Friday, July 29, 2016

ValueAct Takes Trinity Industries Stake, Trims Microsoft

Jeff Ubben's activist firm ValueAct Capital has filed two disclosures with the SEC today.

ValueAct Shows New Trinity Industries Stake

First, the investment firm has filed a 13D with the SEC regarding shares of Trinity Industries (TRN).  Per the filing, ValueAct now owns 6.8% of the company with over 10.39 million shares.

The filing shows ValueAct was out buying July at prices between $18.69 and $21.50.  Also, in June they entered into Equity Forward Transactions with Societe Generale.

The 13D also notes that ValueAct intends to have conversations with members of the company's management and board of directors to enhance shareholder value.

Per Google Finance, Trinity Industries is "a diversified industrial company that owns a range of businesses providing products and services to the energy, transportation, chemical and construction sectors. The Company's products and services include railcars and railcar parts; parts and steel components; the leasing, management and maintenance of railcars; highway products; aggregates; inland barges; structural wind towers; steel utility structures; storage and distribution containers, and trench shields and shoring products. The Company's segments include the Rail Group, Railcar Leasing and Management Services Group, Construction Products Group, Energy Equipment Group, Inland Barge Group and All Other Groups. Its Rail Group is a manufacturer of freight and tank railcars in North America used for transporting a range of liquids, gases and dry cargo, through Trinity Rail Group. The Company's Railcar Leasing and Management Services Group is a provider of rail industry services in North America."

Ubben's Firm Trims Microsoft Stake

Second, in a Form 4 filed with the SEC, ValueAct has sold shares of Microsoft (MSFT).  Per the filing, ValueAct sold 18 million shares in total on July 27th and 28th at prices of $56.38 and $55.95.

After these sales, they still own over 38.62 million shares.

Per Google Finance, Microsoft is "is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers. The Company operates in five segments: Devices and Consumer (D&C) Licensing, D&C Hardware, D&C Other, Commercial Licensing, and Commercial Other. The Company’s products include operating systems for computing devices, servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. It also offers cloud-based solutions that provide customers with software, services and content over the Internet by way of shared computing resources located in centralized data centers. It provides consulting and product and solution support services."

For more from this investor, we've also highlighted another position they've been buying recently.

Hedge Fund Links ~ 7/29/16

At world's largest hedge fund, sex, fear and video surveillance [NYTimes]

Investors say stop paying fund of hedge funds [NYPost]

How solo fund managers stack up against the team players [FT]

The strategy of hedge fund selection [Global Investor Magazine]

Profile of Bronte Capital's John Hempton [Bloomberg]

The optimal size of hedge funds [Harvard Law]

Inside McKinsey's private hedge fund [FT]

The hedge fund industry needs a makeover [FT]

ValueAct to pay record $11 million to settle antitrust lawsuit [WSJ]

After Brexit, Steve Cohen doubles down [NYTimes]

10 tips for new Wall Street interns from Citadel [Business Insider]

A hedge fund or a fraud? [Bloomberg]

Thursday, July 28, 2016

Corsair Capital Q2 Letter: Quintiles Transnational / IMS Health Thesis

Jay Petschek and Steven Major's hedge fund Corsair Capital is out with its second quarter letter. 

In it, they touch on the unique world of negative interest rates we now live in and how investors are reacting:

"The U.S. stock market is currently trading at approximately 16x-17x next year’s earnings. This equates to an earning’s yield of approximately 6% after-tax and 8% on a pre-tax basis - a big gap to 10-year treasury bonds yielding just 1.5%. As long as investors believe that stocks will generally continue to earn what they currently do (even with zero growth), equities will seem to be mathematically quite cheap compared to bonds. Of course, just because bonds are expensive doesn't mean investors have to invest in stocks. However, if not stocks, where will investors turn? It just seems the answer is TINA – there is no alternative – as all assets are historically expensive and stocks may prove to be the proverbial 'best house in a lousy neighborhood.'"

They also provide updates on numerous positions, including Diamond Resorts International (DRII), Olin Corp (OLN), Clearwater Paper (CLW), Voya Financial (VOYA), Countrywide plc (CWD),  and IAC/InterActive (IAC).

Lastly, they feature a write-up on Quintiles Transnational (Q) which is set to merge with IMS Health (IMS).

Embedded below is Corsair's Q2 letter:

For more recent hedge fund letters, we've also posted:

- Third Point's Q2 letter

- Greenlight Capital's Q2 letter

Marcato Capital Takes Terex & Buffalo Wild Wings Stakes

Mick McGuire's activist firm Marcato Capital Management has recently taken stakes in two companies.

Marcato Discloses Terex (TEX) Stake

First, Marcato just filed a 13D with the SEC regarding shares of Terex (TEX).  They now own 5.1% of the company.  CNBC reported that the firm will urge a spinoff and restructuring but support the CEO.

Per Google Finance, Terex is "a lifting and material handling solutions company. The Company is focused on providing its operations and delivering solutions for a range of commercial applications, including the construction, infrastructure, mining, manufacturing, transportation, energy and utility industries. It operates through five segments: Aerial Work Platforms (AWP), Construction, Cranes, Material Handling & Port Solutions (MHPS), and Materials Processing (MP). The AWP segment designs, manufactures, services and markets aerial work platform equipment, telehandlers and light towers. The Construction segment designs, manufactures and markets over two primary categories of construction equipment and their related components, and replacement parts. The Cranes segment designs, manufactures, services, refurbishes and markets mobile cranes. MHPS designs, manufactures, services and markets industrial cranes. The MP segment designs, manufactures and markets materials processing equipment."

McGuire Starts Buffalo Wild Wings (BWLD) Position

Second, McGuire has also filed a 13D with the SEC regarding shares of Buffalo Wild Wings (BWLD).  Per the filing, Marcato now owns 5.1% of the company with 950,000 shares.  The stake is comprised of various common stock holdings as well as the purchase/sale of various options which you can view here at the very bottom.

This is a newly disclosed position.  They were active in shares and options as early as June 20th and as late as July 22nd.

The filing notes they've already had discussions with directors and will continue to have discussions.

Per Google Finance, Buffalo Wild Wings is "an owner, operator and franchisor of restaurants featuring various menu items. The Company's restaurants feature a bar, which offers a selection of 20 to 30 domestic, imported and craft beers on tap, as well as bottled beers, wine and liquor. The Buffalo Wild Wings restaurants feature various menu items, including its Buffalo, New York-style chicken wings spun in one of its signature sauces from sweet to screamin' hot, which includes Sweet barbeque (BBQ), Teriyaki, Bourbon Honey Mustard, Mild, Parmesan Garlic, Medium, Honey BBQ, Spicy Garlic, Asian Zing, Caribbean Jerk, Thai Curry, Hot BBQ, Hot, Mango Habanero, Wild and Blazin', or signature seasonings, Buffalo, Desert Heat, Chipotle BBQ, Lemon Pepper, and Salt & Vinegar. Its restaurants include a multi-media system, a bar and an open layout. It operates Buffalo Wild Wings, R Taco and PizzaRev restaurants, as well as sells Buffalo Wild Wings and R Taco restaurant franchises."

Coatue Management Reduces Twilio Position

Philippe Laffont's hedge fund firm Coatue Management has filed an amended 13G with the SEC regarding their position in Twilio (TWLO).

Per the filing, Coatue now owns 3.8% of TWLO with 437,152 shares.  This is down from the 625,000 shares they previously reported owning.  This filing was due to activity on July 25th.

Per Google Finance, Twilio "offers Cloud Communications Platforms. The Company enables developers to build, scale and operate real-time communications within software applications. It Programmable Communications Cloud software enables developers to embed voice, messaging, video and authentication capabilities into their applications via its Application Programming Interfaces. The Super Network is its software layer that allows its customers' software to communicate with connected devices globally. It interconnects with communications networks around the world and continually analyzes data to optimize the quality and cost of communications that flow through its platform. The Programmable Communications Cloud consists of software products that can be used individually or in combination to build rich contextual communications within applications. The Programmable Communications Cloud includes Programmable Voice; Programmable Messaging; Programmable Video; Use Case APIs, and Add-on Marketplace."

Wednesday, July 27, 2016

Third Point Q2 Letter: Long Didi Chuxing & Energy Credit

Dan Loeb's hedge fund Third Point is out with its Q2 letter.  In it, they talk about their new private investment in Didi Chuxing, a Chinese ridesharing service that currently has more market share than Uber in China.  Apple (AAPL) also recently invested. 

Third Point also updates their stake in Baxter (BAX) and talks about their increased energy credit exposure.

Third Point's Q2 letter is embedded below:

You can download a .pdf copy here.

For other recent hedge fund letters, check out Greenlight Capital's Q2 letter.

Greenlight Capital Q2 Letter: Long Chemours (CC)

David Einhorn's hedge fund Greenlight Capital is out with its Q2 letter.  They feel that the 'Brexit' won't be a significant economic event by itself.

Turning to specific stocks, Greenlight outlines its thesis on Chemours (CC), a recent spin-off from DuPont (DD). 

They note, "CC should benefit from the continued recovery of TiO2 prices.  Further, EU regulations are driving adoption of CC's next generation refrigerant Opteon, which should increase fluoroproduts profits.  Lastly, management can reduce costs and shutter unprofitable businesses now that the company is independent of DuPont.  We expect the stock to appreciate as investors refocus on the earnings power of the business, which we think will approach $2.00 in 2017.  Our overall average purchase price is $6.58."

The hedge fund also exited numerous longs during the quarter: Macy's (M), American Capital Agency (AGNC), Baxter (BAX), Oil States International (OIS).

They also covered short positions after the Brexit volatility, including: Intuitive Surgical (ISRG), Under Armour (UA), and United Rentals (URI).

At the end of Q2, Greenlight's largest disclosed longs (in alphabetical order) were: AerCap, Apple, CONSOL Energy, General Motors and gold.  Average exposure was 96% long and 69% short.

Greenlight's Q2 letter is embedded below:

H/T ValueWalk

For other recent hedge fund letters, we also posted up Third Point's Q2 letter here.

What We're Reading ~ 7/27/16

Find ideas that are good and different [Medium]

The values of value investing [IMAUSA]

The promise of Regrexit [George Soros]

How borrowed shares swing company votes [WSJ]

The downside of past performance [A Wealth of Common Sense]

On Amazon, eBay, and eCommerce arbitraging [Entrepreneur]

The best paid CEOs run some of the worst performing companies [WSJ]

An in-depth look at food chain Chili's [GQ]

India's audacious plan to bring digital banking to 1.2 billion people [Bloomberg]

India's Flipkart has an Amazon problem [Bloomberg]

The new class war [Economist]

China: a transition well underway [ValueWalk]

How one investor approaches valuation [Medium]

Why you should understand what's happening with Italian banks [SNBCHF]

Why ultralow rates are here to stay [WSJ]

Warren Buffett deputy Ted Weschler makes his mark [Institutional Investor]

FCC sets stage for next generation of wireless: 5G [LATimes]

Watching Brazil's rich: a full-time job [NYTimes]