Wednesday, February 8, 2017

What We're Reading ~ 2/8/17

Misbehaving: The Making of Behavioral Economics [Richard Thaler]

Honored to be listed in 2016's most influential finance Twitter accounts [Sentieo]

Shameless plug: if you don't already, follow @marketfolly on Twitter

Mitigating short exposure: learning from others' mistakes [CFA Institute]

Interview with Ed Thorp, the man who beat the casinos & markets [FT]

Stop chasing the wrong kind of growth [Harvard Business Review]

On analyst ratings and the institutional imperative [Base Hit Investing]

Old Mutual boss on how to run an active fund patiently [Daily Mail]

FIZZ: The secret history of the LaCroix fad [Bon Appetit]

How streaming is changing music consumption [HeavyBlogisHeavy]

Cannabalization, intense competition both roadblocks for Chipotle [Peridot]

The individual investors' performance incentive system [Rational Walk]

A look at NAFTA and American manufacturing [Vox]

Fidelity's bond king banks on Trump reflation trade [Bloomberg]

Facebook is trying everything to re-enter China and it's not working [WSJ]

BlackRock's robot stock-pickers post record losses [Bloomberg]

Tuesday, February 7, 2017

Becoming Warren Buffett HBO Documentary

Warren Buffett of Berkshire Hathaway was recently profiled in an HBO Documentary entitled, "Becoming Warren Buffett."  The film by Peter Kunhardt examines the life of the great investor.

Below are some notes and anecdotes:

-  He was always fascinated by numbers and it talks about how at an early age he discovered the power of compound interest.  He concluded, "It's a pretty simple concept, but over time it accomplishes extraordinary things."

- He goes to McDonald's everyday for breakfast on the way to work and has three options based on how much change his wife has given him for the day.  Yup, one of the biggest owners of American Express (AXP) pays for breakfast in cash.

- He framed newspapers from various financial crises and hung them on the wall as a reminder that "anything can happen in this world."

- As a young student, all his teachers owned AT&T at the time and he shorted the stock and showed the teachers proof to kind of spite them.

-  Buffett learned two rules of investing from Benjamin Graham: Rule 1: Never lose money.  Rule 2: Never forget rule number one.

- Doesn't hang his diploma from undergrad or graduate school, but instead the certificate from the Dale Carnegie course of public speaking, which he says changed his life since he was so scared of it.

- Charlie Munger said Buffett made a lot of money early on buying thinly traded securities that were incredibly cheap statistically ("cigar butt" investing).

- Started his first partnership with $105,100 - $100 from himself and the rest from investors.

- Buffett says, "The trick in investing is to just sit there and watch pitch after pitch go by and wait for the one in your sweet spot.  There's a temptation for people to act far too frequently in stocks simply because they're so liquid.  Over the years, you develop a lot of filters.  I do know what I call my circle of competence.  I stay within that circle.  Defining what your game is, where you're going to have an edge is enormously important."

- He later adds, "If you're emotional about investment you're not going to do well."

- Charlie Munger had a big impact on him by shifting him to look at wonderful companies at fair prices rather than fair companies at wonderful companies.

- Buffett said he spends 5-6 hours a day reading.  He likes to just sit and think.  When asked to describe what one word describes his success, he said 'focus.'

- "The biggest thing in making money is time.  You don't have to be critically smart, you just have to be patient."

- "Look for the job you'd take if you didn't need a job."

Someone else has uploaded it YouTube and the video is embedded below:

For more on the Oracle from Omaha, be sure to also check out Warren Buffett's recent interview with Charlie Rose.

Foxhaven Asset Management Shows Trivago Stake

Michael Pausic's hedge fund firm Foxhaven Asset Management has filed a 13G with the SEC regarding Trivago (TRVG).  Per the filing, Foxhaven now owns 8.7% of Trivago with over 2.61 million shares.

This is a newly disclosed equity position and the filing was made due to activity on January 25th.  TRVG recently completed its initial public offering (IPO) but is controlled by Expedia (EXPE), which owned 63.5% of the company as of the end of the third quarter in 2016.

At the end of the third quarter in 2016, Foxhaven also owned almost 800,000 shares of Expedia too.  They also had additional long exposure to the online travel booking segment via Priceline (PCLN) and MakeMyTrip (MMYT).

About Foxhaven Asset Management

This is the first time Foxhaven has been featured on the site.  Prior to founding the fund in 2013, Mike Pausic worked at Maverick Capital as head of the media and telecom team.  Foxhaven focuses on the technology, media, and telecom sector as well as consumer and internet. 

About Trivago

Per Google Finance, Trivago is "a company based in the Netherlands that operates an online hotel search platform. The platform allows users to search for, compare and book hotels. It gathers information from various third parties' platforms and provides information about the hotel, pictures, ratings, reviews and filters, such as price, location and extra options. The Company offers access to approximately 1.3 million hotels in over 190 countries via more than 50 localized websites and applications in various languages. The Company also offers marketing tools and services to hotels and hotel chains, as well as to online travel agencies and advertisers, among others. Its principal executive offices are located in Germany."

ValueAct Capital Sells Allison Transmission Shares Back to Company

Jeff Ubben's activist firm ValueAct Capital recently announced an agreement with Allison Transmission (ALSN) to sell shares back to the company, per an 8-K filed with the SEC.

Allison will buy 10.52 million shares at a price of $34.50 per share and the transaction is expected to close tomorrow.  ValueAct will no longer own a stake and its member will not seek re-election on the board of directors. 

Just yesterday, we highlighted how ValueAct also sold some Microsoft (MSFT) shares.  Given these two sales, perhaps they're looking to put capital to work in another name?

Also worth noting: Ashe Capital Management, an owner of 6.1% of ALSN, just filed a 13D noting that they'd be nominating William Harker to the board of the company in absence of ValueAct's representative.

Per Google Finance, Allison Transmission "design and manufacture commercial and defense fully-automatic transmissions. The Company manufactures fully-automatic transmissions for medium- and heavy-duty commercial vehicles and medium-and heavy-tactical the United States defense vehicles. The Company operates through manufacture and distribution of fully-automatic transmissions segment. The Company's transmissions are used in a range of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school, transit and hybrid-transit), motorhomes, off-highway vehicles and equipment (energy, mining and construction) and defense vehicles (wheeled and tracked). The Company's transmissions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name. The Company has developed over 100 different models that are used in over 2,500 different vehicle configurations."

Monday, February 6, 2017

ValueAct Capital Trims Microsoft Position, Adds To Alliance Data Systems

Jeff Ubben's activist investment firm ValueAct Capital has filed two separate Form 4's with the SEC regarding their recent activity.

ValueAct Reduces Microsoft Stake

First, Ubben's firm has reduced its position in Microsoft (MSFT).  Per the filing, ValueAct sold 11 million shares between February 1st through 3rd at prices of $63.72, $63.12, and $63.33.

After these transactions, they're left owning over 27.62 million MSFT shares. This was their top holding at the end of the third quarter

Per Google Finance, Microsoft "develops, licenses, and supports a range of software products, services and devices. The Company's segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company's products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services."

Ubben's Firm Adds To Alliance Data Systems

Second, ValueAct has also filed a Form 4 with the SEC regarding their Alliance Data Systems (ADS) stake.  Per this filing, they bought 57,400 shares on January 26th at varying prices (the bulk at $217.57 and $219.18).

After these buys, they now own over 5.87 million shares of ADS. 

Per Google Finance, Alliance Data Systems is "a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company's Canadian AIR MILES Reward Program and BrandLoyalty; Epsilon, which provides end-to-end, integrated marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company's private label and co-brand retail credit card programs."

Senator Investment Group Shows Equity Stakes in Star Bulk Carriers and Noble Corp

Doug Silverman and Alex Klabin's hedge fund firm Senator Investment Group has filed two 13G's with the SEC recently.

Senator Shows Star Bulk Carrier Equity Position (SBLK)

First, Senator has filed a 13G on Star Bulk Carriers (SBLK) indicating they own 6.83% of the company with over 4.07 million shares.  This is a newly disclosed equity position for the firm and the filing was made due to activity on January 23rd.

This was part of a private placement of common shares where Oaktree Capital and Senator pruchased at $8.154 per share.  The sale netted the company $51.5 million and they've agreed to "grant shelf registration rights to the investors for the resale of their common shares"  per a press release.

Per Google Finance, Star Bulk Carriers is "an international shipping company. The Company owns and operates a fleet of dry bulk carrier vessels. The Company's segment is operating dry bulk vessels. The Company will have a fleet of approximately 76 vessels consisting primarily of Newcastlemax and Capesize, as well as Kamsarmax, Ultramax and Supramax vessels, with a carrying capacity between 45,588 dwt and 209,537 deadweight tonnage (dwt). Its fleet, which emphasizes Capesize vessels, primarily transports minerals from the Americas and Australia to East Asia, particularly China, as well as Japan, South Korea, Taiwan, Indonesia and Malaysia. The Company's Supramax vessels carry minerals, grain products and steel between the Americas, Europe, Africa, Australia and Indonesia and from these areas to China, Japan, South Korea, Taiwan, the Philippines and Malaysia. Its vessels include Maharaj, Star Poseidon, Leviathan, Peloreus, Star Borealis, Star Angie, Star Georgia, Star Nina and Mercurial Virgo."

Senator Also Shows Noble Corp (NE) Stake

Second, the hedge fund firm also has filed a 13G on Noble (NE) indicating they own 5.76% of the company with 14 million shares.  This is another newly disclosed equity position and the activity was made due to activity on January 24th.

Per Yahoo Finance, Noble "operates as an offshore drilling contractor for the oil and gas industry worldwide. It owns and operates a fleet of mobile offshore drilling units."

Balyasny Asset Management Adds To Restoration Hardware Holdings

Dmitry Balyasny's hedge fund firm Balyasny Asset Management has filed a 13G with the SEC regarding its stake in Restoration Hardware (RH).  Per the filing, Balyasny now owns 5.41% of the company with over 2.2 million shares.

This marks an increase in their position size of over 1.85 million shares since the end of the third quarter of 2016.  The filing was made due to activity on January 30th.

Per Google Finance, Restoration Hardware is "a luxury retailer in the home furnishings marketplace. The Company offers merchandise assortments across a range of categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and child and teen furnishings. The Company classifies its sales into furniture and non-furniture product lines. The Furniture category includes both indoor and outdoor furniture. The Non-furniture category includes lighting, textiles, accessories and home decor. As of October 29, 2016, the Company operated a total of 85 retail galleries, consisting of 51 legacy Galleries, six larger format Design Galleries, seven next generation Design Galleries, one RH Modern Gallery and five RH Baby & Child Galleries throughout the United States and Canada, as well as 15 Waterworks showrooms in the United States and in the United Kingdom. In addition, as of October 29, 2016, the Company operated 28 outlet stores."

Valiant Capital Shows Yatra Online Stake

Chris Hansen's hedge fund firm Valiant Capital has filed a 13G with the SEC regarding shares of Yatra Online (YTRA).  Per the filing, Valiant now owns 13.6% of the company with over 4.37 million shares.

The filing was made due to activity on December 31st.  Yatra recently completed its initial public offering (IPO) at the end of last year.  Valiant has previously invested in the company when it was still private back in 2011.

About Valiant Capital

Chris Hansen founded Valiant Capital in 2008 after previously being a Managing Director at Blue Ridge Capital.  Valiant is a globally focused firm with many international holdings in both private and public companies and has had between $2-2.5 billion in assets under management, preferring to stay smaller to be more nimble.  Valiant returned 4.9% in 2015.

About Yatra Online

Per Google Finance, Yatra Online is "an India-based consumer travel platform and online travel agent. The Company’s segments include Air Ticketing, Hotels and Packages, and Others. Through Internet and mobile-based platform and call-centers, the Company provides the facility to book and service international and domestic air tickets to customer through business-to-consumer (B2C) and business-to-business-to-consumer (B2B2C) channel. Through an Internet and mobile-based platform, call-centers and branch offices, the Company provides holiday packages and hotel reservations. The Other segment includes the advertisement income from hosting advertisements on its Internet Websites, income from sale of rail and bus tickets, and income from facilitating Website access to travel insurance companies. It offers multiple mobile applications for a range of consumer segments and services, including Yatra, Yatra Mini, Yatra Web Check-In, Yatra Corporate, Travelguru HomeStay and Yatra Hoteliers DESTranet."