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.