Friday, May 11, 2018

Hedge Fund Links ~ 5/11/18


Inside the strange odyssey of hedge fund manager Eddie Lampert [Vanity Fair]

Do hedge funds profit from public information? [SSRN]

Hedge funds that do the most research will post the best returns [CNBC]

Activist ValueAct sets sights on Citigroup [WSJ]

At short selling conference, hope springs eternal [Institutional Investor]

More hedge funds closed than opened in 2017 [Bloomberg]

Third Point seeks to launch blank check company [Reuters]

Time to go long David Einhorn [Forbes]

Hedge fund manager reportedly owes $1 billion in taxes [CNBC]

A sidelined Wall St legend bets on bitcoin [New Yorker]

The last days of Whitney Tilson's hedge fund [Institutional Investor]


Wednesday, May 9, 2018

What We're Reading ~ 5/9/18


Factfulness: Ten reasons we're wrong about the world [Hans Rosling]

Retail: is the beauty industry 'Amazon proof?' [FT]

The hyperfragmentation of retail and why the winners are digital ad platforms [Medium]

Attack of the micro brands [Medium]

Big beer struggles to tap into shifting consumer trends [Food Dive]

Morrisons' recovery is underway but is it in the share price? [UK Value Investor]

Behind the rise of activist short sellers [AFR]

Why T. Rowe Price likes Alphabet, Amazon, Facebook [Barrons]

A seed investing framework [Medium]

The Chinese unknown that's making Africa's phones [Bloomberg]

China wants its tech firms back, are CDRs the answer? [Bloomberg]

Why there's a worldwide shortage of vanilla [The Economist]

The Canadian king of New York: inside the rise of Brookfield [Bisnow]

At Uber, new CEO shifts gears [New Yorker]

Mark Zuckerberg on Facebook's hardest year, and what comes next [Vox]

Deep fiber: the next internet battleground [Deloitte]

CRISPR: the gene-editing tool revolutionizing biomedical research [CBS News]

Where's the invisible hand when you need it? [Stanley Druckenmiller]

The importance of high standards [Medium]


Tourbillon's Jason Karp on Invest Like The Best Podcast

Jason Karp, founder of hedge fund Tourbillon Capital recently appeared on Patrick O'Shaughnessy's podcast, Invest Like The Best, and he talked about a range of investing topics.  We posted extensive notes from the conversation with the full audio below.


On The Differences Between Public and Private Investing These Days

Years ago, 40-50% of stock market volume came from fundamental allocators.  Today it's less than 10%, so 90% of trading activity is coming from passive, quant, CTAs, risk premium captures, etc.  The vast majority of trading then is not coming from people who are concerned with 'what does this company do?' etc.  This leads to multi-day or even multiyear dislocations.

"The time for convergence between cashflows and the fundamentals of a business and stock price is usually 3-5 years at worst."

He said private companies tapping venture capital can now gain massive scale (i.e. Uber) without even going public.  Over the past 5 years there's been an 'explosion' of capital via VC's etc. 

"I believe the trends of why people allocating so aggressively privates is because the public markets have gotten harder. And people don't want to deal with daily, monthly mark-to-market."

He thinks there's a lot of edge left in private equity and a "more linear relationship between effort and outcome."  While that's applicable to public market investing, your time horizon has to be around 5 years.  But if you or your investors have a shorter horizon, it's less so.


On His Investment Style

"If I can find deep value, where the cashflows are growing, which is extremely rare, then that's the best case scenario.  My primary first variable is: 'are the cashflows growing?' Because growth solves a lot of sins."  If cashflows are growing, you can be wrong on the valuation.

They'll take the price today and instead of doing a DCF, he'll do it in reverse and try to figure out what's priced in today's stock and what would have to happen for it to be worth x.

He says that with deep value stocks, most have problems.  "All the cheap stocks have things that are very, very wrong with them.  So you're inherently in an adverse selection pool to try and find the frog that you can kiss that turns into a prince, when most of them are frogs and you're going to get warts on your face.  I just think there's an easier game to play."

On general investment advice he's learned over the years: "It's very important for you to keep your consumer hat on at all times, and remember that your gut instinct about how you feel about the product and experience... is so important."  He compared it a bit to a Peter Lynch-esque approach.  It helps you spot trends much earlier.


Talking Stocks

He thinks Facebook (FB) and Alphabet (GOOG) are surprisingly cheap given how entrenched they are in your everyday life.  He says FB's Instagram specifically is going to grow like crazy with businesses.  There's highly cyclical companies that are trading at around the same valuations, which is kind of crazy.

3 types of edge in market:  information edge, which is largely gone.  Analytical edge still exists and it's based on how you process information versus others.  Structural edge is where he sees the most opportunity: being able to stomach volatility via long-term holding etc. 

"There's more opportunity than I've ever seen in my career for duration... ever."  He says there's so many stocks that screen poorly and others that screen extremely well and are getting very crowded.

He thinks quality, safe, low volatility stocks are very overextended and then there's others that are more value and a little hairier... the disconnect between fundamental value and where the price is, is the largest he's seen in his career.


Industries To Watch For The Future

Karp feels health and wellness is one of the most interesting places to be doing research both in public and private markets right now.  The megatrend here is people focusing on less processed foods, not caring about brand, mainly just wanting quality products.  He thinks the trend is here to stay because once people find out about all the chemicals in their food and how it affects test animals or humans, there's no turning back.  And a lot of it will be demographics since millennials are so young and already focused on this.

He also feels cannabis is going to be one of the biggest industries in this country in the next 5-10 years.  He says it's much more valuable to be learning about this than crypto.  Many of these stocks will go to zero but many will also go up ten-fold.  As the tipping point has hit with legalization starting to happen, he thinks there will be alpha there.


On Hiring

He says that knowledge and passion are the two most important factors in hiring people.  The first is easy to find, the second's not.  And it's the more important of the two.  You want the people working for you to actually enjoy what they do. 

The third variable is emotional intelligence and it's the hardest to find.  He thinks it's more important than IQ.  It's about the ability to control yourself, have empathy, see other points of view, and rapidly change your opinion.  In the investment industry, these are crucial. 

He hires a lot of athletes due to the competitive nature (something we've heard from Julian Robertson before), and people from military backgrounds due to training.  He's also found mothers to be spectacular due to their perspective on managing people and conflicts.  Instead of looking at a resume, look at what a person has been through or actually done.


Embedded below is the podcast interview with Tourbillon's Jason Karp:



And if you haven't already, be sure to check out Patrick O'Shaughnessy's podcast: Invest Like The Best.


Third Point's Q1 Letter: United Technologies, DowDuPont, Lennar & Dover

Dan Loeb's hedge fund firm Third Point is out with its first quarter letter.  During Q1, they returned -0.6%.  The letter talks about their new stake in United Technologies (UTX). 

They're pushing for a split-up into 3 companies: Otis, CCS, and an aerospace company.  They see this driving $20 billion of excess value (>20% of market cap) due to the fact that all three standalone companies should trade at higher multiples based on equivalent peers. 

They write, "Otis peers Kone and Schindler trade on average at 15x forward EV/EBITDA.  CCS peers, Allegion, Ingersoll-Rand, and Lennox, trade on average at 13x forward EV/EBITDA.  The remaining aerospace company would be the only liquid, US large-cap aerospace supplier other than TransDigm, which trades at 15x forward EV/EBITDA."  They also note though that management seems 'less open' to a three-way split than shareholders might want. 

Third Point also provide updates on their positions in DowDuPont (DWDP) and Lennar (LEN).  The former is one of their largest positions and they see a discount to intrinsic value that has widened.  The latter they view as the best homebuilder in the industry with the best set of veterans.  They also updated their Dover (DOV) position, noting the event-driven nature of the company now. 

You can read Third Point's full Q1 2018 letter embedded below:



You can download a .pdf copy here.


Tuesday, May 8, 2018

New Graham & Doddsville Issue: Mauboussin, Greenwald & More

A new issue of Columbia Business School's Graham & Doddsville newsletter has been released.  It features interviews with Professor Bruce Greenwald as he retires, and Mark Cooper of First Eagle Management.  It also features a conversation with Michael Mauboussin of Blue Mountain Capital and Tom Digenan of UBS Asset Management.

Lastly, it also interviews upcoming fund launch: Rishi Renjen's ROAM Global.  Prior to launching, he worked at Maverick Capital, TPG-Axon, and Glenview Capital.

This time around, Graham & Doddsville also includes student investment pitches from the Pershing Square Challenge. 

1st place this year was a short of Stericycle (SRCL), 2nd place was a short of Credit Acceptance (CACC), and 3rd place was a short of Spotify (SPOT).  The issue also showcases pitches on short CH Robinson (CHRW), short Harvey Norman, and long Digicel credit.

Embedded below is the latest issue of Graham & Doddsville:



You can download a .pdf copy here.

And if you missed it, be sure to check out the recent past issue that includes interviews with Lee Cooperman, David Poppe, and John Harris.


Monday, May 7, 2018

Warren Buffett, Charlie Munger & Bill Gates Interview

Today on CNBC, Berkshire Hathaway's Warren Buffett was interviewed by Becky Quick and talked about a range of topics.  Charlie Munger and Bill Gates later joined the conversation.  Here's some takeaways and quotes:


Warren Buffett's Thoughts

On the market: Stocks aren't in a bubble now.  Though said some private deal valuations are getting high and it's harder to find bargains these days.

On the economy:  Thinks the economy has picked up steam. "Yeah, I see a lot of numbers (from all BRK's businesses).  Business is generally pretty strong."  He cited railcar loadings, etc.  Also notes you've seen some inflation.

Says he thinks it's hard for unemployment to really go much lower as they have a ton of jobs available.  "If a resource is scarce, prices go up."  Says certain job lines are much harder to fill these days (construction cited specifically).

On potential trade wars:   "I don't think we will have trade wars of significance."  He thinks there will be trade movements though.  Says a trade war with China would be negative for all involved as they have a common interest.

On Amazon / Jeff Bezos:  Still laments not buying it in the past, says what Bezos has done is incredible.

On moats: Cited iPhones, Costco, and Elmer's glue as examples

On Apple: Says he doesn't have to do anything because the company will buyback so many shares, so his ownership stake will go up naturally.  He recently bought a ton more AAPL shares.  Said he currently owns around 5% of the company but he'd like to own 100% of it.  The consumer behavior was the main driver behind his ownership, as the device has woven itself into consumer's daily lives and minds, and it's a very useful product.

On owning banks:  Has owned one in the past and loves the banking business but doesn't want to now because of the bank holding co act.  Says Wells Fargo (WFC) was slow to act in addressing bad actions but still has a fundamentally solid business.

On bitcoin:  Compared it to the tulip bubble years ago.  Says it's a non-productive asset and just sits there.

On autonomous vehicles: 'Net it will be bad for the car insurance industry if autonomous vehicles become the norm.'  It will be very hard to pick winners in 5 years.

On reading he recommends, Buffett again pointed to Chapter 8 of The Intelligent Investor.  But this time around he also recommended Chapter 4 of Steven Pinker's new book, Enlightenment Now.

Ends his interview by reiterating: "It's very important in life to associate yourself with people that are better than you."


Charlie Munger's Thoughts

On the biggest thing he and Buffett have disagreed on:  Munger wanted to buy the French stake in Costco.  Buffett didn't and says he should have.  "Charlie really wants to wait for the fat pitch."

Munger said, "There's a million ways to be irrational." And while Berkshire makes mistakes, they make them far less frequently than others and he thinks that's their main advantage.

Munger noted: "The Munger family is invested in China substantially.  Since about 14 years ago, and I did it because I respected the man that was going to do the investing (Li Lu) and it looked undervalued and the companies looked very strong."  Today, he says the best companies in China are still cheaper than the best companies in the US.  "I don't think it'd be all that hard for people to find 4 or 5 companies in China to invest in."

He also said he wished Berkshire owned more of Apple.  He likes that it's reasonably priced and strong, a 'very desireable combination' as well as 'very intelligent management.'

On bitcoin, Munger called it worthless artificial gold.  "It's a scumball activity."

On potential trade wars with China: "It would be insane for them not to work together."

On what he's been reading recently:  A book by a Chinese economist, though he didn't mention the name specifically.


Bill Gates' Thoughts

He said that "T-bills set the rules" and he pointed out that since the 10-year yields 3%, you've got that hurdle to get over by taking more risk.  He says asset class returns will be lower over the next 10 years.

On bitcoin: There's some really good technology as far as sharing databases etc, but the coin itself is a speculative thing.  He received some for his birthday a while back but sold it, so doesn't own it now.  Called it a greater fool investment, and said he'd short it if there was an easy way to do so.

Gates says there are tech stocks that are undervalued, but you're going to get very high variance as the winner in some markets gets a high share of the profit pool.

He owns a ton of Microsoft (MSFT) obviously, but revealed he has a 'fantasy stock portfolio' of companies he thinks will do well but doesn't own.  "The top tech companies have a very strong share of the profit pool right now."  He obviously declined to reveal names.

Gates also echoed Munger's China sentiment that it looked attractive.

On tech and data privacy, thinks regulation is inevitable.  But the big companies will handle that.

On Tesla (TSLA): thinks they have a great product but a very high valuation and a lot of competition coming.  Says autonomous and electric vehicles are coming simultaneously and thinks 15 years from now things will be very different.

On what he's been reading recently:  Hans Rosling's book Factfulness.  Says it helps you think about a lot of different things in the world.


Monday, April 23, 2018

Notes From Sohn New York Investment Conference 2018: Einhorn, Robbins, Gurley & More

The annual Sohn New York Investment Conference recently took place and featured top hedge fund managers sharing their latest ideas to benefit charity.  Below are notes from the event.  We've also posted up notes from the emerging manager panel, Next Wave Sohn New York.


 Notes From Sohn New York Investment Conference 2018


John Khoury, Long Pond Capital: Long D.R. Horton (DHI).  He runs a $2.5B long/short fund mainly in Real Estate.  Pitch is DHI is getting asset light by only building on developed lots instead of buying raw land, getting approvals, and building the infrastructure.  So it's an asset-light model with less debt and better ROIC, so deserves better multiple.  They are the biggest US builder based on number of units - average price is $300k, basically entry-level homes, and they built 50k last year.  What about interest rates? Says that is the biggest fear now, but rates could go up 100 bp and housing would still be affordable in relation to current income and net worth of households.  Key is rates would be coming up from such a low place. Says record low inventories.  Expects $5.50 EPS by 2020, uses 13x to get $71.50, or 63% upside.


Li Ran, Half Sky Capital.  Long: GrubHub (GRUB).  2014 IPO.  Felt like the companion pitch to the TKWY pitch in the morning at Next Wave Sohn from Alex Captain of Cat Rock Capital.  Large addressable market, positive unit economics, proof of concept, and support from restaurants.  Painted a pretty rosy picture, didn't really touch on the bear case.  She says $70B TAM on 35% penetration on 110M diners (they have 14.5M now, and many analysts think they are close to fully penetrated in the US.)  She has done surveys of restaurant managers that expect GRUB to keep growing.Price Target $160, on 15x EV/EBITDA, up 60% from here.  Previously worked at Lone Pine Capital.


Jeffrey Gundlach, DoubleLine Capital: Long XOP ETF, short Facebook (FB).  His FB pitch seemed to mainly be based on technicals.  He used the fact that FB is below the 200 day moving average at the time as his reason to be short.  He also cited 2 examples of government regulation hurting stocks - one was tobacco. (He didn't mention other examples where stocks were stronger yet, such as credit cards, banks, etc.).  He pointed out a 'head and shoulders' formation on the FB chart, which is usually bearish.       


Chamath Palihapitiya, Social Capital: Long Box (BOX).  He said BOX was an AI play, and he also said you should have an AI basket of AMZN, GOOG, BOX.  He was less enthusiastic about NVDA, because he believed GOOG's TPUs are "ten times better."  On BOX, he said it goes up 10x in 10 years, even though it has 70% of Fortune 500 already.  Core business stable, adding SaaS revenue.  Big Data/AI play, and 4.3x revenue. Only growing 20% CAGR, yet he expects multiple expansion.


Glen Kacher, Light Street Capital: Long Palo Alto Networks (PANW).  Tiger Cub 1993-1997.  He was up 11% through the end of Q1 in 2018.  He talked about cyber warfare, and how firewalls weren't enough and how you need a platform approach.  $19B market cap, biggest in Cyber, ARPU 4x the competition, which is CHKP, CSCO, FTNT, JNPR and others. Compares their attempt to shift to subscription services that ADBE has done (though he didn't mention the difference is that ADBE didn't sell hardware).  He gets a $360 price target using 10.6x Revenue.  He admits products slipped in 2017, but thinks it comes in 2018.


Seth Stephens-Davidowitz, New York Times op-ed contributor, visiting lecturer at The Wharton School and former Google data scientist.  Gave an interesting preview of his book, Everybody Lies.  Basically, a lot of people have secrets and tendencies, even though they don't admit it, but you can find out because of Google searches, which he calls "Digital Truth Serum."


Scott Ferguson, Sachem Head Capital: Long Whitbread (WTB).  Basically "Dunkin Donuts of the UK, with a budget hotel thrown in.  "Hasn't done well, they have been stuck in it for a year, he says the bad news is now priced in.


John Pfeffer, Pfeffer Capital: Long bitcoin.  The other alternative coins aren't great, stick with best of breed.  The pitch was basically that bitcoin is gold 2.0, similar to what the Winklevoss twins have argued.  Used a lot of formulas in the pitch.  Ultimately says could be a 1% chance that XBT goes to $700k if it's used as a Reserve Currency.  Maybe it's only Gold 2.0, then it's worth about $90-180k per coin, up from about $9k today.


Bill Gurley, Benchmark, with Chamath Palihapitiya:  Interesting back and forth between two talented VCs.  Gurley contemplates the idea of "peak car" ownership in the US.  3.2 cars per household now, could never get higher.  Says Uber is getting turned around, culture improving.  Slack, AirBnB are big ones to watch when they IPO.  He says autonomy could be 2 decades away, because the US is such a litigious society.  FB- he would be long, says this is not an existential threat.  AMZN- "of course, long."  GOOG - he's concerned - they have problems, although he wouldn't short (He also told an amusing story how they turned them down for VC money).  TSLA- says Musk is making it too risky to own the stock.  SoFi- "when you are handing out money there is no barrier to entry and the guy doing the highest volume usually has the loosest rule set."  HTZ- he would be short, even against Icahn.  Several issues:"disruption and debt are bad sisters," 5-15x levered, depending on whether you count the car loans.  Ride sharing is a huge substitute for rental cars in many US cities.  Systematic used car problem - if the macro gets hard at all, this business has zero flexibility due to the debt load.


Larry Robbins, Glenview Capital: Long ESRX, MCK, CVS.  Says AMZN is not going to get into their business, the PBMs aren't really gouging, they only make pennies, and drug prices have actually dropped over the last 4 years.  Says they trade at historically low multiples.  Says MCK goes up 91% in 2-3 years after the spin, and share buyback. ESRX deal with CI will happen.


Sohn Idea Contest Winner, Andrew Walker: Long LQM.  Mispricing due to taxable spin, incentive to keep price low.  This is a popular HF play right now.


Nathaniel August, Mangrove Partners: short EROS."Netflix of India" maker of Bollywood films.  He did a long presentation which focused on how he argues the company is cheating on their accounting every way possible.  He's being sued by the company.  Small cap, doesn't trade much.


David Einhorn, Greenlight Capital: Short Assured Guaranty (AGO).  Bond insurer, beset by Puerto Rico bonds and decline in overall muni bond issuance.  Business is also levered, with smaller room for error.


Be sure to also check out notes from the emerging manager segment of the conference: notes from Next Wave Sohn New York.


Notes From Next Wave Sohn New York Investment Conference 2018

The annual Sohn New York Investment Conference recently took place and featured hedge fund managers sharing their latest investment ideas to benefit charity.  Before the main event, emerging managers shared their ideas in the Next Wave Sohn portion of the event.  Here's notes from these pitches.  You can also view notes from the main Sohn New York Conference here too.

Next Wave Sohn New York Notes 2018

Dylan Adelman, 2017 Sohn Investment Idea Contest Winner, Student at Penn.  Long Vostok New Ventures. (VNV) Listed in Stockholm.  Russian classified business.  He compared it to Craigslist, which has 90% operating margins and only 40 employees, making $500 million/year in profit.  Basically, "the Craigslist of Russia, but run to maximize profit.


Alexander Captain, Cat Rock Capital Management: Long Takeaway (TKWY), listed in Amsterdam.  "The Grubhub of Central Europe."  He said they looked for stocks that could go up 10x in 10 years, such as AMZN that when up 23x, and MA, PCLN, which went up more than 10x each.  Key was three factors: a big market, obvious shift, and winner-take-most economics.  He says Online Food Delivery fits these criteria.  $50B of a $2T food market, so huge market.  Ecommerce for restaurants is an obvious shift, as 80% of orders are still done over the phone now.


Tim Garry, Pelorus Jack Capital: He is predicting a price momentum / Beta crash.  Says 40% of market was driven by fundamental investors 10 years ago, and now it's only 11%. Relation to style factors such as momentum is more important than Beta.  Says there is a big spread between growth and value, and now quants are all in growth trades.  He uses DeMark indicators and was mixing up technical analysis and quant talk.  "High beta stocks underperform low beta."  Sounded like his pitch was almost be long dividend stocks and short growth stocks (back in 2016 for 2 months, growth stocks dropped 5% two months in a row).


Rashmi Kwatra, Sixteenth Street Capital:  Long Bank of Bangladesh (BRAC).  She runs a concentrated long only fund investing in Southeast Asia.  Bangladesh has a population of 163M, is located between India and China, entire country is the size of New York State.  Similar thesis for region - underbanked, rapid growth, etc


Oleg Nodelman, EcoR1 Capital: Long Ascendis Pharma (ASND).  Biotech PM, cancer survivor, claims to be "value oriented" Biotech PM, yet less than 10% of biotechs are profitable, and he points out that there is a 90% clinical failure rate.  ASND is a "platform company" which is in Phase 3 trials of a new Growth Hormone Deficiency treatment that only needs once a week shots instead of current treatments which are daily shots.   He does the math and gets $1.5B peak revenue based on $35k/year and 50% penetration, 8 years duration.  Says Big Pharma will buy them out if they are approved, and could pay 4x revenue to get $129/share. They also have Achondroplasia treatment (this is what Verne Troyer had) which he says is worth $111, and something called PTH worth $49.  so he argues you could double your money on this one.


Scott Goodwin, Diameter Capital Partners: Short Rallye, the owner of a levered French grocery called Casino, buy the 3 year CDS.  He runs a $1.7B credit fund, long/short.  This play has all the elements they look for: business with complexity, challenged industry, and similar playbook in other situations.  "We want equity risk masquerading as credit risk." Grocers are already under attack, just like they are in the US, but if macro turns down at all, there is no margin for error here at all.


Be sure to also check out notes from the main Sohn New York Conference as well, featuring Bill Gurley, David Einhorn, Larry Robbins and more.


Tuesday, April 3, 2018

The China Hustle: Trailer & Documentary

The China Hustle is a recently released documentary from Academy Award winner Alex Gibney and Academy Award nominees Frank Marshall and Jed Rothstein and the producers of Enron: The Smartest Guys in the Room.  The China Hustle features the story of the wave of Chinese reverse mergers that swept the market a few years ago.

It details a play by play of the various frauds that took place and the short sellers involved in discovering and drawing attention to them.  Featured in the documentary are the likes of Jim Chanos of Kynikos Associates, Carson Block of Muddy Waters Research, Soren Aandahl of Glaucus Research and more.

The trailer is embedded below with a preview. 

The China Hustle Documentary Trailer



The documentary is out now.  You don't even have to go to a movie theater to watch it.  It's on demand via various platforms and you can get it on Amazon Video here for only $6.99.


Eminence Capital Boosts Formula One Position

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Formula One (FWONK).  Per the filing, Eminence now owns 5.4% of the company with over 10.86 million shares. 

This is up from the 8.58 million shares they owned at the end of 2017.  The filing was made due to activity on March 19th.

Per Liberty Media's site, Formula One is "an iconic global motorsports business."

We've also highlighted another stock that Eminence Capital has been buying recently.


Wednesday, March 28, 2018

What We're Reading ~ 3/28/18


A look at Todd Combs and his healthcare pursuit [Bloomberg]

Not all quality companies are quality stocks [Albert Bridge Capital]

From the archives: On sources of edge [Miller Value Partners]

Debt, loans and credit quality: the devil's in the details [Frank K. Martin]

Summary of some recent macro data and charts [Dash of Insight]

Why volatility matters [Newfound Research]

TV's death by a thousand streaming apps [Bloomberg]

How calls for privacy may upend business for Google and Facebook [NYTimes]

Trump hates Amazon, not Facebook [Axios]

The largest company in every state by revenue [Visual Capitalist]


Pershing Square Annual Report 2017: Sold Nike, Covered Herbalife Short

Bill Ackman's Pershing Square is out with its annual report for 2017.  For the year, they lost 4% net.

The report gives updates on their positions in Automatic Data Processing (ADP), Restaurant Brands (QSR), Mondelez (MDLZ), Howard Hughes (HHC), Chipotle (CMG), Fannie Mae & Freddie Mac, and Platform Specialty Products (PAH).

Pershing Square Sold Nike (NKE) Position Already

Pershing Square reveals they already sold their new Nike (NKE) position and explain the rationale below:

"During the course of our four-month ownership of Nike (we sold the position recently), the stock price appreciated by34%, reducing the returns to be earned from our investment to a level at which we believed our capital could be allocated to more attractive opportunities.  It is rare that we are a short-term investor.That said,we are always willing to redeploy capital if an investment appreciates to a level that no longer offers sufficient returns relative to other potential opportunities."


Rationale For Covering Herbalife (HLF) Short

They also outline why they covered their Herbalife (HLF) short position:

"While we have been correct in our belief that Herbalife’s business fundamentals would deteriorate as earnings per share, revenue growth, and other measures of business performance weakened substantially since we initiated the investment, we underestimated Herbalife’s ability to access debt capital and use financial engineering which–coupled with Mr.Icahn’s share purchases to materially reduce the company’s free float–has driven share price appreciation."


Embedded below is Pershing Square's 2017 annual report:



You can download a .pdf copy here.


Tuesday, March 27, 2018

Fairholme Capital Reduces Seritage Growth Properties Position

Bruce Berkowitz's Fairholme Capital has filed an amended 13G regarding its position in Seritage Growth Properties (SRG).  Per the filing, Fairholme now owns 4.9% of the company with 1.69 million shares.

The filing was made due to activity on March 16th.  This is down from the previous 3.27 million shares Fairholme owned at the end of 2017.

Per the company's website, Seritage is "a publicly traded, self-administered, self-managed REIT with a portfolio of 235 wholly-owned properties and 31 joint venture properties, consisting of approximately 42 million square feet of building space."


Glenview Capital Boosts Newell Brands Exposure

Larry Robbins' hedge fund firm Glenview Capital has ratcheted up its exposure to Newell Brands (NWL).  Per a 13G filed with the SEC, Glenview now shows a 5.56% ownership stake with over 26.96 million shares. 

The filing was made due to portfolio activity on March 16th.  This is up from the 17 million shares they owned at the end of 2017. 

As we've highlighted previously, activist investor Starboard Value is involved in Newell shares and it's recently been revealed that Carl Icahn owns NWL as well


Berkshire Hathaway Files Amended 13D on USG

Warren Buffett's conglomerate Berkshire Hathaway has filed an amended 13D with the SEC regarding its position in USG Corporation (USG).  Per the filing, Berkshire owns 30.8% of the company with 43.38 million shares as of March 23rd.

This is up slightly from the 39 million shares Berkshire reported owning at the end of 2017 per their most recent 13F filing.

The main reason for the filing is the information below, pulled verbatim from the filing:

"From time to time, beginning many years ago, executives of Gebr. Knauf Verwaltungsgesellschaft KG (“Gebr. Knauf”) and/or C & G Verwaltungs GmbH (“C & G Verwaltungs” and, together with Gebr. Knauf, the “Knauf Entities”) have contacted Berkshire’s Chief Executive Officer (“CEO”) to describe the Knauf Entities’ potential and conditional interest in a transaction with USG. Most recently, the Knauf Entities furnished Berkshire a copy of a letter from Gebr. Knauf to USG dated March 15, 2018 in which Gebr. Knauf submitted an indicative and non-binding proposal for the acquisition of 100% of the outstanding shares of Common Stock of USG at $42.00 per share.

On March 23, 2018 Berkshire’s CEO and another Berkshire executive held a telephonic discussion with two executives of the Knauf Entities and three representatives of one of the advisors of the Knauf Entities, during which Berkshire proposed to grant to the Knauf Entities an option to purchase all of the Berkshire Entities’ shares of Common Stock of USG, subject to legal review. Such option would be exercisable only in connection with the consummation of a purchase by the Knauf Entities of all of the outstanding shares of Common Stock of USG that the Knauf Entities did not already own, at a price of not less than $42.00 per share, subject to and in accordance with applicable law and contractual restrictions. The option exercise price per share was proposed by Berkshire to be the price per share paid to such other holders of Common Stock of USG by the Knauf Entities, less the option purchase price of $2.00 per share to be paid to the Berkshire Entities upon entering into a definitive option agreement. The option would have a term of approximately 6 months.

The Knauf Entities have not responded to this proposal, and the Reporting Persons do not know whether the Knauf Entities will pursue further discussion with Berkshire of the proposed option or will make an offer to purchase shares of Common Stock of USG. Berkshire has not agreed to support any plan or proposal by the Knauf Entities with respect to the Common Stock of USG, and there are no agreements, written or otherwise, between the Reporting Persons and the Knauf Entities.Depending upon price, market conditions, availability of funds, evaluation of other investment opportunities, and other factors, the Reporting Persons may at any time and from time to time sell or otherwise dispose of some or all of the shares of Common Stock of USG held by them, either as contemplated by the Registration Rights Agreement or in another manner permitted by applicable law."


Tiger Global Buys Some More Apollo Global

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

Per the filing, Tiger acquired 100,000 APO shares on March 23rd at a weighted average price of $30.338.  After this transaction, they now own 34.32 million shares.

Apollo Global is an American private equity firm.

We've also highlighted another stock Tiger Global has been buying recently.


Wednesday, March 21, 2018

What We're Reading ~ 3/21/18


Skin in the Game: Hidden Asymmetries in Daily Life [Nassim Taleb]

Tech's next big wave: big data meets biology [Fortune]

Looking at the Wyndham spinoff [Clark Street Value]

Comcast and the curse of diversified holdings companies [Yet Another Value Blog]

An IPO valuation of Spotify [Aswath Damodaran]

The death of many brands: the rise & risks of concierge brands [Intrinsic Investing]

Billionaire raises his bet on containerships [WSJ]

How Amazon became corporate America's nightmare [Bloomberg]

The 10 best and worst performing stocks since the financial crisis [Zen Investor]


Tuesday, March 20, 2018

Senator Investment Group Files 13D on Gogo

Alex Klabin and Doug Silverman's hedge fund firm Senator Investment Group has filed a 13D with the SEC regarding shares of Gogo (GOGO).  Per the filing, Senator now owns 6.5% of the company with 5.64 million shares.

This is up from the 4.96 million shares they owned at the end of 2017, as they originally built a position in the third quarter of 2017 and continued buying in the fourth quarter.  The 13D notes they've talked with management and may do so in the future.

It also discloses their recent trading activity in the stock.  They were bought in late January and late February, with primary purchases coming between $9.0251 and $9.2546.  In total, they bought over 681,000 shares.

Per Google Finance, Gogo is "s a provider of in-flight broadband Internet service and other connectivity services for commercial and business aircraft, headquartered in Chicago, Illinois"



ValueAct Capital Increases Trinity Industries Exposure

Jeff Ubben's activist investment firm ValueAct Capital has filed an amended 13D and Form 4 with the SEC regarding its stake in Trinity Industries (TRN).  Per the filing, ValueAct now owns 13.8% of the company with over 20.76 million shares.

The filings indicate ValueAct purchased Form 4 indicates ValueAct purchased over 1.5 million shares across March 2nd, 6th, 7th, 8th, 15th, 16th, and 19th.  These purchases came at prices between $31.10 and $33.

For more on this firm, we recently highlighted another stock ValueAct was reducing its position in.

Per Google Finance, Trinity Industries is "a diversified industrial company that owns businesses providing products and services to the energy, chemical, agriculture, transportation and construction sectors. The Company's products and services include railcars and railcar parts; parts and steel components; the leasing, management and maintenance of railcars; highway products; construction aggregates; inland barges; structural wind towers; steel utility structures; storage and distribution containers, and trench shields and shoring products. The Company's segments include the Rail Group, Construction Products Group, Inland Barge Group, Energy Equipment Group, Railcar Leasing and Management Services Group, and All Other. Its All Other segment includes its captive insurance and transportation companies, and other peripheral businesses. It manufactures a line of railcars, including autorack cars, box cars, covered hopper cars, gondola cars, intermodal cars, open hopper cars and tank cars."



Carl Icahn Files 13D on Newell Brands

Carl Icahn has filed an amended 13D with the SEC regarding his stake in Newell Brands (NWL).  Per the filing, Icahn now owns 6.96% of the company with 33.79 million shares (including shares underlying forward contracts).  The filing notes they've now formed a group with Brett Icahn and include his ownership stake.

The forward contracts have a forward price of $23 per share and expiration of January 28th, 2020 and includes exposure to just over 3.01 million shares.  The rest of Carl Icahn's position is common stock.  Brett Icahn owns 500,000 NWL shares.

The filing notes that Icahn started buying on January 25th and was buying as recently as March 16th.

In a previous CNBC interview, Icahn noted that, "I believe Newell itself is undervalued and that's why I bought it."  He said he originally bought NWL around $25

We've highlighted previously that activist firm Starboard Value has also been involved in Newell Brands.


Friday, March 16, 2018

TCI Fund Goes Activist on Altaba, Calls For Liquidation

Sir Christopher Hohn's investment firm TCI Fund Management has filed a 13D with the SEC regarding its position in Altaba (AABA).  They now own 9.7% of the company with 79.77 million shares.

They've been slowly selling shares throughout the first three months of the year, presumably to stay below the 10% ownership cap as AABA has been buying back stock.


TCI Goes Activist on Altaba

The big development here, is that they've converted their 13G into a 13D and gone activist.  They're calling for a liquidation of the company, which owns big stakes in Alibaba (BABA) and Yahoo Japan.

Hohn sent a letter to Altaba, detailed below:

"As you know TCI is the largest shareholder of Altaba owning close to 10% of the company. We have very much appreciated your efforts to create shareholder value. We fully agree with your explicit goal of narrowing the wide discount to net asset value at which Altaba continues to trade.However, we believe that the current strategy of Altaba is unlikely to materially reduce this discount. A clear plan of liquidation is now necessary. This should involve a complete distribution or sale of all of Altaba’s Alibaba and Yahoo Japan shares.We attach a presentation for the Board and shareholders of Altaba laying out in summary our proposed plan of liquidation. We strongly believe that the vast majority of Altaba’s shareholders would be supportive of this plan.We have today converted our SEC filing to a 13D so that we may engage actively with you, the Board of Altaba and all shareholders to create the best outcome for all parties. We look forward to engaging with you constructively as you consider our proposal."

TCI's Presentation on Altaba

Hohn's firm also published a presentation on AABA and we've embedded it below.



Hedge Fund Links ~ 3/16/17


A look at D.E. Shaw: How a group of computer geeks changed Wall St [NYMag]

Paul Tudor Jones predicts inflation surge [CNBC]

Elliott Management urges change at Telecom Italia [Bloomberg]

Coatue's Philippe Laffont says AI will transform Intel and Twitter [Forbes]

On Bridgewater's big bet against Europe [Reuters]

Halvorsen's Viking moves into big data [Bloomberg]

Greenlight off to a rough start this year [Reuters]

US Treasury to close carried interest loophole [Reuters]


Paulson & Co Buys More International Tower Hill Mines

John Paulson's hedge fund firm Paulson & Co has filed a 13D and Form 4 with the SEC regarding its stake in International Tower Hill Mines (THM).  Per the filing, Paulson now owns 31.97% of the company with 59.59 million shares. 

The Form 4 notes they bought over 4.1 million shares on March 13th at a price of $0.50 per share.  The 13D notes this transaction was a private placement.

Per Yahoo Finance, International Tower Hill Mines is "a mineral exploration company, acquires and explores for mineral properties in Canada and the United States. It holds or has rights to acquire ownership or leasehold interests in the Livengood Gold Project that covers approximately 19,546 hectares located to the northwest of Fairbanks, Alaska. The company was formerly known as Tower Hill Mines Ltd. and changed its name to International Tower Hill Mines Ltd. in March 1991. International Tower Hill Mines Ltd. was founded in 1978 and is headquartered in Vancouver, Canada."


Thursday, March 15, 2018

ValueAct Capital Reduces Armstrong World Industries Exposure

Jeff Ubben's activist investment firm ValueAct Capital has filed a 13D and a Form 4 with the SEC regarding its stake in Armstrong World Industries (AWI).  Per the filing, ValueAct now owns 12.9% of the company with 6.85 million shares. 

The Form 4 notes they sold 2.35 million shares on March 12th at $59.60 per share.  We've also highlighted other recent portfolio activity from ValueAct here.

Per Google Finance, Armstrong World Industries is "a global producer of ceiling systems. The Company owns and operates the Building Products (Ceilings) segment. The Company designs, manufactures and sells ceiling systems (primarily mineral fiber, fiberglass wool and metal) around the world. Its products are used in commercial and institutional buildings. Its geographical segments include Americas (including Canada); Europe, Middle East and Africa (including Russia) (EMEA), and Pacific Rim. As of December 31, 2016, it had 15 manufacturing plants in eight countries, including six plants located throughout the United States. Its Americas segment sells products for use in single and multi-family housing. It sells commercial products to building materials distributors re-selling its products to contractors, subcontractors' alliances, architect and design firms, and facility owners. Residential ceiling products are sold in the Americas primarily to wholesalers and retailers."


Wednesday, March 14, 2018

What We're Reading ~ 3/14/18


On buybacks and the instant gratification of financial engineering [Frank Martin]

Michael Mauboussin on the future of active management [Sumzero]

Google's Larry Page: flying taxis, now exiting stealth mode [NYTimes]

Amazon strategy teardown [CB Insights]

Netflix's secrets to success [Variety]

18 cognitive bias examples visualized [Visual Capitalist]

Crowdsourcing: what 5 stocks would you hold for 10 years? [Scuttlebutt Investor]

Which advertising channels have the highest conversion rates? [Priceonomics]

Business schools rethink MBA strategy as market demand shifts [FT]

On shifting institutional investors from benchmark-based to goal-based [Institutional Investor]


Pershing Square Trims Automatic Data Processing (ADP) Position

Bill Ackman's activist investment firm Pershing Square Capital has filed an amended 13D with the SEC regarding its position in Automatic Data Processing (ADP).  Per the filing, Pershing now owns 7.2% of the company with 31.79 million shares.

It notes that, Pershing "sold a net amount of 5,004,633 shares of Common Stock and American-style call options for portfolio management purposes.”  You can view the full list of transactions here.

For more on this fund, we highlighted some other recent portfolio activity from Pershing Square here.

Per Google Finance, ADP is "a provider of human capital management (HCM) solutions to employers, offering solutions to businesses of various sizes. The Company also provides business process outsourcing solutions. Its segments include Employer Services and Professional Employer Organization (PEO) Services. The Employer Services segment offers a range of human resources (HR) business process outsourcing and technology-enabled HCM solutions. These offerings include payroll services, benefits administration, talent management, HR management, time and attendance management, insurance services, retirement services, and tax and compliance services. ADP TotalSource, ADP's PEO business, offers small and mid-sized businesses a HR outsourcing solution through a co-employment model. As a PEO, ADP TotalSource provides HR management services while the client continues to direct the day-to-day job-related duties of the employees."


Tuesday, March 13, 2018

Eminence Capital Increases Papa John's Pizza Position

Ricky Sandler's hedge fund firm Eminence Capital has filed a 13G with the SEC regarding shares of Papa John's Pizza (PZZA).  Per the filing, Eminence now owns 6.5% of the company with over 2.19 million shares. 

The filing was made due to portfolio activity on February 28th.  This means they've increased their position size up from the 568,026 shares they owned at the end of 2017.

Per Google Finance, Papa John's Pizza is "operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark Papa John's. The Company operates through five segments: domestic Company-owned restaurants, North America commissaries, North America franchising, international operations and all other business units. North America is defined as the United States and Canada. Domestic is defined as the contiguous United States. International franchisees are defined as all franchise operations outside of the United States and Canada. As of December 25, 2016, there were 5,097 Papa John's restaurants in operation, consisting of 744 Company-owned and 4,353 franchised restaurants operating domestically in all 50 states and in 45 countries and territories. It offers pizza along with side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. "


Tiger Global Shows Bright Scholar Education Stake

Chase Coleman's hedge fund firm Tiger Global has filed a 13G with the SEC regarding shares of Bright Scholar Education (BEDU).  Per the filing, Tiger now owns 5.8% of the company with over 1.57 million shares. 

The filing was made due to portfolio activity on February 28th.  They did not show an equity stake at the end of 2017 in their most recent 13F filing.

For more on this fund, we highlighted other recent portfolio activity from Tiger Global here.

Per Google Finance, Bright Scholar Education is "an operator of international and bilingual K-12 schools in China. The Company is engaged in providing international education to Chinese students. Its schools comprise international schools, bilingual schools and kindergartens. It offers a broad range of internationally-accredited curricula at its international schools. It also offers a range of complementary education services, including overseas camps and after-school programs. As of February 28, 2017, the Company had six international schools, which focus on internationally-accredited curricula and offer extracurricular activities and programs; 11 bilingual schools, which provide government-mandated curricula and developing students’ English proficiency; and 34 bilingual kindergartens, including 11 that deliver international curricula. As of February 28, 2017, the Company operated 51 schools."


Trian Partners Buys More Bank of New York Mellon (BK)

Nelson Peltz's activist investment firm Trian Partners has filed a Form 4 with the SEC regarding its position in Bank of New York Mellon (BK). 

Per the filing, Trian was buying 360,000 BK shares on March 9th at weighted average prices of $56.5188.  After this buy, Trian now owns over 16.12 million shares.

Per Google Finance, Bank of New York Mellon is "an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of December 31, 2016, the Company had $29.9 trillion in assets under custody and/or administration and $1.6 trillion in assets under management. The Company's Investment Management boutiques offer a range of actively managed equity, fixed income, alternative and liability-driven investments, along with passive products and cash management. The Company offers asset servicing, clearing services, issuer services and treasury services to its clients. "


Monday, March 12, 2018

Viking Global Discloses US Steel (X) Position

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of US Steel (X).  Per the filing, Viking now owns 5.5% of the company with over 9.66 million shares. 

This is a newly disclosed equity position for the firm and the filing was made due to portfolio activity on February 27th.  This is now around a $425 million position, making it a top-20 US holding in their portfolio. 

Per Google Finance, US Steel is "an integrated steel producer. The Company is engaged in producing flat-rolled and tubular products with production operations in North America and Europe. The Company operates through three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE) and Tubular Products (Tubular). The Flat-Rolled segment includes the operating results of its integrated steel plants and equity investees in the United States involved in the production of slabs, rounds, strip mill plates, sheets and tin mill products, as well as all iron ore and coke production facilities in the United States. The USSE segment includes the operating results of U. S. Steel Kosice (USSK) and its integrated steel plant and coke production facilities in Slovakia. The Tubular segment includes the operating results of its tubular production facilities, primarily in the United States and equity investees in the United States and Brazil."


Friday, March 9, 2018

Sohn Investment Conference New York 2018 & Investment Idea Contest

The 23rd annual Sohn Investment Conference New York is right around the corner.  It will be held on April 23rd at Lincoln Center from 8 AM to 7 PM.

The Sohn Conference Foundation in partnership with CNBC will see the event raise money for pediatric cancer research.  You can find out more about the event and register for it at their website:  http://www.sohnconference.org/new-york/


Sohn Conference New York Speakers List

Hedge fund managers that will be sharing their latest investment ideas to benefit charity include:

- Larry Robbins, Glenview Capital
- David Einhorn, Greenlight Capital
- Nathaniel August, Mangrove Partners
- Scott Ferguson, Sachem Head Capital
- Jeff Gundlach, DoubleLine Capital
- Bill Gurley, Benchmark
- Glen Kacher, Light Street Capital
- John Khoury, Long Pond Capital
- Chamath Palihapitiya, Social Capital
- Li Ran, Half Sky Capital
- John Pfeffer, Pfeffer Capital
- Seth Stephens-Davidowitz



Next Wave Sohn Speakers List

In the morning, prior to the main event, emerging managers will be pitching ideas in the fifth annual Next Wave Sohn series.  This year's speakers include:

- Alexander Captain, Cat Rock Capital
- Tim Garry, Pelorus Jack Capital
- Scott Goodwin, Diameter Capital
- Rashmi Kwatra, Sixteenth Street Capital
- Patrick McCaney, Oaktree Capital
- Oleg Nodelman, EcoR1 Capital


You can register for the Sohn Conference by clicking here.


Sohn Investment Idea Contest 2018

Submit your investment idea to be judged by a panel of Larry Robbins, Seth Klarman, Bill Ackman, David Einhorn, and Joel Greenblatt.

The winner will present his or her idea at the Sohn Conference to more than 3,000 attendees.  The contest supports the Foundation's mission to treat and cure pediatric cancer and is sponsored by GLG (Gerson Lehrman Group).

Contest Start Date: March 13th, 2018

Submission Deadline: 12pm EST on April 5th, 2018

Rules: Long or short marketable security with market cap above $1 billion.

Click here to enter the contest


Thursday, March 8, 2018

What We're Reading ~ 3/8/18


On interest rates and stock prices: it's complicated [Aswath Damodaran]

Why software is the ultimate business model [Medium]

Profile of JAB: the secretive company that pours America's coffee [WSJ]

Lessons from Spotify [Stratechery]

The state of the subscription economy [Forbes]

The economy is soaring & so is the deficit: that's a bad combination [538]

Ray Dalio sees 70% chance of recession before 2020 [Reuters]

Why Priceline or Expedia might be the next great hotel brand [Skift]

Pitch on Newell Brands [InvestPBA]

Persuasion as a skill and habit [First Round]

Fun little online game: can you run a struggling mall? [Bloomberg]


Wednesday, March 7, 2018

Tiger Global Increases TransDigm Group Stake

Chase Coleman's hedge fund firm Tiger Global now owns 5.3% of TransDigm Group (TDG) with 2.78 million shares, per a 13G filed with the SEC.  The filing was made due to portfolio activity on March 6th.

This is up from the 1.91 million shares they previously owned at the end of 2017.  We've also posted about some other recent portfolio activity from Tiger here.

Per Google Finance, TransDigm Group is "a designer, producer and supplier of engineered aircraft components for use on commercial and military aircraft in service. The Company operates through three segments: Power & Control, Airframe and Non-aviation. The Power & Control segment includes operations that primarily develop, produce and market systems and components that provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. The Airframe segment includes operations that primarily develop and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Its product offerings include mechanical/electro-mechanical actuators and controls, engineered latching and locking devices, and seat belts and safety restraints."


Tuesday, March 6, 2018

Lone Pine Capital Takes Exact Sciences Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding shares of Exact Sciences (EXAS).  Per the filing, Lone Pine now owns 5.3% of the company with over 6.39 million shares.

This is a newly revealed equity position for the firm.  The filing was made due to activity on February 23rd.

Per Google Finance, Exact Sciences is "a molecular diagnostics company. The Company focuses on the early detection and prevention of some forms of cancer. It offers a non-invasive screening test called Cologuard for the early detection of colorectal cancer and pre-cancer. Its Cologuard test is a stool-based deoxyribonucleic acid (sDNA) screening test, which utilizes a multi-target approach to detect deoxyribonucleic acid (DNA) and hemoglobin biomarkers associated with colorectal cancer and pre-cancer. The Cologuard test is intended for the qualitative detection of colorectal neoplasia associated DNA markers and for the presence of occult hemoglobin in human stool. It focuses on the development of additional tests for other types of cancer. It is developing a blood-based biomarker test to aid in the early detection of lung cancer in individuals with lung nodules discovered through a computerized tomography (CT) or other scan."


Makaira Partners Buys More Wesco Aircraft

Tom Bancroft's Makaira Partners has filed a Form 4 with the SEC regarding its stake in Wesco Aircraft Holdings (WAIR). 

Per the filing, Makaira acquired WAIR shares on March 1st and 5th.  In total, they bought 83,810 shares, with the bulk of the transaction coming at a weighted average price of $9.2699 per share. 

After these buys, they now own 10.81 million shares.  Bancroft and his family also own shares personally, according to the filing.  We've also previously detailed how Makaira was buying WAIR last August as well.

Per Google Finance, Wesco Aircraft Holdings is "a distributor and provider of supply chain management services to the global aerospace industry. The Company operates through two segments: North America and Rest of World. As of September 30, 2016, the Company supplied over 565,000 active stock-keeping units (SKUs), including C-class hardware, chemicals, electronic components, bearings, tools and machined parts. The Company's products include Hardware, Chemicals, Electronic Components, Bearings and Other Products. Its Services include Quality Assurance, Kitting and JIT Supply Chain Management. It caters to commercial, military and general aviation sectors, including the original equipment manufacturers (OEMs) and their subcontractors, through which it supports various Western aircraft programs, and also sells products to airline-affiliated and independent maintenance, repair and overhaul (MRO) providers. It also services industrial customers."


Trian Partners Sells Some Mondelez

Nelson Peltz's activist firm Trian Fund Management has filed a Form 4 with the SEC regarding its stake in Mondelez (MDLZ).  Per the filing, Trian sold over 6.52 million shares of MDLZ at $43.67 on February 27th. 

The filing notes that this sale was "made for portfolio management purposes, including in connection with the liquidation of a fund" that acquired shares prior to the end of 2012.  After this sale, the firm still owns 35.96 million shares.

Per Google Finance, Mondelez is "a snack company. The Company manufactures and markets snack food and beverage products for consumers. It operates through four segments: Latin America, Asia, Middle East, and Africa (AMEA), Europe and North America. As of December 31, 2016, its brands spanned five product categories: Biscuits (including cookies, crackers and salted snacks); Chocolate; Gum and candy; Beverages (including coffee and powdered beverages), and Cheese and grocery. Itsportfolio includes various snack brands, including Nabisco, Oreo, LU and belVita biscuits; Cadbury, Milka, Cadbury Dairy Milk and Toblerone chocolate; Trident gum; Halls candy, and Tang powdered beverages. The Company sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and retail food outlets. As of December 31, 2016, it sold its products to consumers in approximately 165 countries. "


Monday, March 5, 2018

Starboard Value's Letter To Newell Brands Shareholders

Jeff Smith's activist investment firm Starboard Value has taken a stake in Newell Brands (NWL).  They've teamed up with former Jarden management players in order to force change at the company.

We also highlighted last week that Carl Icahn owns Newell shares as well, though it doesn't look like they've teamed up at this point.

Starboard is seeking to replace the board of directors and today released a letter to Newell shareholders.  They write,

"While these have been  extremely challenging times for Newell, we believe that the recent poor financial  and  stock  price  performance  has  created  a unique  opportunity  to  invest  in  an  iconic company and embark on a multi-year operational turnaround that can deliver outstanding returns to  shareholders."

Embedded below is Starboard Value's letter to Newell Brands shareholders:



You can download a .pdf copy here


ValueAct Capital Trims CBRE Group Stake, Adds To Trinity Industries

Jeff Ubben's activist firm ValueAct Capital has submitted two SEC filings recently.

ValueAct Trims CBRE Group Stake

First, in an amended 13D with the SEC regarding its stake in CBRE Group (CBG), ValueAct now reports they own 5.9% of the company with 19.91 million shares.

The 13D indicates ValueAct sold 5 million CBG shares on March 1st at a price of $45.78.  This is the third time they've made filings indicating they've reduced their position over the past 6 months.

Per Google Finance, CBRE Group is "a holding company that conducts all of its operations through its subsidiaries. The Company operates as a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. The Company provides commercial real estate services under the CBRE brand name, investment management services under the CBRE Global Investors brand name and development services under the Trammell Crow Company brand name. The Company's business is focused on commercial property, corporate facilities, project and transaction management, tenant/occupier and property/agency leasing, capital markets solutions (property sales, commercial mortgage brokerage, loan origination and servicing) real estate investment management, valuation, development services and proprietary research. "


ValueAct Adds To Trinity Industries Position

Second, ValueAct has also filed a Form 4 with the SEC regarding its position in Trinity Industries (TRN).  Per that filing, ValueAct acquired 950,000 TRN shares across February 28th, and March 1st and 2nd. 

They purchased shares around the $32.85 level and after these buys now own over 19.55 million TRN shares.

Per Google Finance, Trinity Industries is "a diversified industrial company that owns businesses providing products and services to the energy, chemical, agriculture, transportation and construction sectors. The Company's products and services include railcars and railcar parts; parts and steel components; the leasing, management and maintenance of railcars; highway products; construction aggregates; inland barges; structural wind towers; steel utility structures; storage and distribution containers, and trench shields and shoring products. The Company's segments include the Rail Group, Construction Products Group, Inland Barge Group, Energy Equipment Group, Railcar Leasing and Management Services Group, and All Other. Its All Other segment includes its captive insurance and transportation companies, and other peripheral businesses. It manufactures a line of railcars, including autorack cars, box cars, covered hopper cars, gondola cars, intermodal cars, open hopper cars and tank cars."


Lee Cooperman Buys More Ocwen Financial

Per a Form 4 filed with the SEC, Omega Advisors' Lee Cooperman has indicated he's purchased more shares of Ocwen Financial (OCN).  This is the second time this year he's purchased shares, as we highlighted his previous OCN buy as well.

In various trades on February 28th, March 1st, and March 2nd, Cooperman bought 539,798 shares in total at prices around $3.5872 for various Omega investment vehicles.

For more on this investor, be sure to also check out Cooperman's recent interview in the Graham & Doddsville newsletter.

Per Google Finance, Ocwen Financial is "a financial services holding company. The Company, through its subsidiaries, originates and services loans. The Company's segments include Servicing, Lending, and Corporate Items and Other. The Company's Servicing segment consists of its residential servicing business. The Company's Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans. The Company's Corporate Items and Other segment includes revenues and expenses of Automotive Capital Services (ACS) and its other business activities. Its servicing clients include some of the financial institutions in the United States, including the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the Government National Mortgage Association (Ginnie Mae) and non-Agency residential mortgage-backed securities (RMBS) trusts. "


Thursday, March 1, 2018

Free Chapter From Dear Chairman Book: Dan Loeb and Hedge Fund Activism

Jeff Gramm's book, Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism, has been featured on the site before and we reviewed it here.

We wanted to let everyone know that Gramm has generously made the chapter about Third Point's Dan Loeb available for free.  The chapter is entitled: Daniel Loeb and Hedge Fund Activism: The Shame Game.  This was one of our favorite parts of the book so if you haven't read it yet, check it out.

You can download a .pdf copy of the free chapter on the book's website here.

And if you haven't already, definitely be sure to pick up a copy of Dear Chairman.


Carl Icahn Reveals Newell Brands Stake

Per an interview with CNBC today, activist investor Carl Icahn reveals he has taken a stake in Newell Brands (NWL).  "I believe Newell itself is undervalued and that's why I bought it" Icahn noted.

He says he bought NWL around $25 and has a less than 5% stake in the company, though Icahn feels he has one of the largest positions in the company.

Another activist investor, Jeff Smith's Starboard Value is also involved in the company and has joined Jarden executive Martin Franklin in trying to replace the entire board.

Newell merged with Jarden and the Starboard contingent feels that the Newell management team has not managed the integration well.  The company features prominent consumer brands such as Rubbermaid, Elmer's glue, and more.

NWL was featured in the investment thesis summary section of  the Q3 2017 issue of our Hedge Fund Wisdom newsletter if you're looking to catch-up on the company's background.



Wednesday, February 28, 2018

What We're Reading ~ 2/28/18


On decision regret [A Wealth of Common Sense]

Why competitive advantages die [Collaborative Fund]

Notes from the Wharton restructuring & distressed conference [Reddit]

The case against Google [NYTimes]

Consumer goods: big brands battle with the little guys [FT]

The end of the low volatility regime [13D]

Myths and facts about "risk parity" [FT Alphaville]

Inside Facebook's two years of hell [Wired]

How Softbank, world's biggest tech investor, throws around its cash [WSJ]

Canada's housing market flirts with disaster [FT]

Everything you need to know about 5G [IEEE Spectrum]

Inside T-Mobile's big, brash comeback [Fortune]

Boeing is killing it by squeezing its suppliers [Bloomberg]

From imitation to innovation: how China became a tech superpower [Wired]

Chinese tourists are taking over the earth [Bloomberg]

There's a global race to control batteries - and China is winning [WSJ]

Didi Chuxing took on Uber and won, now it's taking on the world [Wired]

Autonomous cars: no one wants to let Google win the war for maps all over again [Bloomberg]

Dyson bets on electric cars to shakeup industry [FT]

How to succeed in business?  Do less [WSJ]


Pershing Square Building United Technologies Stake; Covers Herbalife Short

Per CNBC, Bill Ackman's Pershing Square has reportedly been building a stake in United Technologies (UTX).  Ackman told Scott Wapner that he thought the company was "great."  The company has been awaiting the closure of its acquisition of Rockwell Collins (COL).  Additionally, UTX management has said they've been evaluating splitting up into a few different entities.

Secondly, Ackman has exited his bet against Herbalife (HLF).  He had previously been outright short shares, but then this past November restructured the short via put options.  Now, he's out of his short bet entirely.  

This comes after he said back in 2013 that he'd go to the "ends of the earth" to shut the company down, dubbing it a pyramid scheme.  Shares of HLF are already up 36% year-to-date after being up a similar amount already last year.

Pershing Square has been active lately, as it also recently revealed a new Nike (NKE) position.

For more from this investor, you can view a recent Pershing Square presentation here.


Tiger Global Selling eHi Car Service Stake

Chase Coleman's hedge fund firm Tiger Global has filed a 13D with the SEC regarding its stake in eHi Car Services (EHIC).  Per the filing, Tiger Global is selling 5.26 million ADR shares representing 10.52 million class A shares.

The SEC filing specifies the details:

"On February 23, 2018, Global Mauritius, a Reporting Person, entered into a Securities Purchase Agreement (the "Purchase Agreement") with BPEA Teamsport Limited (the "Purchaser") for the sale of 5,264,080 ADSs, representing 10,528,160 Class A Shares, to the Purchaser.  The closing of the transaction contemplated by the Purchase Agreement is scheduled to occur on or prior to May 30, 2018. The initial purchase price is US$12.00 per ADS, subject to adjustment as provided in the Purchase Agreement. The Purchaser is participating in that certain consortium including Mr. Ray RuiPing Zhang, the Chairman and Chief Executive Officer of the Issuer, and other potential investors, in connection with the proposed acquisition of the Issuer in a "going-private" transaction for US$13.35 in cash per ADS, as disclosed in Exhibit 99.1 to the Issuer's Form 6-K furnished with the United States Securities and Exchange Commission on January 2, 2018."

The entire securities purchase agreement is found here.

Per Google Finance, Ehi Car Services "is engaged in car rentals and car services. The Company provides self-drive car rental services to both individual customers, as well as corporate and institutional clients to meet travel, leisure, business and ground transportation needs. The Company operates its car rentals business primarily through its subsidiaries, including Shanghai eHi Car Rental Co., Ltd. (eHi Rental), eHi Auto Services (Jiangsu) Co., Ltd. (eHi Jiangsu), and their subsidiaries and branches. For its car services business, the Company provides vehicles and chauffeur services through different subsidiaries. The Company provides chauffeur services through its subsidiary, Shanghai Smart Brand Auto Driving Services Co., Ltd. (Shanghai Smart Brand), and its subsidiaries and branches. The Company has a limited operating history."


Tuesday, February 27, 2018

Warren Buffett CNBC Interview: Summary & Transcript

CNBC's Becky Quick interviewed Berkshire Hathaway's Warren Buffett on a range of topics yesterday.  Below is a summary of noteworthy comments and a link to the full transcript.


On tax reform:  "It's a huge tailwind. And it's particularly a tailwind if you've got-- particularly for companies that have had lots of depreciation and taken bonus depreciation up front. So it's a big item-- there. Not as many companies have lots of appreciation and marketable securities, but it's a big item for those that do."


On market valuation:  "I mean, it--in fact, I-- the market-- the stock market relative to the long-term bond market-- people have free choices, pretty much, if they're going to be in marketable securities. They can own reasonably long-term bonds, they can own equities, or they can keep it in short-term cash equivalents. And--- if-you had to choose between buying long-term bonds or equities-- I would choose equities in a minute now ...

That doesn't mean I think the stock market is gonna go up or anything else. But if- I were going to own a 30-year government bond or own equity for 30 years, I think equities will considerably outperform that 30-year bond over the 30 years. I don't know what they're gonna do in any day or week or month ...

In-- so far this year we've been-- a net buyer, although we sold-- a chunk of Phillips to get below 10%"


On whether he would buy any parts of General Electric (GE):  "If we like the business and the price was right, we could write a check for cash. And that would apply to GE. They've got a few big businesses. I don't think they want to sell them, but they have some smaller units that they're interested in selling. But we're always in the market for a big business that we can understand and that we like, and we think that we've got the management for and so on."


On Buffett's favorite stock, besides Berkshire:  "Well, if you look at our holdings, you would assume that we like them in the order in which they rank by dollar value of holdings. But if you look at them in terms of recent purchases, you know, over the last year, we've bought more Apple than anything else ... I haven't told you what I might have been buying in the last week. Or month"


Shoutout to CNBC for asking the question we submitted on Twitter via the #AskWarren hashtag:  Has Buffett ever disagreed with any of Todd (Combs) or Ted's (Weschler) investments, and why?



"Yeah, well, they make their own decisions, 100% and they each manage $12 billion or $13 billion now. Well, they started actually, I think when Todd came about a year ahead of Ted. And I think maybe it was $2 billion, but it has increased at various points and then they've earned a lot of money for Berkshire, which builds up for them, too. There's certainly – they've done things I wouldn't have done. But I've done things they wouldn't do, too. I mean, I want them to figure out their own. The choices – they are good at managing money, and they've got the advantage of managing smaller sums than I'm running. But they've got the disadvantage of running quite a bit larger sums than most people run. I mean, it gets more difficult with size. But they not only have done a good job of managing the money and trusted them. But they've contributed to Berkshire in just dozens of ways. They were sensational hires."

Becky Quick then followed up and asked if he talks to Todd/Ted about investments beforehand:

"No, not ahead a time. And there's a number of them I haven't talked with them at all. I couldn't even – I couldn't name three quarters of their portfolio. I couldn't tell you the amounts. I don't remember that well. But I've gotten ideas from them. But they take on other tasks. I mean, Todd is on the health care situation. He's there on Saturday. I was there on Saturday. He's there all day talking to people around the country in terms of looking for the right CEO and that sort of thing. They are enormous contributors to Berkshire."


On owning Samsung in the past:  "I don't own them, and Berkshire doesn't own them now. But Berkshire has owned Samsung. It doesn't get reported in our 13F.  But I think I'm right on that. I'm 99% sure. And so we bought some when Samsung was at about a million yuan – you got to divide that by something over 1,000 – we bought a reasonable amount. We did sell it when it went up. It's higher than this now. It went up to 1.8 million, or something. I think it's around 2 million, 2.3 million or 2.4 million. The yuan went in our favor a little bit too. So we did a little bit better in dollars."


On why he sold IBM in favor of buying more Apple (AAPL):  "Well I was wrong on – at least I felt I was wrong on IBM. Now, I may have been wrong when I sold it, too. But I certainly was wrong when I bought it. And I've felt that Apple has an extraordinary consumer franchise. Apple's a different kind of business than IBM. They're both tech, obviously, in a major way. And they even have a joint venture, you know, on some things. But I think I understand consumer behavior perhaps better than I do the tech business. It wouldn't take much to beat it. And I liked it, I like Tim Cook very much. I like their policies. I see how strong that ecosystem is. It's to an extraordinary degree. I mean, I look at my grandchildren, my great grandchildren and everybody in the office, I mean, their families. I talk to the people at the Furniture Mart when the ten hadn't arrived, nobody goes over to, you know, buy an Android. I mean, you are very, very, very locked in at least psychologically and mentally, to the product you're using. I mean, you got all kinds of stuff up on there. It's a very sticky product."


On the airline industry (he owns stakes in AAL, UAL, DAL, LUV): "It's-- a business that's-- always subject to somebody doing something very dumb competitively. And—-- they've done it a lot in the past. There was more chance of them doing it when there were seven of 'em than the big ones, than-- than four. I mean, the industry was suicidally competitive for decades. I mean, they net lost money-- and-- while they were growing like crazy in units. And I was on the board of U.S. Air so I saw how it all happened. And it can turn into fierce competitive battles that'll wipe out earnings. Or it can be a business that's more decent, but still subject to lots of competition. And-- it's really hard to know, you know, for sure how it will develop. It's-- not risk free in their competition at all. In-- in the railroad business, all the tracks have been pretty much laid and all of that. So that settled into a business. Now, it's regulated and means that your earnings, you know, can only-- you're a common carrier. And-- many places, you compete with another railroad, and other places, you don't. And there're different rules that apply even in terms of pricing in those cases. But it's a perfectly decent business. It will lose volume in coal over time. And that's an important product. But it'll probably gain in other areas. So it's-- it's two different animals."


On stocks and volatility:  "Well, some people should not own stocks at all because they just get too upset with price fluctuations. If you're going to do dumb things because a stock goes down, you shouldn't own a stock at all ... But some people are not actually emotionally or psychologically fit to own stocks. But I think more of them would be if you get educated on what you're really buying, which is part of a business. And the longer you hold stocks, the less risky they become, whereas the longer the maturity of a bond, the more risky it becomes."

Here's a link to the full CNBC Warren Buffett interview transcript.

And for even more, be also sure to check out Warren Buffett's 2017 annual letter.