Thursday, April 13, 2017

Bill Miller Wealthtrack Interview

Bill Miller recently appeared on Consuelo Mack's WealthTrack for an interview.  He's beat the S&P 500 for 15 consecutive years when he worked at Legg Mason.  Then he had a few years of underperformance and has come back with Miller Value Partners, an independent investment advisory firm. 

Here are some of the key takeaways:

-  Looks for stocks trading at a discount to intrinsic business value (present value of future free cashflow): looks for business that are naturally cash generative and buys them when free cashflow yield is 50% or more higher than the market.

-  Noted that typical value investors look for accounting value versus economic value.  Cites them missing Amazon (AMZN) as an example over the past 20 years.

-  Miller looks for "companies that can earn above their cost of capital through an economic cycle."

-  "Where you can really make significant amounts of money is when an industry changes from being one that doesn't generate economic value to one that does."  One example of this he cites is the airlines now.  Now they've had positive cashflow ever since 2009.  He owns Delta (DAL), United (UAL), American Airlines (AAL).  Consolidation has played a huge role.  As we've noted before, Warren Buffett is also now a large shareholder of airlines.

- Also owns Valeant Pharmaceuticals (VRX) equity in one fund and the bonds in another fund.  Notes that Bill Ackman has sold his VRX position.  Miller was buying around $30.  Thinks "perceived risk is way underpriced to real risk."  Thinks it could be a $50-60 stock in 3 or 4 years.

-  Miller thinks Apollo Group (APO) and Carlyle Group (CG) are cheap.  We've highlighted how Tiger Global has been buying APO as well.

-  Miller doesn't think the market is overvalued on a relative or absolute basis.  Especially compared to other asset classes it's cheap.

-  Likes Intrexon (XON), leading company in synthetic biology (think re-writing DNA). 

-  If he had to pick one stock to own for the long-term he'd pick Amazon (AMZN).  Compared it to Alphabet (GOOGL) and Facebook (FB) and their core business is the $500-600 billion ad market which is growing 5% a year.  Whereas AMZN's core business is retail.  US retail alone is $5 trillion so the total addressable market is huge.  Not to mention Amazon Web Services, etc.

Embedded below is the video of Bill Miller's Wealthtrack interview:

For more recent Wealthtrack interviews, we've also posted Consuelo Mack's interview with Joel Greenblatt.

The Wizard of Lies Movie Trailer: Bernie Madoff HBO Film

HBO has released a trailer for its new film The Wizard of Lies featuring Robert De Niro and Michelle Pfeiffer.  This new television movie tells the story of Bernie Madoff's infamous ponzi scheme. 

It premiers on May 20th on HBO and also features Hank Azaria, Alessandro Nivola, and Kristen Connolly, among others.

Embedded below is the video trailer for HBO's Wizard of Lies:

There has been a surge of recent documentaries, shows, and films on finance.  We've highlighted HBO's Becoming Warren Buffett as well as Showtime's Billions if you're interested.

Hayden Capital's Thesis on Zooplus

Fred Liu's Hayden Capital has penned an in-depth write-up on Zooplus (ETR: ZO1), a leading online retailer of pet food and supplies in Europe.

They see a return of around 20% per year as the company has 50% market share in its category and is the low cost provider.

Hayden notes the company's 94% sales retention rate and 31% annualized sales growth since 2010.

As far as risks go, they cite what any retailer fears: the looming Amazon (AMZN) threat.  Hayden counters that AMZN's European distribution centers aren't equipped to handle heavy, bulky items and points to's success in the US market. 

Also, Hayden acknowledges that there's some degree of 'key man' risk here as CEO Cornelius Patt has been a 'visionary' and losing him would be a big detriment.

Embedded below is Hayden Capital's full thesis on Zooplus:

You can download a .pdf copy here.

Berkshire Hathaway Trims Wells Fargo Stake To Stay Below 10% Threshold

Warren Buffett's Berkshire Hathaway has withdrawn its application to the Federal Reserve which would have let them take their ownership stake above 10%.  Now, they'll sell 9 million shares instead in order to remain below the 10% level.

As of the end of 2016, Berkshire owned 479 million WFC shares. The latest news indicates Berkshire has sold 7.13 million WFC shares and plans another 1.87 million share sale soon. 

Berkshire has said that "investment or valuation considerations" did not play a part in their decision to sell as it looks like they're merely just trying to stay under the threshold. 

For more on Berkshire, here's Warren Buffett's most recent interview on Apple and other topics.

Per Google Finance, Wells Fargo is "a diversified financial services company. It has three operating segments: Community Banking, Wholesale Banking, and Wealth and Investment Management. The Company offers its services under three categories: personal, small business and commercial. It provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries. It provides other financial services through its subsidiaries engaged in various businesses, including wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, computer and data processing services, investment advisory services, mortgage-backed securities servicing and venture capital investment."

Wednesday, April 12, 2017

What We're Reading ~ 4/12/17

Matchmakers: The New Economics of Multisided Platforms [David Evans]

Beating the odds when you launch a new venture [Harvard Business Review]

Consolidated learnings: What I think I know about investing [Medium]

Inside Blue Apron's meal kit machine [Bloomberg]

Is it last call for craft beer? [NYTimes]

Americans haven't been this optimistic about stocks for nearly two decades [Bloomberg]

The gap between sentiment and certainty is stunning [WSJ]

On the ramifications of Brexit [Arp Investments]

How Canada completely lost its mind over real estate [Macleans]

Why Costco (COST) loves store sales: you try shipping a tub of mayo [WSJ]

Q&A with Airbnb's CEO Brian Chesky [Fortune]

Mobile video to grow almost 900% by 2021 Cisco predicts [Fierce Wireless]

Inside Verizon's go90, a video app mix between YouTube and Netflix [Business Insider]

Your focus should be on saving money, not investment returns [Collaborative Fund]

Instagram (FB) 'influencer' marketing is now a $1 billion industry [MediaKix]

Quick video on Zara: How a Spaniard invented fast fashion [YouTube]

Tuesday, April 11, 2017

JANA Partners Files 13D on Whole Foods Market

Barry Rosenstein's hedge fund firm JANA Partners has filed a 13D with the SEC regarding shares of Whole Foods Market (WFM).  Per the filing, JANA now owns 8.3% of the company with 26.31 million shares (including options to purchase 3.53 million shares).

The filing indicates JANA was buying throughout February, in early March and late March, and into early April.  The bulk of their buying came between $29 and $31 per share.

As to why they purchased shares, the 13D filing notes that JANA is looking to:

"(1) addressing the Issuer's chronic underperformance for shareholders, (2) changing the Issuer's board and senior management composition and addressing governance, (3) optimizing the Issuer's real estate and capital allocation strategies, including discussing the Issuer's "365" small store format and opportunities to improve returns on invested capital, (4) pursuing opportunities to improve performance by advancing its brand development and by addressing core operating deficiencies in areas including customer loyalty and analytics, category management and analytics, technology and digital capabilities, procurement and buying practices, pricing strategies and value proposition communication, and online offerings, (5) improving in-store execution, including labor scheduling and management, management of inventory and shrink levels, stocking practices, product layout, in-store signage, private label program strategy and management, and assessing broader cost structure and operating opportunities, (6) evaluating opportunities to re-engineer the Issuer's suboptimal and cost-disadvantaged grocery procurement and distribution strategy, such as by internalizing distribution or pursuing other hybrid strategies, in order to diversify away from its existing primary wholesale distribution partner, while in the interim implementing better management and increased auditing of this relationship to reduce costs, improve execution, and limit such distribution partner's influence, and (7) initiating a review of strategic alternatives particularly in light of the Issuer's apparent unwillingness to engage in discussions with third parties regarding such alternatives."

Per Google Finance, Whole Foods Market is "engaged in the business of natural and organic foods supermarket. The Company operates approximately 456 stores in the United States, Canada and the United Kingdom. Its stores have an average size of approximately 39,000 square feet, and are supported by its distribution centers, bake house facilities, commissary kitchens, seafood-processing facilities, a produce procurement center, and a specialty coffee and tea procurement and roasting operation, among others. It offers over 30,000 organic stock keeping units (SKUs), covering various areas of its store, including produce, packaged goods, bulk, frozen, dairy, meat, bakery, prepared foods, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, body care, pet foods and household goods. The Company's brands include 365 Everyday Value, Allegro Coffee, Whole Foods Market, Whole Paws, and Engine 2 Plant-Strong. It also offers approximately 400 temporary exclusives. ."

Tiger Global Buys More Apollo Global Again

Chase Coleman's hedge fund firm Tiger Global has filed a Form 4 with the SEC regarding its position in Apollo Global Management (APO). 

Per the filing, Tiger Global purchased 1,266,800 shares in total across April 6th and 7th at weighted average prices of $25.254 and $25.301.  After these purchases, Tiger Global now owns over 25 million shares of APO. 

This comes after the hedge fund has been buying Apollo Global over the past two months.

Per Google Finance, Apollo Global Management is "an alternative investment manager in private equity, credit and real estate. The Company raises, invests and manages funds on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors. The Company's segments include private equity, credit and real estate. The private equity segment invests in control equity and related debt instruments, convertible securities and distressed debt investments. The credit segment invests in non-control corporate and structured debt instruments, including performing, stressed and distressed investments across the capital structure. The real estate segment invests in real estate equity for the acquisition and recapitalization of real estate assets, portfolios, platforms and operating companies, and real estate debt, including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities."

Monday, April 10, 2017

Sohn New York Conference & Investment Contest 2017

Since 1995, the Sohn Investment Conference in New York has been the premier investing event.  It features top hedge fund managers sharing their latest insights and ideas in order to benefit the Sohn Conference Foundation's work to end childhood cancer.

This year's conference is coming up fast, so be sure to register for the conference before it sells out.

Sohn New York Event Details

When: May 8th, 2017

Where: David Geffen Hall, Lincoln Center, New York City

Sohn New York Speakers List 2017

David Einhorn, Greenlight Capital

Bill Ackman, Pershing Square Capital

Jeff Gundlach, DoubleLine Capital

Clifton Robbins, Blue Harbour Group

Josh Resnick, Jericho Capital

Larry Robbins, Glenview Capital

Davide Serra, Algebris Investments

Brad Gerstner, Altimeter Capital

Keith Meister, Corvex Capital

Debra Fine, Fine Capital Partners

Chamath Palihapitiya, Social Capital

Tal Ben-Shahar, Potentialife

Kevin Warsh, Hoover Institution

To hear the latest investment ideas from these top managers next month, sign up for the New York Sohn Investment Conference here.

Sohn Investment Idea Contest

Also, the Sohn Investment Idea Contest is now live.  Pitch your best idea with a 12-month horizon and have it judged by David Einhorn, Bill Ackman, Joel Greenblatt, Seth Klarman, and Larry Robbins.

The winner of the contest will then present their idea in front of 3,000 people at the Sohn Investment Conference in New York.

You can enter the idea contest here.

Kase Capital Short Wingstop Presentation

Whitney Tilson's hedge fund firm Kase Capital has released a slide deck on its short position in Wingstop (WING).  This is Kase's largest short position.

He notes that while the company is growing rapidly, the stock's valuation is "absurd", trading at 52x trailing EPS and 29x trailing EBITDA.

Tilson points out that same store sales growth is decelerating and the company's gross margin has also declined significantly. 

Embedded below is Kase Capital's presentation on why they're short Wingstop:

You can download a .pdf copy here.

Betting on Zero Trailer: Documentary on Bill Ackman's Fight Against Herbalife

Bill Ackman and Pershing Square's short bet against Herbalife (HLF) has been dragging on for quite some time now.  Simply put, he argues the company is a pyramid scheme.

Now, a documentary has been released called Betting on Zero.  It details Bill Ackman's 'holy war' against the company and also touches on Carl Icahn's long position. 

The documentary is available on iTunes now, but here's a teaser of what you can expect.

Embedded below is the video trailer for Betting on Zero:

For more on this fund, we've detailed Pershing Square's 2016 annual report.