Friday, October 28, 2016

Julian Robertson Likes Microsoft, Air Canada, Celgene

Hedge fund legend Julian Robertson of Tiger Management sat down with CNBC to talk about markets recently and what stocks he's fond of these days.

He really likes Microsoft (MSFT) and thinks its cloud exposure, new management has "brought a revival of Bill Gates' initial strategy."

Robertson also likes Air Canada and says they're doing all the right things, cheap at 3.5x earnings.  Thinks it's well-run at a very cheap price.

Looking at stocks selling at depressed levels, he pointed to biotech and particularly Celgene (CELG).  He noted the fear that Hillary Clinton would put some of these companies out of business.  Robertson says "a lot of them have a lot of promise" and he prefers ones that have sold off a lot.  He was a big holder of Gilead (GILD) but said he's basically 'given up' because the company hasn't put its massive cash pile to work.

Turning to media, he said that, "I have always regrets about selling anything of Reed Hastings."  He regrets not being in Netflix (NFLX) but says "it's not the world's cheapest stock" so he says they 'removed' themselves. 

Turning to currencies, the hedge fund manager thinks the Peso is undervalued as it has largely been a 'Trump trade' recently.

On the hedge fund industry, he said "(The shakeout) is caused by increased competition from more hedge funds."

For young people in finance, he said he'd tell them to go to an industry that's lacking people.

For more from this hedge fund manager, we also posted another recent interview with Julian Robertson as well.

JANA Partners Files 13D on HD Supply Holdings

Barry Rosenstein's activist investment firm JANA Partners has filed a 13D with the SEC regarding shares of HD Supply Holdings (HDS).  Per the filing, JANA now owns 8.1% of the company with 16.25 shares.

This is an increase of over 13.25 million shares since the end of the second quarter when they owned 2.99 million HDS shares.  The filing was made due to activity on October 17th.

The 13D notes they were buying throughout September and into October mostly between $30-32 per share.  HDS currently trades around the $33 level.

JANA has already met with management to discuss strategic alternatives, as well as financial and operational means of maximizing value for shareholders.

For more from this manager, we posted up a recent interview with Barry Rosenstein here.

Per Google Finance, HD Supply Holdings is "an industrial distributor in North America. The Company provides a range of products and value-add services to approximately 500,000 customers in maintenance, repair and operations, water infrastructure and residential and non-residential construction sectors. The Company operates in three segments: Facilities Maintenance, Waterworks, and Construction & Industrial-White Cap. Facilities Maintenance distributes MRO products, provides value-add services and fabricates custom products. Waterworks distributes lines of water and wastewater transmission products, serving contractors and municipalities in the water and wastewater industries for non-residential and residential uses. Construction & Industrial-White Cap distributes specialized hardware, tools, engineered materials and safety products to non-residential and residential contractors."

Hedge Fund Links ~ 10/28/16

Excerpts from Viking Global's Q3 letter [ValueWalk]

Ray Dalio: 'big, bad outcomes' if ECB doesn't keep buying bonds [Business Insider]

Are sports betting hedge funds coming? [ESPN]

Former Corvex exec gets seed money [Reuters]

Tiger Global lifts net long exposure [ii alpha]

How Steve Cohen amassed a $1 billion art collection [Fortune]

Scrutinizing Sequoia Fund: are quality and value back in? [Citywire]

Thursday, October 27, 2016

Notes From Invest For Kids Chicago 2016: Grant, Zell, Brosens, Lykouretzous

The 8th annual Invest For Kids Chicago investment conference just ended and below are notes from the event.  Just click each link to go to that presentation.  Enjoy!

Notes From Invest For Kids Chicago Conference 2016

- Jim Grant (Grant's Interest Rate Observer): Bearish on BlackRock (BLK)

- Sam Zell (Equity Group): Fireside chat

- John Lykouretzos (Hoplite Capital): Long Sealed Air (SEE)

- Frank Brosens (Taconic Capital): Long Kaupthing

- Ed Garden (Trian Partners): Long Bank of New York Mellon (BK)

- Jonathan Gray (Blackstone Group): On real estate

- Leah Zell (Lizard Investors): Long BIM, Short Woolworth's

- Josh Wolfe (Lux Capital): Long nVidia (NVDA), Short Intel (INTC)

- Matt Halbower (Pentwater Capital): 2 investment ideas

- William Heard (Heard Capital): Long Fair Isaac (FICO)

- Arthur Kaz (Greenbriar Asset Management): Long Avaya bonds

For more investment conference coverage, be sure to also check out our notes from the recent Sohn San Francisco conference as well as the Great Investors Best Ideas Dallas conference.

Jim Grant Bearish on BlackRock: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Jim Grant of Grant's Interest Rate Observer who was bearish on BlackRock (BLK).

Jim Grant's Presentation at Invest For Kids Chicago 2016 

•    So much data – how do we know what is true?

•    Easy to be overwhelmed

•    Narratives as a belief system

•    Active investors accept or reject narratives; passible investors always accept the narrative by default

•    Markets are episodically efficient; they are no more coolly analytical than the people in them or the algorithms they write

•    Interest rates are certainly low – not good for my business model

•    Since 1997, the number of public companies in U.S. has been cut in half

•    Now we have the first nominally negative bond yields in 5,000 years

•    If Fed were late to raise rates it wouldn’t be the first time; likewise wouldn’t be the first time the bond market underestimated the fallibility of human beings

•    Bearish on Blackrock (BLK) 

•    Its motto should be “built for a time of falling rates, rising asset prices, massive inflows…”

•    Tailor-made for the financial moment

•    Hand-in-glove with the Fed – Blackrock is the Federal Reserve’s Wall Street doppelganger

•    BLK took in 18% of all mutual fund and ETF inflows in 2015

•    Assets may come, assets may go

•    Margins? There is a price war in passive. Fees are ~69 bps at BLK versus 15 at Vanguard. Further compression is likely.

•    BLK is at 18x EPS vs. 14x industry average

•    Massive amounts of insider selling at BLK without any buys

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Sam Zell's Presentation at Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Sam Zell of Equity Group Investments.  He had a fireside chat to talk real estate.

Sam Zell's Presentation at Invest For Kids Chicago 2016

•    70% of what we do is in assets other than real estate

•    We prefer a monopoly, but we’ll settled for an oligopoly; we look at costs to entry and barriers to entry and replacement cost

•    We’ve done a lot of roll-ups over the years, and each begins with the idea that we don’t necessarily believe in synergies

•    Domestic versus international investments: going outside of the U.S. means sacrificing the rule of law; trading growth for rule of law; tricky to weigh those considerations, but emerging markets are where the growth is; fertility and economic growth create demand; biggest challenge we have today is where the demand will come from:

o    International investments also bring the risk of currency volatility, which requires extra patience
o    Prefer inflation-sensitive asses when currency is an issue
o    Mexico, Brazil, Colombia, India are biggest markets for us; very optimistic about Latin America
o    We like investing in a country when it is on the cusp of reaching investment grade
o    Doesn’t always work; we’ve been fortunate to move in and out at good times; Brazil recently was like handing the car keys to a teenager…sometimes they wreck it
o    European demographics are horrible, and only Japan might be worse; hard to see growing demand

•    Why does negativity abound among the investing class? We’re only wealthier in the past few years in terms of a fiat currency – are we moving from a responsible developed world to one dominated by competitive devaluations? And where is the demand? Our compliance costs have gone up 5x over the past eight years. So productivity is at an all-time low while regulation is at all-time high – unlikely to make historical rates of return in such an environment.

•    Look at the stock market. One could say that given the level of investment and growth it is overpriced. Real estate assets are at an all-time high. Inflation is at all-time lows. The result is not likely to be long-term positive results. More likely to have a recession, a cleansing, a market clearing before U.S. can grow. We can’t pretend and extend our way to growth.

•    On being pessimistic compared to Jon Gray or Barry Sternlicht: “I’m not as optimistic, but then I use my own money.”

o    Not finding ways to deploy capital in CRE today. Happy to sell to Jon and Barry.

•    On the traits of a good leader: it starts with 11th commandment, which is thou shalt not take oneself too seriously. Smile, make fun of yourself. Lead by example, not pontification.

•    The definition of a schmuck is someone who has reached his goals.

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Frank Brosens Long Kaupthing Icelandic Bank: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Frank Brosens of Taconic Capital who pitched long Kaupthing, one of three Icelandic banks.

Frank Brosens' Presentation at Invest For Kids Chicago 2016

•    $6 billion AUM, event-driven and multi-strategy

•    Risks are high due to central banks

•    We seek very low correlation in our investments; we want no beta or duration; look for non-economic actors and forced sellers

•    Angst in the hedge fund industry as high as ever, but the opportunity is actually pretty good •    Returns likely to be muted versus historical levels

•    Long Kaupthing, one of three Icelandic banks

•    Iceland’s banking industry swelled in the prior decade to unsustainable levels – assets/GDP of ~10x

•    We are largest Kaupthing creditor, having acquired most of the stake in 2012 and 2013

•    In 2015 our partner in London got restricted and entered the negotiations with Icelandic task force

•    In December 2015 the liquidation process finally commenced; payouts began in January 2016 but only 1/3 of proceeds distributed so far

•    >200 assets in 12 countries; disclosure is very opaque – have to be a detective

o    Our partner went person by person within Kaupthing, often using LinkedIn, to piece together relationships and affiliations; then talked to local businessmen and brokers to triangulate asset values

o    Today, 16% cash, 33% operating assets and real estate, 25% stake in stable Icelandic bank, 25% other/misc.

o    We believe our notes are worth par, with some upside beyond that, against a price of 86

o    Most asset sales are coming in the next few quarters, so time horizon should be one year or less

Be sure to check out the rest of the presentations from Invest For Kids 2016.

John Lykouretzos Long Sealed Air: Invest For Kids Presentation

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is John Lykouretzos of Hoplite Capital who pitched long Sealed Air (SEE).

John Lykouretzos' Presentation at Invest For Kids Chicago 2016

•    $2.6 billion AUM, Tiger Cub, equity long/short, established 2003

•    Largest holding is Sealed Air (SEE)

•    Started in bubble wrap, now has three businesses

•    Highly integrated into customers’ processes = good pricing power

•    History of management was very good and then quite bad; new CEO named in 2012 and turnaround, results have been impressive; overhauled strategy, executives, pricing, cost structure, compensation; focus now on FCF

o    Turnaround is far from over – [EBITDA] margins have another 400 basis points to expand

•    Pricing power remains, even after CEO has aggressively raised price multiple times in recent years; customers have no choice; also now getting paid as a percentage of the savings generated for the customer
o    Estimate 1-2% price increases per year through 2022; mix improving too; 2% volume growth

•    Limited capital intensity and no M&A appetite – 10% of shares likely to be repurchased each year

•    Normalized FCF per share going from ~$2.89 in FY16 to $4.49 in FY18

•    Diversey (cleaning and sanitation segment) is somewhat of a comp to Ecolab; acquired in 2012 in an ill-conceived move, leaving the company over-levered and lacking direction

o    Will spin off this business; it could grow faster as an independent company – it needs investment in its salesforce, whereas SEE’s other businesses do not

•    Target price: $60 in 2016, $70 in 2017, $84 in 2018, $102 in 2019

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Jonathan Gray on Real Estate: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Jonathan Gray, head of real estate at Blackstone who talked about real estate.

Jonathan Gray's Presentation at Invest For Kids Chicago 2016

•    16% net return to Blackstone

•    Our edge is scale and conviction

•    We seek an opportunity to buy it, fix it, sell it

•    Timing on Hilton and EOP deals in 2007 was poor, but still made 3x our investors’ money because we had the right structure and we didn’t panic; both were good assets and while levered they had reserves and no covenants; key was not being forced to sell; and had 2/3 of EOP assets not been sold 90 days after closing to delever, we wouldn’t be sitting here

•    Airbnb has reduced hotels’ pricing power, but most are leisure travels; business travels often still want hotels

•    Record occupancy across hotel industry

•    Good opportunity in logistics but a real challenge for retail, especially “generic consumer supply” retail

•    We’re looking to own in areas that are exciting and driven by technology/innovation: Bay Area, Seattle, New York

•    Risks today: sharp jump in rates due to wage inflation; political crisis leading to economic crisis in Europe; China deceleration gets worse

o    All are risks but none are base case

•    Sam Zell says I’m too optimistic but I think we’re likely to continue slow growth; housing recovery has legs; banks are in good shape; realistic but trying to find opportunity in slow growth world

•    Powerful urbanization trend in Chicago – people want to come here and live in the city, with companies like McDonald’s and Conagra following them

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Ed Garden Long Bank of New York Mellon: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Ed Garden of Trian Partners who pitched a long of Bank of New York Mellon (BK).

Ed Garden's Presentation at Invest For Kids Chicago 2016

•    Long Bank of New York Mellon (BK)

o    $1.3 billion invested; Garden on board since Dec. 2014

•    We invest in great companies when undermanaged, underperforming, underappreciated; we try to work with management to become best in class at everything; we usually take a board seat

o    Eliminate management’s information advantage over board

o    Find problems, identify opportunities to attack

•    No hedging, long only, dislike the activist label

o    Income statement focus, not balance sheet

•    BK fits our risk profile: provides critical infrastructure, has good capital, is fee-driven (not NIM driven), has huge scale, and has opportunity to improve operations with cyclical upside as a bonus

•    Progress so far: 9% reduction in real estate owned; leaner cost structure; five new board members; returning $2.75 per share to shareholders in 12 months ended 6/30/17; margins and EPS up

•    25% discount to the market valuation; hurts to have “bank” in our name; most earnings streams at cyclical trough

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Leah Zell Long BIM, Short Woolworth's: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Leah Zell of Lizard Investors who pitched long BIM, short Woolworth's.

Leah Zell's Presentation at Invest For Kids Chicago 2016

•    “The Grocery War Zone”

•    Case study of Aldi’s amazing success over the years; see also “Bare Essentials” by Brandes

o    A limited product range of everyday basics that sell fast

o    Commitment tot be the price leader in the marketplace

o    Extensive use of private label offerings

o    Bare bonds no-frills operations

o    Straight dealings with customers, employees, and vendors

o    Decentralized management with minimal corporate overhead (cash management is only centralized function)

•    Long BIM  

•    Same ideas apply to BIM in Turkey, whose slogan translates to “retail at wholesale prices”

•    Very low operating expenses

•    Low share of fragmented Turkish market

•    All expansion funded with cash flow

•    Since 2005 IPO, 26% CAGR in revenue, 34% in net income; >40% ROIC and ROE; net cash balance sheet

•    Trades at 20x 2017 EPS now, but at 15% revenue growth, flat margins and no multiple expansion, still a double by 2020

•    Short Woolworth’s in Australia 

•    Largest grocer but weaker as compared to Coles

•    Aldi now competing with 400 stores too

•    Woolworth’s now pursuing a restructuring, but too little too late? Needs a 3G makeover a la Heinz Kraft

•    At 3.5% operating margin with single-digit sales declines worth AUD $14.50, down 40%

•    Consumers today want either a premium product or the lowest cost – everything in between is getting squeezed

•    Low cost is powerful (see Ryanair) but hard to execute

o    Need a simple concept, ruthless execution, and a loop wherein scale widens the moat

o    If you find a great business like this, hold on for the long term

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Matt Halbower Long Turquoise Hill & VMWare Tracking Stock: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Matt Halbower of Pentwater Capital who pitched Turquoise Hill (TRQ) and VMWare tracking stock (DVMT).

Matt Halbower's Presentation at Invest For Kids Chicago 2016

•    $3.4 billion AUM

•    Long Turquoise Hill (TRQ) 

•    Copper and gold miner with one mine in Mongolia; 51% owned by Rio Tinto

•    Phase II development on underground mine that will increase output 4x; requires spending $5 billion over next five years

•    Balance sheet is attractive: no debt, $1.4 bn cash, $4.1 bn receivable from Rio Tinto

o    Negative $3.1 billion enterprise value

•    At 7x 2021 EBITDA, worth $8 per share, but likely taken private sooner

•    Rio Tinto has a new CEO, and he has made many public comments about his bullishness on copper; Rio Tinto has engaged bankers regarding its stake in TRQ; logical outcome to take private, likely around $6 per share

•    Long DVMT, VM Ware tracker issued by Dell 

•    VM Ware balance sheet is cash rich; stock is 20% cheap to peers; lots of FCF and buybacks

•    Tracker is trading at 35% discount to VM Ware, much wider than typical 10% discount

o    Discount likely due to Dell as non-investment grade issuer, even though Dell is generating a lot of cash and rapidly delivering – will be IG soon

•    Agreement gives Silver Lake ability to IPO its Dell shares under certain conditions at certain points over the next two years; if so, DMVT tracker can be taken out at a premium

•    IPO seems more likely than not, in which case we think the discount closes; if VM Ware also performs as expected opportunity to make 2x on DMVT

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Josh Wolfe Short Intel, Long nVidia: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Josh Wolfe of Lux Capital who pitched short Intel (INTC) and long nVidia (NVDA).

Josh Wolfe's Presentation at Invest For Kids Chicago 2016

•    Founder of Lux Capital, $750 million VC fund

•    Science background

•    Has Bill Gates on one of his companies’ boards (only board other than Microsoft and Berkshire)

•    Seeks truly radical change and disruptive technology

•    Lux is differentiated by longer horizon of 10 years

•    Best way to predict the future is to invent it

•    Gap between sci-fi and sci-fact is shrinking

•    Companies

o    Kymeta: meta-physics in satellites for transportation applications; Gates on board of directors

o    Planet Labs: tiny satellites

o    Orbital Insight: data analytics and artificial intelligence using big data, often sold to hedge funds

o    Zoox: CPU (multi-cores) going to GPU (hundreds of cores); “these guys are the second coming of Jobs and Woz)

o    Nervana Systems: just sold to Intel

•    Short Intel (INTC) – it is a shell of its former self; it is trying to buy success via M&A; nobody coming out of top schools wants to work there

•    Long nVidia (NVDA), on the other hand, which is ascendant -- $850 million of FCF this year going to $1 billion next year

o    NVDA is the “arms dealer” to all of the companies we’re backing

Be sure to check out the rest of the presentations from Invest For Kids 2016.

William Heard Long Fair Isaac (FICO): Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is William Heard of Heard Capital who pitched long Fair Isaac (FICO).

William Heard's Presentation at Invest For Kids Chicago 2016

•    Long Fair Isaac (FICO)

•    Misunderstood, synonymous with credit scores but has a much broader, better business

•    60% applications, 25% credit scores, 15% tools

•    Valuation seems rich on P/E and P/BV but still a good opportunity

•    Not just levered to consumer credit and mature, saturated markets -- $8 billion total addressable market, so a move from current 3% share to 5% means hundreds of millions in revenues

•    Shrinking share count: -57% since 2004

•    Have beaten quarterly estimates more often than not in recent quarters

•    Only six analysts cover the company

•    $150 price target at 22x forward EPS

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Arthur Kaz Long Avaya Bonds: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Arthur Kaz of Greenbriar Asset Management who pitched long Avaya bonds.

Arthur Kaz's Presentation at Invest For Kids Chicago 2016

•    Long Avaya bonds

o    7% senior secured 1st lien notes worth par within a year

o    Also buying 2nd lien notes at 43

•    Company likely to file for Chapter 11 protection as soon as next month

•    Revenue declining in shift from hardware to software, but margins are offsetting -- -7% sales but +7.7% EBITDA margins

•    Lots of special charges and add-backs that can soon be addressed

•    $200 million of interest expense

•    Believes there is $850 million of EBITDA

o    At 6x and with 4x leverage, believes first liens get 76 cents of cash and stock for ~2/3 of equity in reorganized company

o    Room to be wrong on both EBITDA and multiple

Be sure to check out the rest of the presentations from Invest For Kids 2016.

Wednesday, October 26, 2016

Market Folly Exclusive Discount: Florida's Largest Family Office Conference

Market Folly's partner, The Family Office Club, is lowering the price for you to access their largest event of the year.  The Family Office Super Summit is an incredible conference experience, featuring an audience of 700+ attendees, 250+ family offices, and 50+ family office speakers on stage.

Market Folly readers receive $400 off admission, so you can attend the event for only $299.  Simply use the registration code "Save400" when signing up:

Your week starts with an early arrivals cocktail reception on November 28th, a fully-catered conference session with multiple networking breaks on November 29th, and our final day on November 30th with panels, presentations, and a build your own Bloody Mary Bar to send you off to a week's worth of art, culture, and fun in Miami at the country's biggest private art festival, Art Basel.

For more information and speaker line-up visit:

If you have any questions about the event you can give the Family Office Club a call at (305) 503-9077 and they can help you get signed up with this exclusive discount.

What We're Reading ~ 10/26/16

The $108 billion man who has beaten the market [WSJ]

Cash: the most hated asset class on the planet [Felder Report]

What you can learn from family business [HBR]

On the future of video [REDEF]

The intelligent industrial revolution [nVidia]

Five market insights from Peter Lynch [Ivanhoff]

Explaining what made the internet 'break' recently [Gizmodo]

U-Haul parent Amerco (UHAL): ready to move [Barrons]

Arbs stay on sidelines of AT&T, Timer Warner deal [WSJ]

Private equity is sitting a ton of cash [ai-cio]

Interview with CEO of new exchange IEX [Bloomberg]

Why negative churn is such a powerful growth mechanism [Tom Tunguz]

WeChat works to maintain startup culture as it matures [WSJ]

Pershing Square Exercises Chipotle Options

Bill Ackman's activist firm Pershing Square Capital Management filed an amended 13D with the SEC regarding their position in Chipotle (CMG).  Per the filing, Pershing's ownership stake remains unchanged at 9.9% of the company.

However, the filing notes that they exercised forward purchase contracts on CMG on October 20th.  Total trade amount was just over $947 million and yielded them over 2.32 million shares of Chipotle common stock.

Chipotle just reported earnings yesterday and the stock is trading down 8% today.

You can view other recent Pershing Square portfolio activity here.

Per Google Finance, Chipotle "operates Chipotle Mexican Grill restaurants. The Company's Chipotle Mexican Grill restaurants serve a menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads. The Company operates approximately 1,970 Chipotle restaurants throughout the United States, over 10 in Canada, seven in England, four in France and one in Germany. The Company's restaurants include over 10 ShopHouse Southeast Asian Kitchen restaurants, serving Asian-inspired cuisine. The Company owned and operated approximately three Pizzeria Locale restaurants, a fast casual pizza concept, resulting in a totaling of approximately 2,010 restaurants. The Company sells gift cards which do not have an expiration date."

Tuesday, October 25, 2016

Notes From Great Investors Best Ideas Conference (GIBI) Dallas: Einhorn, Pickens, Gabelli

Below are some notes from the 2016 Great Investors Best Ideas (GIBI) conference in Dallas, TX.  It featured prominent investors sharing investment ideas to benefit the Michael J. Fox Foundation for Parkinson's research and Vickery Meadow Youth Development Foundation.

Notes From Great Investors Best Ideas (GIBI) Dallas Conference 2016

David Einhorn (Greenlight Capital):  Likes Mylan (MYL), thinks the Epipen situation is overblown relative to the rest of their business as they're mainly in generic drugs.  "So the earnings that we're looking at in 2018 are in the low $6's and we think only about 25 cents of it comes from EpiPen, so you're gonna earn something in the high $5s, excluding EpiPen and the stock's today in the mid $30's."

Contrasted the situation to that of Mallinckrodt (MNK) which bought QuestCor, a formerly highly shorted hedge fund name.  Their Acthar Gel drug has raised prices from $40 in 2001 up to a whopping $40,000 a dose but you don't hear about it as much because less people use it but says they're more exposed to potential health care focus on lowering drug prices given Acthar is a much larger portion of MNK's profit. 

Thinks General Motors (GM) is cheap and can earn its entire market cap before Tesla turns a profit.  Laid it out as follows:  stock could fall 3/4 and still has enough to pay the dividend.  Another quarter of the earnings are stock buybacks so you're basically getting a 5-6% share reduction, a 5% dividend so you're almost getting a 11% return just by sitting around. 

Thinks the Rite Aid (RAD) deal closes and separately also sees upside in Chemours (CC).  You can view his thesis on Chemours in Greenlight's Q2 letter.

Talked about the active vs passive investing debate.  Noted that "It seems to me that passive money management strategies are fundamentally momentum strategies.  In other words, the more the stock goes up, the more it becomes weighted in the index.  The more it becomes weighted in the index, the more important it becomes.  It continues going up, it doesn't ever revert."  Also called stocks like Apple (AAPL), Herc Holdings (HRI), and CIT (CIT) 'very cheap stocks.'

Boone Pickens (BP Capital):  Sees oil at $60 by the end of 2016 and up to $70 by the end of next year.  Likes EOG Resources (EOG) as well as Pioneer Natural Resources (PXD). Says 'you can't miss' on the later, argued that the only thing that can mess up his thesis is a recession.  Says PXD has a huge amount of oil.  (In the past we've posted how David Einhorn has/had been short PXD.)  Pickens says he's up 300% this year

Mario Gabelli (GAMCO Investors): Likes Herc Holdings (HRI), recent spin-off from Hertz Global (HTZ),  as a play on infrastructure: thinks EBITDA margins widen up to 1000 basis points.  Says the biz is growing 4-5% and is a highly fragmented biz but with 3 major players (other two being Ashtead (LSE:AHT) and United Rentals (URI).  Thinks stock triples over next 5 years.  He also posted about HRI on his Twitter account here.

Andy Beal (Beal Financial): He was pretty bearish and argued that government policies are basically depriving them of potential investment opportunities and basically said to get out of everything.  Talked up rental real estate.

Lisa Hess (SkyTop Capital):  Formerly of Loews, now manages SkyTop.  Her pick was Constellium (CSTM) as a proxy for more use of aluminum in automobiles etc.

Caroline Cooley (Crestline Investors):  Long Shutterfly (SFLY).  Says they have 60% market share and likes it as a growth play.  Said she's not worried about competition from the likes of Amazon (AMZN) and others like Snapfish.  Cited Apple trying and failing to compete with a similar service.  Says SFLY earns ten times that of its next biggest competitor, giving them a huge advantage.  Likes new CEO Chris North (previously of Amazon UK) and says company has some potential partnerships in the works and has bought back stock in the past.

Ray Nixon (Barrow Hanley Mewhinney & Strauss):  Talked about active vs passing investing.  Argued Buffett could potentially buy Phillips 66 (PSX) around $100 per share.  We've highlighted how Buffett has been accumulating PSX.

For more coverage of other recent investment conferences, head to our notes from the Sohn San Francisco conference.

Balyasny Asset Management Ups Oasis Petroleum Stake

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has filed a 13G with the SEC regarding its stake in Oasis Petroleum (OAS).  Per the filing, Balyasny now owns 6% of OAS with over 13.75 million shares.

This is an increase of over 10.17 million shares since the end of the second quarter when they only owned 3.58 million shares.  The filing was made due to activity on October 18th.

We also just recently highlighted how SPO Advisory reduced its Oasis Petroleum stake this month as well.

Per Google Finance, Oasis Petroleum is "an independent exploration and production company. The Company is focused on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. Its segments include Exploration and Production, which is engaged in the acquisition and development of oil and natural gas properties; Well Services, which performs completion services for the Company's oil and natural gas wells operated by Oasis Petroleum North America LLC (OPNA), and Midstream Services, which performs salt water gathering and disposal and other midstream services for the Company's oil and natural gas wells operated by OPNA. The Company's projects include Williston Basin, West Williston and East Nesson. It also operates a well services business through Oasis Well Services LLC (OWS) and a midstream services business through Oasis Midstream Services LLC (OMS)."

Inaugural Sohn Australia - Hearts and Minds Investment Leaders Conference (Marks, Zell, Ho & More)

The Sohn Conference Foundation has announced a partnership with the Hearts & Minds Investment Leaders Conference to create the inaugural Sohn Australia - Hearts & Minds Investment Leaders Conference.

This will be the premier investment conference in Australia and will take place on November 11, 2016 at the Sydney Opera House.  Like the other Sohn events around the world, it will feature top fund managers sharing investment ideas to benefit charity and good causes. 

Proceeds from Sohn Australia will be dedicated to medical research and care within the prestigious Victor Chang Cardiac Research Institute as well as the Black Dog Institute, MS Research Australia and JDRF Australia.

For more about the event and to register, head to

Sohn Australia 2016 Speakers List

- Howard Marks, Oaktree Capital
- Leah Zell, Lizard Investors
- Shane Finemore, Manikay Partners
- John Ho, Janchor Partners
- Madeleine Beaumont, BlackRock Asset Management
- Anthony Aboud, Perpetual
- Peter Cooper, Cooper Investors
- Hamish Douglass, Magellan Financial Group
- Patrick Hodgens, Macquarie Investment Management
- Philip King, Regal Funds Management
- Robert Luciano, VGI Partners
- Michael Messara, Caledonia
- Kerr Neilson, Platinum Asset Management
- David Prescott, Lanyon Asset Management
- Geoff Wilson, Wilson Asset Management
- John Pearce, UniSuper Management
- The Hon. Paul Keating, Former Prime Minister of Australia
- The Hon. Mike Baird, MP, Premier of New South Wales, Australia
- Dr. Silviu Itescu, Mesoblast

Event Details

When: November 11, 2016

Where: Sydney Opera House, Sydney Australia

RegistrationYou can click here to register for the event

Monday, October 24, 2016

Bill Miller Thinks We're in a Secular Bull Market, Talks Stocks He Likes

Value investor Bill Miller of LMM Investments appeared on CNBC today and thinks we're in a secular bull market that began in March 2009.

"Bonds are unattractive in my view.  I believe we hit a double bottom in bonds in the summertime... 35 year bull market in bonds is over."

"As long as stocks yield more than bonds, stocks are attractive."

Miller is fully invested and says, "Cash earns zero, why do I want something that earns zero?"

He likes One Main Financial (OMF), bought in the spring, still thinks it's 'crazy cheap.'  Thinks smaller financials are attractive, mentioned MGIC (MTG) and Radian (RDN), mortgage insurers. 

Miller also likes big financials as well: Bank of America (BAC), Citigroup (C), JPMorgan (JPM).  Value investor Rich Pzena also likes financials, as he mentioned in his interview last week.

Bill Miller has owned Amazon (AMZN) since the IPO and still owns it today.  He says that was one of the best decisions he's ever made, and one of the worst has been selling any shares of it.  It's his largest position and says people have misunderstood AMZN's valuation from the beginning.  "Amazon's total addressable market is just so much bigger than any other company on earth."

He also talked about Twitter (TWTR), saying he sold half of his call options when it was in the $20s, and thinks it's a unique asset as a 'network of interests.'  He thinks they need a fulltime CEO and suggested they could perhaps switch to a paid monthly platform.  "We own Twitter because of the optionality."  He think it has a floor of $15-16.

Miller also owns various homebuilders such as Lennar (LEN) and TriPointe (TPH).  Feels builders will grow double-digits for the next few years.

On airlines, Miller still owns them and says Delta (DAL) is trading at a 15% free cash flow yield and will generate $5 billion in free cash and return 75% of that to shareholders.  He likes United (UAL) with more upside as the margins are depressed and they've got new management there.

Miller also commented on former hedge fund hotel Valeant Pharmaceuticals (VRX):  "It's probably the most toxic stock in the overall market.  It's blown a hole in Ackman's portfolio, it cost Bob Goldfarb, one of the best investors in our generation his job.  Our cost is from $20-35, we just bought more last week." 

He says they have 2 issues: the legacy issue of transitioning new leadership and then the debt load.  He thinks it doubles in 3 years as the company has a lot of cashflow and will look to sell non-core assets.

He also talked about Netflix (NFLX), noting it's an incredible company and he's owned it twice before, but thinks it's expensive now.  Also thinks Tesla (TSLA) is expensive and most energy plays are as well, especially the integrated players.

For more from prominent investors, check out David Tepper's recent interview, as well as Keith Meister's thesis on YUM China