Friday, April 28, 2017

Third Point's Q1 Letter: Thesis on Honeywell, UniCredit, E.On

Dan Loeb's hedge fund firm Third Point returned 5.9% in the first quarter of 2017.  Their Q1 letter to investors was just released and outlines their thesis on stocks such as Honeywell (HON), UniCredit, and E.On.

Honeywell (HON)

Basically, they're looking for the company to spin-off its aerospace division.  They think this "would result in a sustained increase in shareholder value in excess of $20 billion.  Spinning off Aerospace would transform Honeywell into an industrial growth company with a focus on automation and productivity."


Third Point sees the first quarter as a 'turning point' for European financials as they've traded at lower valuations and UniCredit recently raised 13 billion Euros in capital in March.  They write, "We were drawn to UniCredit by its low valuation and the rights issue.  We believe in the medium-term story because of its new CEO, Jean Pierre Mustier."


"Following a spin-off of its generation assets into Uniper last year, the company has emerged as a regulated grids and renewables business that is currently misunderstood by the market and attractively priced."

To see the full thesis on all of these names, check out the full letter. 

Embedded below is Third Point's first quarter letter:

You can download a .pdf copy here.

You can also view other recent portfolio activity here.

ValueAct Capital Takes KKR Stake

Jeff Ubben's activist firm ValueAct Capital has taken around a $750 million stake in private equity firm KKR (KKR).  Partner Mason Morfit talked about the position at 13D Monitor's Active-Passive Investor Summit in New York, according to Business Insider.

This is yet another prominent firm that has jumped on the private equity train.  We've highlighted recently how Tiger Global has been building a position in Apollo Global Management.

At the presentation, Morfit called KKR a "50 cent dollar" and thinks that big firms will get even larger.

ValueAct recently returned a chunk of capital to investors as they were having trouble finding ideas in a market with stretched valuations.  But apparently they've at least found one place to park some capital in KKR.

You can view other recent portfolio activity from ValueAct here.

Per Google Finance, KKR is "a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. The Company's business offers a range of investment management services to its fund investors, and provides capital markets services to its firm, its portfolio companies and third parties. The Company conducts its business with offices across the world, providing it with a global platform for sourcing transactions, raising capital and carrying out capital markets activities. The Company operates through four segments: Private Markets, Public Markets, Capital Markets and Principal Activities. It operates and reports its combined credit and hedge funds businesses through the Public Markets segment. The Capital Markets segment consists primarily of its global capital markets business. Through its Principal Activities segment, the Company manages the firm's assets and deploys capital."

Hedge Fund Links ~ 4/28/17

The hedge fund manager that's shorting America's malls [WSJ]

Hedge funds prize open Japan [Bloomberg]

Coatue invests in Domino Data Lab [ZDnet]

On the value of doing site visits in fund manager selection [Research Puzzle]

An activist investment in Whole Foods exposes shifting power on Wall Street [NYTimes]

Wednesday, April 26, 2017

What We're Reading ~ 4/26/17

The downside of managing downside risk [Morningstar]

A short guide to short selling [Dead Companies Walking]

James Montier: market fair value is 50% lower [Finanz und Wirtschaft]

On the many price fluctuations items see on online shopping [The Atlantic]

4 things that set successful CEOs apart [Harvard Business Review]

Using Eisenhower boxes to improve productivity [Quartz]

3 ways to build a culture of better decisions [CFA Institute]

Against all odds, the US tobacco industry is rolling in money [WSJ]

Refuting the short thesis on Apple [Bireme Capital]

Sprint said to look beyond T-Mobile for other deal options [Bloomberg]

Losses are the new black [L2 inc]

The unique advantage of equity investment [Fundsmith]

Profile of the founder of Chobani [CBS]

Millennials and credit: are we missing the real story? [FICO]

On being special in investing [Reaction Wheel]

What separates champions from 'almost champions?' [NYMag]

Berkshire Hathaway Buys More Liberty SiriusXM

Warren Buffett's Berkshire Hathaway has submitted a couple of Form 4's with the SEC regarding its position in Liberty Sirius XM (LSXMA / LSXMK). 

Per the filings, Berkshire was out buying both the Series C stock (LSXMK) and the Series A stock (LSXMA).  They purchased over 3.87 million LSXMK shares across April 20th, 21st, and 24th at weighted average prices between $38.7043 and $40.62.  After these buys, Berkshire now owns 27.23 million shares of LSXMK.

They also bought over 2.47 million LSXMA shares in total across the same dates at weighted average prices between $38.6046 and $40.795.  After these buys, they now own over 13.15 million LSXMA shares.

Liberty Media's Greg Maffei also tweeted: "Nice to have Berkshire, Warren B, and Ted Weschler step up their $LSXMA investment.  Thanks.  $SIRI. #hearmysiri." And then followed it up with: "Forgot to bow to altar: $BRK.A #OmahaRules."

Given that Ted Weschler was mentioned as the investor involved in this name, it seems natural to draw similarities to a past position of his.  At his old hedge fund Peninsula, Weschler previously owned DirecTV and a large part of the thesis there was a levered buyback.  Given that Sirius XM seems to be following a similar playbook, it seems plausible that this is one of the reasons Weschler is attracted to this name as there are some similarities.  Not to mention, Sirius XM has grown subscribers consistently over the past 7 years.

Per Google Finance, Liberty Sirius XM "owns interests in subsidiaries and other companies, which are engaged in the media and entertainment industries. The Company's principal businesses and assets include its consolidated subsidiaries Sirius XM Holdings Inc. (SIRIUS XM) and Braves Holdings, LLC (Braves Holdings), and its equity affiliate Live Nation Entertainment, Inc. (Live Nation). The Company's segments are SIRIUS XM, and Corporate and other. SIRIUS XM provides a subscription-based satellite radio service. Through its subsidiaries and affiliates, the Company principally operates in North America. The Company also owns a portfolio of minority equity investments in publicly traded media companies, including Time Warner, Inc. and Viacom, Inc. SIRIUS XM transmits music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through two satellite radio systems. "

Foxhaven Boosts Trivago Stake

Michael Pausic's hedge fund firm Foxhaven Asset Management has filed a 13G with the SEC regarding its position in Trivago (TRVG).  Per the filing, Foxhaven now owns 11.4% of Trivago with over 3.42 million shares.

This marks an increase of 810,431 shares since January when we highlighted how Foxhaven had boosted its TRVG stake. The latest filing was made due to activity on April 20th.

About Foxhaven Asset Management

Foxhaven is a long/short equity hedge fund that focuses on the technology, media, and telecom sector as well as consumer and internet.  Prior to founding the fund in 2013, Mike Pausic worked at Maverick Capital as head of the media and telecom team

About Trivago

Per Google Finance, Trivago is "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."

Tuesday, April 25, 2017

Boyar Research Reports on Hanesbrands, Legg Mason, and Liberty Global

Barron’s recently ran a bullish story on Hanesbrands where they argued the stock could advance by 25%. The piece references extensively a recent report published by Boyar Research. Boyar was kind enough to provide our readers with this report as well as additional reports on Legg Mason and Liberty Global.

To receive these free reports, please visit:

Boyar Research takes a private equity approach to public market investing by identifying securities trading at a substantial discount to their estimate of intrinsic or private market value. Since 2009, the average return for each company profiled in their flagship publication Asset Analysis Focus has been 83.7%, compared with an average return of 53.3% for the S&P 500.*

Hanesbrands Inc. (HBI)

- Hanesbrands, the world’s largest basic apparel company, boasts a portfolio of first-rate brands that hold the #1 or #2 market share position in underwear, intimate apparel, hosiery, and active wear in 12 countries.

- Several issues have weighed on HBI shares over the past two years, culminating in a sharp sell-off in the stock after the Company reported poor 4Q 2016 results. HBI’s innerwear segment, which comprises 43% of sales and nearly 60% of operating profit, exhibited surprising weakness during that quarter due to soft retail traffic not being fully offset by their rapidly growing online sales. However, we do not believe that this recent weakness represents a secular shift in the purchasing frequency of HBI’s products. Rather, we believe this is a temporary situation caused by a shift of customer purchasing behavior from brick-and-mortar establishments to online distribution channels.

- To see Boyar’s estimate of intrinsic value for HBI and to receive their complimentary full report, please click here

Legg Mason, Inc. (LM)

- Legg Mason, Inc. is a formidable player within the asset management industry, possessing impressive scale (~$710 billion of AUM) and a diverse line of well-established products catering to a full range of investment styles and asset classes.

- Approximately 70% of LM’s strategies are outperforming benchmarks from one-year and three-year perspectives, and the figure for the five-year and ten-year perspectives exceeds 80%.

- The Company has also reduced its shares outstanding by 40% and has raised its dividend seven times since 2010. However, LM shares have failed to achieve significant outperformance despite the Company’s strategic advances. In large part, this likely reflects the difficult fundamentals currently impacting the actively managed fund sector.

- LM is trading at approximately 0.7% of AUM, a substantial discount from how comparable firms have historically been valued in transactions.

- To see Boyar’s estimate of intrinsic value for LM and to receive their full report, please click here

Liberty Global plc (LBTYA / LBTYK)

- Liberty Global is the largest European cable systems operator.

- Liberty Global is underpenetrated in its existing network and has plans to expand its footprint by 6-7 million homes in the coming years.

- Liberty Global shares have de-rated to ~9x EV/OCF, below their longer-term average of ~10x—offering a bargain, in our view, for a high-margin, recession-resistant business best positioned to capitalize on the secular growth in internet data usage.

- To see Boyar’s estimate of intrinsic value for LBTYK and to receive their full report, please click here

Monday, April 24, 2017

Marcato Capital's Presentation on Buffalo Wild Wings

Activist investor Mick McGuire's Marcato Capital Management has filed an amended 13D with the SEC regarding its position in Buffalo Wild Wings (BWLD).  Per the filing, Marcato has sent a letter indicating they think the board and management at the company needs to be replaced (letter here).

Marcato has also created a separate slideshow presentation and has outlined a multi-step plan to help turnaround the business: 

1) Refocus the company on its core brand and value proposition,

2) Sell stores to new and existing franchisees (targeting 90% mix of franchised stores by 2020),

3) Create a capital deployment strategy based on returns and profitability, 

4) And finally, realign management incentives to focus on returns on capital and per-share value instead of top-line growth or profit dollars.

Embedded below is Marcato's presentation on Buffalo Wild Wings:

You can download a .pdf copy here.

You can follow Marcato's presentations at the website

Market Strategist Jeff Saut on Gaining Street Smarts

Market strategist Jeff Saut has released his latest weekly investment strategy piece entitled "Street Smarts."  The title sums up exactly what his piece is about as he begins by quoting Confessions of a Street Smart Manager by David Mahoney:

"Some people can have a lot of experience and still not have good judgement. Others can pull a great deal of value out of much less experience. That’s why some people have street smarts and others don’t. A person with street smarts is someone able to take strong action based on good judgement drawn from hard experience. For example, a novice trader once asked an old Wall Street pro why he had good judgement. “Well,” said the pro, “Good judgement comes from experience.” “Then where does experience come from?” asked the novice. “Experience comes from bad judgement,” was the pro’s answer. So you can say that good judgement comes from experience comes from bad judgement."

We've said before that investing is a continual education, you never stop learning.  And while you can read all the investment books out there and learn from the mistakes of others (which is highly beneficial), sometimes you just have to make a mistake yourself to truly learn from it.

Saut's weekly strategy piece "Street Smarts" is embedded below:

You can download a .pdf copy here.

Bridger Capital Adds To Atara Biotherapeutics

Roberto Mignone's hedge fund firm Bridger Capital has filed a 13G with the SEC regarding its stake in Atara Biotherapeutics (ATRA).  Per the filing, Bridger now owns 5.2% of the company with over 1.52 million shares.

This means Bridger has boosted its position size by 725,870 shares since the end of 2016.  The filing was made due to activity on April 11th.

Per Google Finance, Atara Biotherapeutics is "a clinical-stage biopharmaceutical company. The Company is focused on developing therapies for patients with severe and life-threatening diseases. The Company operates through the business of developing and commercializing therapeutics segment. The Company is focused on developing allogeneic or third-party derived antigen-specific T-cells. T-cells are a type of white blood cell. The Company's product candidate, ATA129, is a third-party derived Epstein-Barr virus CTL for the treatment of Epstein-Barr virus (EBV). ATA188 is in development for the treatment of multiple sclerosis. ATA520, which is a third-party donor derived WT1-CTL, targets cancers expressing the antigen Wilms Tumor 1 (WT1). ATA520 is in Phase I clinical trials. The Company's T-cell product candidate, ATA230, which is a third-party derived cytomegalovirus-CTL (CMV-CTL), is in Phase II clinical trials for refractory CMV. "