can repay the price with free cashflow in about 5 years.  Thinks there's a lot of synergies and margin overlap.  SHW does higher margins in paint/consumer and VAL does better margins in industrial coatings.  "You can't buy paint online."

John Lykouretzos (Hoplite Capital):  Takes a bit of an issue with the 'oligopoly' theme of airlines, saying it's still a competitive industry with margin pressure.  Bearish on the industry.  Main threats: excess capacity, union labor wage hikes, and of course higher oil prices.  Says that low cost carriers (LCC's) have basically destroyed the chance for legacy airlines to become a true oligopoly.  Thinks American Airlines (AAL) is the most compelling short play there.  Has some of the highest costs & exposure to rising oil.  High leverage.  Weakest FCF generation of the group.  Thinks that Southwest Airlines (LUV) can still add capacity even at higher oil prices (~$80 or so) and still generate high IRR.

John Burbank (Passport Capital):  Says China won't let outside companies 'win' especially Facebook.  "It's a hard place to win if you're not Chinese."  (While he didn't mention it, just look at Amazon's failed venture there as well).  Burbank owns Tencent (700.HK) with short Chinese Renminbi as partial hedge.  Thinks it isn't as much of a crowded trade as Facebook (FB) is.  His slide also said "Short FXI: Hedge out 'Old China' country-specific risk with China large cap ETF."

Jim Chanos (Kynikos Associates): Still short Cheniere Energy (LNG), calling it a 'pipe dream' and very expensive to peers.  Trades at 11-12x EV/EBITDA using "base case" 2021 EBITDA of $2.1bn.  Peers trading between 5-7x 2020 EBITDA.  Also commented on Alibaba (BABA) saying their accounting is dubious and that you don't really know what they're earning, calls it some of the most questionable he's ever seen. Chanos also recently talked about some of his short positions at the Sohn Conference.

For other recent hedge fund manager thoughts, head to our notes from Sohn Conference New York 2016.

Howard Marks' Talk at Google: The Most Important Thing

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is Oaktree Capital's Howard Marks.  He is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor.

Marks often shares wisdom in periodic memos that we always post on the site (you can scroll through his past letters here).  His thoughts are widely read (even by the likes of Warren Buffett) as they constantly feature enlightenment on various investing topics.

He is known for his belief of investing as part psychology and part finance.    In this talk he shares his wisdom as well as origins and inspirations for the book.

Embedded below is the video of Howard Marks' Talk at Google:

You can read Howard Marks' book The Most Important Thing here.

Kerrisdale Capital's Short Thesis on Dish Network: Calling Charlie's Bluff

Sahm Adrangi's hedge fund Kerrisdale Capital recently raised $100 million to short 1 stock.  That stock has been revealed as Dish Network (DISH).  They outlined their thesis in a presentation called "Calling Charlie's Bluff."

The title refers to DISH CEO Charlie Ergen, a noted poker player.  While most would think of Dish Network as simply that, a satellite television provider, Ergen has essentially bet the company on wireless spectrum by acquiring a ton of it with the view that there are multiple options to monetizing it.

Kerrisdale's argument is that the most likely buyers/partners for that spectrum (the major wireless carriers) don't really need as much of it these days and as such its value has decreased.  Combine this with DISH's core TV product that is in decline, and Kerrisdale thinks that DISH shares can trade between 58-80% lower.

Embedded below is Kerrisdale Capital's 31-page thesis on their short of Dish Network:

You can download a .pdf copy here.

Passport Capital Updates Hortonworks Stake

John Burbank's hedge fund firm Passport Capital has filed an amended 13G with the SEC regarding its stake in Hortonworks (HDP).  Per the filing, Passport now owns 12.7% of the company with over 7.18 million shares.

This is up from the 1.7 million HDP shares at the end of 2015.  The latest filing was due to activity on February 29th.

Per Google Finance, Hortonworks is "a provider and distributor of an enterprise-grade Hadoop solution called the Hortonworks Data Platform (HDP). The Company's platform integrates with data center technologies to enable data architectures and enables its customers to collect, store, process and analyze existing and new data types in a way that augments rather than replaces their existing data center infrastructure. It provides support subscription offerings and related professional services around the HDP, which is its open source software distribution of Apache Hadoop and associated projects. Its products include Hortonworks Data Platform and Hortonworks Sandbox. Its range of professional services are training and consulting. It caters to vertical markets, including online services, education, financial services, Government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology and telecommunications.."

Wednesday, May 11, 2016

London Value Investor Conference Agenda - Limited Ticket Availability

With just over two weeks to go until the fifth London Value Investor Conference on 26th May the final programme including presentation titles have now been announced.

On the morning of the 26th, delegates will gather in the networking area for breakfast from 7.30am, with the conference opening remarks beginning at 8.30am.  Shortly afterwards Gary Channon of Phoenix Asset Management will give the first presentation - titled "Running Winners".

There will also be more than 10 investment ideas presented in detail at the conference this year, with some interesting topics presented and discussed, plus extensive audience Q&A sessions with both Howard Marks of Oaktree Capital and Jean-Marie Eveillard of First Eagle.

There are still a limited number of tickets available for the conference but you need to book now if you want to attend - until Tuesday 17th May (or until tickets sell out).  MarketFolly readers can get a discount of £120 (inc VAT) by using the code MARKETFOLLY-MAY when booking.

Here is the full agenda for 26th May:

Tuesday, May 10, 2016

William Thorndike's Talk at Google: The Outsiders

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is William Thorndike who talks about his popular book, The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success.

This book was recommended by Warren Buffett in his 2012 annual letter. The Outsiders basically looks at 8 CEO's that have excelled at capital allocation and shareholder value creation.

The book almost has a cult-like following in that investors have latched onto the fact that management is a critical part of any investment.  As such, investors are always trying to find the next 'Outsider.'  This book has also been referenced in numerous hedge fund letters over the years.

In his talk, Thorndike talked about certain CEOs who might potentially fit the mold in today's markets.

- Jeff Bezos ( ~ AMZN): Though he admits to not studying the company too terribly in-depth, he believes Bezos is probably the best CEO example in tech given his 5-10 year focus on per share value.

- Nick Howley (TransDigm Group ~ TDG): Specialized aircraft components roll-up.

- Rales Brothers (Colfax ~ CFX): This is a re-up of the playbook they ran at Danaher, but with more cyclical businesses to start.

- Mark Leonard (Constellation Software ~ CSU.TO): Software

- Mike Pearson (Valeant Pharmaceuticals): He said it was still 'early days' in assessing this one, but obviously this one has kind of blown up.  It should be noted that Thorndike's talk was published on October 2015.

- ArchRe

- Mini Berkshire insurance companies: WhiteMountain, Allegheny, Fairfax, Markel

- NVR: Homebuilder

Embedded below is the video of William Thorndike's Talk at Google:

If you haven't already, be sure to pickup a copy of The Outsiders.

Pershing Square Offering Zoetis Block of Shares For Sale

Yesterday it was rumored that Bill Ackman's hedge fund Pershing Square Capital was shopping an over 16.8 million block of shares of Zoetis (ZTS) and the NYTimes basically confirmed it. 

Bank of America and Credit Suisse are running the transaction which would net Pershing around $800 million.  After the sale, Pershing will still own around 25 million shares of ZTS.

Pershing's board member also stepped down at Zoetis recently.

Ackman has suffered a big blow with his investment in Valeant Pharmaceuticals (VRX) which has left him reshuffling the rest of his portfolio a bit.  Part of his thesis on ZTS was that perhaps VRX might be interested in buying it.

This is the second stake that the hedge fund manager has trimmed recently.  He sold some Mondelez (MDLZ) back in March.

For more on this firm, we also posted up Pershing's latest presentation on their holdings.

ValueAct Capital Trims MSCI Stake Again

Jeff Ubben's investment firm ValueAct Capital has filed a Form 4 with the SEC regarding their stake in MSCI (MSCI).  Per the filing, they sold 91,800 shares at a price of $74.93 on May 5th.  After the sale, they still own over 3.67 million shares.

We posted about how ValueAct sold some MSCI back in March as well, as they previously owned over 6 million shares.

For more from this firm, check out Jeff Ubben's recent interview.

Per Google Finance, MSCI "together with its wholly owned subsidiaries, is a provider of investment decision support tools, including indexes, portfolio risk and performance analytics and multi-asset class market risk analytics products and services. The Company’s products include global equity indexes and environmental, social and governance (ESG) products marketed under the MSCI and MSCI ESG Research brands, its private real estate benchmarks marketed under the IPD brand, its portfolio risk and performance analytics covering global equity markets marketed under the Barra brand, its multi-asset class, market and credit risk analytics marketed under the RiskMetrics and Barra brands and its performance reporting products and services offered to the investment consultant community marketed under the InvestorForce brand." 

Monday, May 9, 2016

Stan Druckenmiller's Sohn Presentation & Transcript: The Endgame

The 2016 Sohn Conference New York just finished and we posted up notes here if you missed them.  Stan Druckenmiller of Duquese Family Office gave a presentation called "The Endgame" and the slideshow and transcript have been released.  They're embedded below:

Druckenmiller's Sohn Conference Presentation

You can download a .pdf copy here.

Druckenmiller's Sohn Conference Transcript

You can download a .pdf copy here.

And if you haven't already, be sure to check out our full notes from Sohn Conference New York featuring the likes of Larry Robbins, David Einhorn, Jim Chanos and more.

Sohn Contest Winner & Finalist Presentations: Short Dexcom, Long Amerco, Long Exor

The Sohn Investment Contest recently concluded and it was announced that the winner was Mark Grow, a Columbia Business School student who pitched a short of Dexcom (DXCM).  We posted up full notes from the Sohn Conference here.

Some of the finalist presentations have also been released, which include Alexandra Esparza, an MBA candidate at the Yale School of Management who pitched a long of Amerco (UHAL) and then Steven Wood of Greenwood Investors who pitched a long of Exor.  All of these presentations are embedded below:

Short Dexcom (DXCM) Sohn Pitch

You can download a .pdf copy here.

Long Amerco (UHAL) Sohn Pitch

You can download a .pdf copy here.

Long Exor Sohn Pitch

You can download a .pdf copy here.

Be sure to check out the rest of the investment ideas shared at the Sohn Conference in New York.

William Green's Talk at Google: Lessons From the Great Minds of Investing

This week, we're taking a look at some "Talks at Google" that focus on investing and feature authors of popular books on the subject.  Previously in one of our "What We're Reading" posts, we featured William Green's book, The Great Minds of Investing.

If you haven't already, we'd recommend checking it out.  Green has had the chance to interview many well known investors such as Seth Klarman, Howard Marks, Joel Greenblatt, Tom Russo, Mohnish Pabrai, and many more.

But also worth your time is this: the author recently had a talk at Google about Lessons From the Great Minds of Investing.  The video of his talk is embedded below:

And you can read William Green's book The Great Minds of Investing here.