Friday, March 3, 2017

Third Point Trims Baxter International Stake

Dan Loeb's hedge fund firm Third Point has filed an amended 13D and a Form 4 with the SEC regarding its stake in Baxter International (BAX).  Per the filing, Third Point now owns 8.5% of BAX with just over 46 million shares.

Per the Form 4, they sold over 5.9 million shares on February 28th at $50.35.  As detailed in our Hedge Fund Wisdom newsletter, Baxter has been Third Point's top position for some time, with a stake worth over $2 billion.  You can view the rest of Third Point's portfolio in the brand new issue.

Per Google Finance, Baxter International is "provides a portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics, and pharmacy automation, software and services. The Company operates through two segments: Hospital Products and Renal. Its Hospital Products business manufactures IV solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps, inhalation anesthetics, and biosurgery products. The business also provides products and services related to pharmacy compounding, and drug formulation. The Renal business provides products and services to treat end-stage renal disease, or irreversible kidney failure and acute kidney injuries."

For more on this hedge fund, also check out Third Point's Q4 letter.

ValueAct Capital Ups Bioverativ Position

Jeff Ubben's activist investment firm ValueAct Capital has filed an amended 13D on its stake in Bioverativ (BIVV).  Per the filing, ValueAct now owns 7.5% of the company with over 8.13 million shares.

This is up from their previous stake of 7.7 million shares and the filing was made due to activity on February 28th. 

The 13D also notes that ValueAct received 6.48 million shares in connection with physical settlement of the forward contracts we previously outlined that they owned.

For more from this firm, also check out Jeff Ubben on the future of shareholder activism at a recent panel.

Per Google Finance, Bioverativ is "focused on the discovery, research, development and commercialization of therapies for the treatment of hemophilia and other blood disorders. It markets approximately two products, including ELOCTATE [Antihemophilic Factor (Recombinant), Fc Fusion Protein], and ALPROLIX [Coagulation Factor IX (Recombinant), Fc Fusion Protein], extended half-life clotting-factor therapies for the treatment of hemophilia A and hemophilia B, respectively. ELOCTATE and ALPROLIX use a process known as Fc fusion to link recombinant factor VIII and factor IX, respectively, to a protein fragment in the body known as Fc. The fusion of the factor with the Fc protein fragment uses a naturally occurring pathway and is designed to extend the half-life of the factor thereby making the product last longer in a person's blood than various factor therapies. Its pipeline includes BIVV 001(rFVIIIFc-VWF-XTEN) and BIVV 002 (rFIXFc-XTEN)." 

Hedge Fund Links ~ 3/3/17

Ray Dalio is stepping down from managing Bridgewater [Business Insider]

Paul Tudor Jones's new hedge fund pitch: much lower fees [WSJ]

On Bill Ackman's crusade against Herbalife [New Yorker]

Excerpts from Tourbillon's letter [Business Insider]

On expensive research and cheap hedge funds [Bloomberg]

Carl Icahn hires Harvard geneticist [CNBC]

More cash likely to flow out of hedge funds again this year [CNBC]

Shareholder activism at Arconic points to a new wave [Dealbook]

Wednesday, March 1, 2017

What We're Reading ~ 3/1/17

The Tao of Charlie Munger [David Clark]

Excellent write-up on Costco (COST) [Scuttlebutt Investor]

YouTube bets it can convince cordcutters to pay for TV [Bloomberg]

Also, YouTube tops 1 billion hours of video a day [WSJ]

The man who broke Ticketmaster [Motherboard]

Cinemark is undervalued [Forbes]

A pitch on Grupo Televisa (TV) [Barrons]

Grit: a complete guide on how to be more mentally tough [James Clear]

Why facts don't change our minds [New Yorker]

Long-term investing in an age of small attention spans [Safal Niveshak]

How Indian families took over the Antwerp diamond trade [Qz]

The fast rise and slow demise of daily deals company LivingSocial [Washington Post]

3G Capital's purchases and their profit margins [Economist]

Amazon's antitrust paradox [Yale Law Journal]

Student debt in America has hit a new record [Bloomberg]

Tuesday, February 28, 2017

SPO Advisory Ups Zayo Group Stake

John Scully's investment firm SPO Advisory has filed a 13G with the SEC regarding its position in Zayo Group (ZAYO).  Per the filing, SPO now owns 5.2% of the company with over 12.68 million shares.

This marks an increase of over 1.88 million shares since the end of 2016 when they owned 10.79 million shares.  The filing was made due to activity on February 17th.

You can view the rest of SPO Advisory's portfolio in the brand new issue of Hedge Fund Wisdom.

Per Google Finance, Zayo Group is "a provider of bandwidth infrastructure in the United States, Canada and Europe. The Company operates in five segments, including Dark Fiber Solutions, Network Connectivity, Colocation and Cloud Infrastructure, Zayo Canada and Other. Its key products include leased dark fiber, fiber to cellular towers and small cell sites, wavelength connections, Ethernet, Internet Protocol (IP) connectivity and cloud services. Its products and services enable high-bandwidth applications, such as cloud-based computing, video, mobile, social media and machine-to-machine connectivity. As of June 30, 2016 the Company owned fiber networks in 300 metro markets, including metro areas, such as New York, Chicago, San Francisco, Paris, and London, as well as smaller metro areas, such as Allentown, Pennsylvania, Fargo, North Dakota, and Spokane, Washington. The Company also provides its network-neutral colocation and interconnection services utilizing its own data centers."

Joel Greenblatt Interview With Consuelo Mack's Wealthtrack

Joel Greenblatt of Gotham Funds recently sat down with Consuelo Mack's Wealthtrack to talk about his hybrid approach to investing where he combines indexing with his active long/short strategy.

Greenblatt is known for generating insanely good returns (34% annualized) in his original Gotham Capital vehicle from 1985 to 1995. 

He took advantage of spin-offs, post-bankruptcy equities, and other plays.  He wrote about his strategy in a really good book that has a cheesy title:  You Can Be a Stock Market Genius.

But nowadays he's focused on some other strategies, and he dives into that in the interview.

Embedded below is the video of Wealthtrack's interview with Joel Greenblatt:

Monday, February 27, 2017

David Tepper Still Long Stocks & Short Bonds

Appaloosa Management's David Tepper has told Scott Wapner at CNBC Fast Money Halftime Report that he's still long stocks and short bonds.  Here's the quote:

"Why are stocks and bonds acting differently?  It's as if they're reacting to two different economies.  Could be that there's too loose monetary policy still around the globe.  It suggests it's affecting the bond market more than stocks."

Here's the video:

To see what stocks Appaloosa is long, check out the newly released issue of our premium newsletter.

Warren Buffett Doubled Apple Stake in January: CNBC Interview

Berkshire Hathway's Warren Buffett sat down for an interview with CNBC's Becky Quick.  Earlier today we posted up Warren Buffett's 2016 annual letter which was just released.

Here's the takeaways from the interview:

- Between right before the election and now, he's bought $20 billion worth of stocks.  Wasn't driven by the election results or anything like that, all just individual equity analysis.  Thinks stocks are cheap given interest rates being where they are.  Would much rather have money be in stocks rather than Treasury bills.

- Has more than doubled his Apple (AAPL) stake in 2017.  Berkshire originally held a smaller position in AAPL (most likely from Ted Weschler and Todd Combs, his portfolio managers).  In the fourth quarter of 2016, Buffett ramped up buying Apple and established over a $6 billion position.  Now he says he doubled his AAPL stake in January.  He bought 120 million AAPL shares after previously owning 57 million shares at the end of 2016.  He now owns $17 billion worth of AAPL, but hasn't bought any shares since the most recent earnings report.  One of Todd/Ted owns an additional 10 million shares, so Berkshire's total exposure is now 130 million AAPL shares.

- Why did Buffett buy Apple?  "Because I liked it."  He also added that he likes CEO Tim Cook's ability to retain consumers and his capital deployment.  "Apple strikes me as having a sticky product, and an enormously useful product to people that use it."  Buffett himself doesn't own an iPhone.  "The continuity of the product is huge and the degree to which their lives center around (the iPhone) is huge."

- Commented he thinks's (AMZN) Jeff Bezos is the best manager out there.  Buffett doesn't own AMZN and admits it was probably a mistake, but he didn't buy because retail is a tricky business to figure out.  Buffett "doesn't have a good answer" for not investing in it.  He didn't understand the power of the model.

- "It absolutely baffles me who buys a 30-year bond."  Getting 3% for 30 years doesn't make sense to him.

- Thinks the typical hedge fund "2 and 20" fee model "is just ridiculous."  Says the fees make people rich, but won't make the investors rich.

- "Self driving cars will be adopted if they're safer. If they're safer, there's less in the way of insurance costs; that brings down premium volume significantly."  Says it will hurt GEICO's business significantly if it happens.  "If I had to take the over/under on whether in 10 years 10% of the cars would be self-driving, I'd take the under."  Lots of brains and billions of dollars being spent here, so it could come sooner than he thinks.  But admits it'll be negative for auto insurers.

Video 1 on Buying Stocks & Apple

Video 2 on Why Apple

Video 3 on Amazon

Video 4 on Treasuries

Video 5 on Hedge Fund "2 and 20" fee system

Video 6 on Self Driving Cars & Insurance

Video 7 on American Dynamism

For more from the Oracle of Omaha, check out Warren Buffett's 2016 annual letter which was just released.

Warren Buffett's 2016 Annual Letter

Berkshire Hathaway's Warren Buffett has released his 2016 annual letter.  In it, he touches on Berkshire's performance and doles out some investing insight.  Here's some quick takeaways:

- Best book Buffett read in 2016: Phil Knight's Shoe Dog about the founding of Nike. (You can view the rest of Buffett's recommended reads here.)

- Blasted professional money managers / active management about the fees they charge.  Said people should stick with low-cost index funds.

- Update on his bet of which will outperform: the S&P 500 versus a pool of 5 fund of hedge funds over the course of 10 years.  The S&P is trouncing with a 85.4% total return thus far, while the very best of the FoF's has returned 62.8% while others have only returned in the single digits.

- Later Buffett writes: "Finally, there are three connected realities that cause investing success to breed failure. First, a good record quickly attracts a torrent of money. Second, huge sums invariably act as an anchor on investment performance: What is easy with millions, struggles with billions (sob!). Third, most managers will nevertheless seek new money because of their personal equation – namely, the more funds they have under management, the more their fees."

- Berkshire's portfolio managers Todd Combs and Ted Weschler are now managing over $10 billion each.

Embedded below is Warren Buffett's 2016 annual letter:

You can download a .pdf copy here.

Be sure to also check out Charlie Munger's annual meeting too.

For more recent letters from top investors, check out Third Point's Q4 letter, as well as Greenlight Capital's Q4 letter, and finally the latest memo from Oaktree Capital's Howard Marks.