Friday, January 26, 2018

Hedge Fund Links ~ 1/26/18

Steve Cohen is about to make his return [Business Insider]

Seth Klarman watching for stumbles among unicorns [WSJ]

Clash between founder and protege at Och-Ziff [WSJ]

This massive hedge fund is betting on AI [Bloomberg]

Sachem Head pushes Whitbread to consider breakup [Reuters]

David Tepper says market is as cheap as year ago [CNBC]

Jana Partners more invested today than ever [CNBC]

ValueAct launching fund with social goals [CNBC]

World's best female poker player joins Bridgewater [Bloomberg]

One of Paulson's funds is down 70% over four years [Bloomberg]

Pershing Square cuts staff, shuns limelight [Reuters]

Boone Pickens closes energy hedge fund [Reuters]

Thursday, January 25, 2018

Pershing Square Takes Nike Stake

Bill Ackman's activist firm Pershing Square has taken a passive stake in Nike (NKE), according to a Reuters report.  Ackman apparently announced the position at an investor event but doesn't plan to go activist as the company is already heading down the right path.  The fund manager reportedly accumulated the stake since October.

We joked on Twitter that perhaps he read Shoe Dog recently?  Shoe Dog, of course, is the book about Nike's founder Phil Knight and has been recommended by the likes of Warren Buffett and numerous other investors.

For more on this fund we've also previously posted Pershing Square's Q3 letter.

Per Yahoo Finance, Nike is "designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. It offers NIKE brand products in nine categories: running, NIKE basketball, the Jordan brand, football, men's training, women's training, action sports, sportswear, and golf. The company also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking, and outdoor activities. In addition, it sells sports apparel; and markets apparel with licensed college and professional team and league logos. Further, the company sells a line of performance equipment, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, and other equipment under the NIKE brand for sports activities; various plastic products to other manufacturers; athletic and casual footwear, apparel, and accessories under the Jumpman trademark; action sports and youth lifestyle apparel and accessories under the Hurley trademark; and casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks. Additionally, it licenses agreements that permit unaffiliated parties to manufacture and sell apparel, digital devices, and applications and other equipment for sports activities under NIKE-owned trademarks. The company sells its products to footwear stores, sporting goods stores, athletic specialty stores, department stores, skate, tennis and golf shops, and other retail accounts through NIKE-owned retail stores and Internet Websites, mobile applications, independent distributors, and licensees. The company was formerly known as Blue Ribbon Sports, Inc. and changed its name to NIKE, Inc. in 1971. NIKE, Inc. was founded in 1964 and is headquartered in Beaverton, Oregon."

Lee Cooperman Acquires More Ocwen Financial

Lee Cooperman of Omega Advisors has filed a Form 4 with the SEC regarding shares of Ocwen Financial (OCN).  Per the filing, Cooperman's most recent activity was buying shares of OCN on January 22nd and 23rd at $3.1582.  In total across various vehicles, he purchased 494,459 shares. 

In an additional 13G filed with the SEC, Cooperman disclosed he now owns 10.5289% of the company with over 14.04 million shares.  Omega previously only owned 8.66 million OCN shares as of the end of the third quarter in 2017.

Per Yahoo Finance, Ocwen Financial is "a financial services holding company, engages in the servicing and origination of mortgage loans in the United States. Its Servicing segment provides residential and commercial mortgage loan servicing, special servicing, and asset management services to owners of mortgage loans and foreclosed real estate. This segment's residential servicing portfolio includes conventional, government insured, and non-agency loans. The company's Lending segment originates and purchases conventional and government-insured residential forward and reverse mortgage loans primarily through its correspondent lending arrangements, broker relationships, and directly with mortgage customers. The company also provides short-term inventory-secured loans to independent used car dealers to finance their inventory. Ocwen Financial Corporation was founded in 1988 and is headquartered in West Palm Beach, Florida."

Tiger Global Takes Barclays Stake: Report

Per the FT, Chase Coleman's hedge fund firm Tiger Global has reportedly taken a stake in Barclays (BCS) worth around $1 billion, but this position hasn't been publicly disclosed.  Reportedly, the fund acquired around a 2.5% stake in November when Barclays shares were in the doldrums. 

Based on Tiger's last 13F filing (as of Q3 2017), this would make it around their fourth, fifth, or sixth largest holding, depending on just how large the stake is and if they've adjusted position sizes in other holdings.

This would also be their second major investment in the financial space as of late, as they also built up a stake in private equity firm Apollo (APO) throughout 2017.

Barclays' CEO, Jes Staley, has been focusing on their US-focused investment bank and UK-focused consumer banking segment. 

Per Yahoo Finance, Barclays is "provides various financial products and services worldwide. It offers personal and business banking services, credit cards, transactional and other lending products, and investment products and services. The company also provides financial advice, primary capital raising and capital markets execution, risk and liquidity management, sales and trading, consumer payments, and wealth management services. It serves corporates, financial institutions, institutional investors, governments, consumers, high and ultra-high net worth individuals, and family offices. The company was formerly known as Barclays Bank Limited and changed its name to Barclays PLC in January 1985. Barclays PLC was founded in 1690 and is headquartered in London, the United Kingdom."

Wednesday, January 24, 2018

What We're Reading ~ 1/24/18

Thinking in Bets: Making smarter decisions when you don't have all the facts [Annie Duke]

The playing field: five levels of investor development [Graham Duncan]

Op-ed written by Warren Buffett [Time]

Breaking out of low growth 'new normal' is on horizon [Mohamed El-Erian]

The annual Barrons roundtable: outlook for economy & stocks [Barrons]

A look at Starbucks (SBUX) [Scuttlebutt Investor]

Inside the eccentric, relentless dealmaking of Softbank's Masa [Bloomberg]

How Charlie Munger became an 'expert generalist' [Quartz]

India has 600 million young people & they're set to change our world [The Guardian]

A slowdown is in store for the self-storage business [WSJ]

How automation will change work, purpose, meaning [HBR]

Beyond the Bitcoin bubble [NYTimes]

Howard Marks Latest Memo on Markets & Tax Cuts

Oaktree Capital's Chairman Howard Marks is out with his latest memo entitled "Latest Thinking."  In it, he details his take on the markets and tax cuts.

He begins by highlighting the positives: fundamentals are solid, worldwide growth is in full effect, deregulation and pro-business policies are in place, etc. 

He then turns to the negatives, writing.

"Most valuation parameters are either the richest ever (Buffett ratio of stock market capitalization to GDP, price-to-sales ratio, the VIX, bond yields, private equity transaction multiples, real estate capitalization ratios) or among the highest in history (p/e ratios, Shiller cycle-adusted p/e ratio).  In the past, levels like these were followed by downturns.  Thus a decision to invest today has to rely on the belief that 'it's different this time.' Prospective returns in the vast majority of asset classes are some of the lowest in history."

Marks says that he would be on the "defensive or cautious part of the spectrum" in regards to portfolio construction at the moment.   You can read his full thoughts:

Embedded below is Howard Marks' new memo, "Latest Thinking":

You can download a .pdf copy here.

For more from this investor, be sure to also read his well-known book, The Most Important Thing.

Sequoia Fund Q4 Letter: Added to Alphabet, Exited Fastenal & Danaher

Ruane, Cunniff & Goldfarb is out with Sequoia Fund's fourth quarter letter.  They returned 20.07% for the year.

At the end of 2017, their top 10 holdings were:

1. Berkshire Hathaway (BRK)
2. Alphabet (GOOG)
3. Mastercard (MA)
4. Constellation Software (CSU)
5. Dentsply Sirona (XRAY)
6. TJX Companies (TJX)
7. Rolls Royce (RR.LN)
8. Charles Schwab (SCHW)
9. CarMax (KMX)
10. Liberty Media

They exited positions in Fastenal (FAST), Danaher (DHR), Emcor, Croda, Tiffany (TIF), and Costco (COST).  They've also trimmed stakes in BRK, MA, O'Reilly (ORLY), Waters, and TJX.

They've added to positions in GOOG, Hiscox, Jacobs, Omnicom, and Wells Fargo.  They've also started new investments in Credit Acceptance (CACC) and Royal Vopak, Priceline (PCLN).

They've been concentrating their portfolio a bit more, and their cash levels have gone down some.

Embedded below is Sequoia Fund's Q4 letter:

You can download a .pdf copy here.

For other recent fund letters, we've also posted Greenlight Capital's Q4 letter.

Tuesday, January 23, 2018

Ray Dalio Interview From Davos: Market Melting Up, Keep Eye on Interest Rates

Bridgewater Associates founder Ray Dalio appeared on CNBC today from the World Economic Forum in Davos to give his thoughts on the economy and markets.  Here's some of the highlights and videos.

- Said the markets are in a 'Goldilocks' period after a beautiful deleveraging as everything is 'pretty good' with a big jolt of stimulation coming from tax laws.  He says we're at the 'later part of the cycle' and there's a lot of cash on the sidelines (banks, corporations, etc).  "We're going to be inundated with cash." 

-  Thinks it might eventually lead to a market blow-off.  Thinks markets will continue to melt up: "If you're holding cash, you're going to feel pretty stupid."  Says last part of the cycle could perhaps last a year.

- Focused on interest rate policy as even a little change there can lead to a bear market.  Dalio says you can't have a significant rise in interest rates without knocking over asset prices. It seems he's saying anything above 4% could potentially get dicey.  Says there's much more interest rate sensitivity than before.

- Also notes that the various bonuses companies are paying out from the tax cuts won't move the needle much on the wealth gap as the middle class has been most impacted by soft income growth.  He's not worried about an immediate downturn, but if there's a good chance there's a downturn in 2-3 years, he's worried about how the difference between rich and poor will affect things.

- On bitcoin, he doesn't know how to value it but thinks it's been a bubble.  Thinks the blockchain technology is useful but doesn't have any other comment.

Embedded below are the videos of Ray Dalio's interview on CNBC:

And if you haven't already, be sure to check out Dalio's new book, Principles.

Monday, January 22, 2018

TCI Fund Trims Altaba Stake (AABA)

Sir Christopher Hohn's TCI Fund Management (The Childrens Investment Fund) has filed an amended 13G and a Form 4 with the SEC regarding its stake in Altaba (AABA).  Per the filing, TCI now owns 9.99% of AABA with 84,709,952 shares.

The Form 4 indicates they sold 750,000 shares at a weighted average price of $74.2795 on January 18th, and another 464,000 shares at weighted price of $74.0791 on January 19th.  Perhaps this transaction was possibly made to keep them below the 10% ownership threshold, though that's purely speculation on our part.

Altaba is the former Yahoo stub that was left after the company was sold to Verizon (VZ).  Altaba is basically a collection of ownership stakes in the likes of Alibaba (BABA), Yahoo Japan, etc.  The thesis has been that the company was trading at a discount to its NAV and that management would look to close the gap or monetize the stakes in a tax efficient manner.

As of the end of the third quarter of 2017, AABA was TCI's largest US holding worth almost $6 billion.  Given the run-up in AABA shares since then, this stake is likely worth even more.  However, there's no way to know if TCI has hedged out this play in anyway, as some other funds involved in the trade have shorted BABA shares to offset the exposure.

Per Yahoo Finance, Altaba "operates as a non-diversified, closed-end management investment company in the United States. Its assets consist primarily of equity investments, short-term debt investments, and cash. The company was formerly known as Yahoo! Inc. and changed its name to Altaba Inc. in June 2017."