Friday, February 3, 2017

Warren Buffett's Interview With Charlie Rose: "Bought $12 Billion of Common Stocks Since Election"

Charlie Rose recently sat down with both Warren Buffett of Berkshire Hathaway as well as Bill Gates of Microsoft. 

They started off talking about the giving pledge and philanthropy and they've been surprised at the overwhelming participation. 

On business, Buffett noted that it's imperative that he be able to know and understand the business and to stay within that sphere of competence.  Of his two younger managers (Ted Weschler and Todd Combs), he notes, "I have two people who themselves have different circles of competence."  They weren't chosen because of that, but it's nice to have a huge circle he says.

He says it's harder to find acquisitions mainly because of the size of Berkshire these days.  On how he finds them, he might get a call, he might be thinking about certain areas.  Occasionally, he decides to act.

One key takeaway from the interview was that Buffett said,"We've bought $12 billion net of common stocks since the election.  (Ted and Todd) have probably bought some too." 

When asked by Rose about his purchase of airline stocks last year, Buffett said it was largely his decision to do so.

The conversation then shifted to allocation of time and Gates poignantly noted that, "You control your time.  Sitting and thinking might be a much higher priority.  It's not a proxy of seriousness that you fill every minute of your schedule."

Buffett added, "I can't buy time" and Rose noted it's the most precious resource.

Buffett thinks a 4% growth rate that the Trump Administration is targeting is pretty high and in actuality, a 2% rate would be fantastic and could potentially be possible.

Embedded below is the video of Charlie Rose's interview with Warren Buffett:

Lone Pine Capital Starts Rice Energy Position

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Rice Energy (RICE).  Per the filing, Lone Pine now owns 5.8% of the company with over 11.68 million shares.

This is a newly disclosed equity position for the firm and the filing was made due to activity on January 23rd, 2017.

Per Google Finance, Rice Energy is "an independent natural gas and oil company. The Company is engaged in the acquisition, exploration and development of natural gas, oil and natural gas liquids (NGL) properties in the Appalachian Basin. The Company conducts its operations through two segments: Exploration and Production, and Midstream. The Exploration and Production segment is engaged in the acquisition, exploration and development of natural gas, oil and NGLs. The Exploration and Production segment operates in the cores of the Marcellus and Utica Shales. The Company controls approximately 231,000 net acres in the Marcellus and Ohio Utica Shale cores. It operates approximately 1,164 drilling locations. The Midstream segment is engaged in the gathering and compression of natural gas, oil and NGL production of, and in the provision of water services to support the well completion activities of, Rice Energy and third parties."

Hedge Fund Links ~ 2/3/17

Excerpts from Viking Global's Q4 letter [ValueWalk]

The case for (some) hedge funds [ai-cio]

Kyle Bass: global markets at the beginning of tectonic shift [Yahoo Finance]

Long-short hedge funds are ditching the shorts to focus on longs [Bloomberg]

The failed quest to bring down Wall Street's most wanted man [Bloomberg]

Hedge funds strike paydirt on Actelion deal after tracking private jet [Bloomberg]

Private equity and hedge fund pros on why they won't hire you [eFinancialCareers]

Pershing Square, nine others hit with SEC 'pay to play' violations [Reuters]

Citadel pays SEC to settle charges of misleading customers [Reuters]

Harvard endowment to lay off half its staff [WSJ]

Activist investor teaming up for CSX stake [Reuters]

A hedge fund expects 'hundreds of billions of dollars' in tech deals [Business Insider]

Numerai is a crowdsourced hedge fund for machine learning experts [TechCrunch]

Scaramucci's SkyBridge to sell majority stake [StreetInsider]

Here's the indictment against Platinum Partners [Business Insider]

When your hedge fund managers buys a Ferrari, find a new manager [Bloomberg]

Thursday, February 2, 2017

Third Point's Q4 Letter: Bullish on Financials

Dan Loeb's hedge fund Third Point finished 2016 up 6.1%.  Third Point's fourth quarter letter outlines their bullish stance on markets, noting that de-regulation and tax decreases under various policies from President Donald Trump should spur US economic activity.

That said, they're still keeping an eye out on the potential for trade wars and/or inflation.

Particularly, they like financials and increased exposure to the sector in November and December: "We reallocated half our initial holdings from high-multiple, FCF businesses in payments, ratings, and P&C (which traditionally outperform during periods of deflation), to more traditional reflationary exposures in banks, brokers, and geographically, in Japan."

Third Point highlights that the bank stocks they're playing trade for less than 10x earnings with EPS growth in the high-teens.

Embedded below is Third Point's Q4 letter:

We've also posted up other letters today, so be sure to also check out Greenlight Capital's Q4 letter as well as Oaktree Capital's Howard Marks' latest memo.

Greenlight Capital's Q4 Letter: Dramatically Increased General Motors Position

David Einhorn's hedge fund Greenlight Capital finished 2016 up 8.4% and has returned 16.1% annualized since inception in 1996.

Their fourth quarter letter examines how their portfolio is positioned now that Donald Trump is president and will be trying to change policies. 

Greenlight is long various US value stocks that could benefit from corporate tax cuts (AMERCO, CC, Dillard's, DSW), they're long companies that can benefit from repatriation of foreign cash (Apple (AAPL)), and they're long companies that can benefit from demand for consumer durables (General Motors (GM), a position in which they've "dramatically increased their position."

They're also short 'bubble basket' stocks (Netflix), oil frackers, and Caterpillar (CAT).

Turning back to their thesis on GM, Greenlight writes that, "While the bears have been screaming 'peak auto' for the last couple of years, we think a strengthening job market will sustain the current upcycle and lead to better than expected credit performance at GM's finance subsidiary.  While the bears also cite long-term concerns over self-driving cars, we see a huge intermediate-term opportunity in assisted-driving cars."

During the quarter, David Einhorn's firm also exited its positions in AECOM (ACM), Michael Kors (KORS), and Take-Two Interactive Software (TTWO).   They also covered short positions in FLSmidth (Denmark: FLS), Mead Johnson Nutrition (MJN), and Reynolds American (RAI).

At the end of 2016, their largest positions in alphabetical order were: AerCap, Apple, CONSOL Energy, General Motors, and gold.  Their average exposures were 106% long and 81% short.

Embedded below is Greenlight Capital's Q4 letter:

We've posted up a bunch of letters today, so be sure to also check out Third Point's Q4 letter as well as Howard Marks' latest memo.

Howard Marks' Latest Memo: Expert Opinion

Oaktree Capital's Chairman Howard Marks has penned yet another memo entitled Expert Opinion.

He notes that, "There are no facts about the future, just opinions.  Anyone who asserts with conviction what he thinks will happen in the macro future is overstating his foresight, whether out of ignorance, hubris or dishonesty."

Embedded below is Oaktree Capital's latest memo from Howard Marks: "Expert Opinion"


We've posted up a bunch of letters today, so be sure to also check out Third Point's Q4 letter as well as Greenlight Capital's Q4 letter.