Wednesday, June 13, 2018

What We're Reading ~ 6/13/18

Big Mistakes: The Best Investors and Their Worst Investments [Michael Batnick]

Assessing the debt picture [Fat Pitch]

Mary Meeker's 2018 internet trends report [KPCB]

Netflix: inside the binge factory [Vulture]

Proprietary product distribution is better than sliced bread [25iq]

The cult of Peloton: reinventing the fitness industry [Adweek]

How millennials became the world's most powerful consumers [FT]

What's driving the billion-dollar natural beauty movement? [Fast Company]

Gucci strikes gold in China, thanks to youth who spend it all [Bloomberg]

How the game Fortnite captured teens' hearts and minds [New Yorker]

Spotify vs Pandora: which is winning the ad-supported game? [Billboard]

A worrying turn ahead for auto loans [WSJ]

NASCAR tries to keep pace in today's ridesharing world [Washington Post]

On watches: an investment on your wrist [NYTimes]

A framework for analyzing factor returns [OSAM]

Paul Tudor Jones Interview: Sees Rate Jumps & Stock Market Higher Later This Year

Paul Tudor Jones of macro hedge fund Tudor Investment Corp recently sat down with CNBC for an interview.

Tudor said that, "Three things that are driving the world today... and they all start here in the United States. Fiscal policy, monetary policy, and of course a trade irritant, rather than a trade problem."  He says you have to monitor for signs of a further trade war escalating.

If Tudor was running the Fed, he said interest rates would be 150 basis points higher than they are now. 

Single best investment that's working for him right now: "Literally as light as I've been... I can't remember the last time I've been this light."  He doesn't have a lot of macro positions on right now, as the reward/risk is diminished at this particularly point in time.

"I like to have significant leveraged positions when I think there's an imminent price move directly ahead."

He thinks the third and fourth quarters are going to be phenomenal trading periods after a summer lull.  He thinks rates will move significantly higher and the stock market also has "the ability to go a lot higher at the end of the year."

Comparing this time period to past ones, he mentioned 1987 ( but "not necessarily saying we're going to have a crash").  He also listed 1999, or 1989 in Japan.  He thinks this will end with a lot higher prices and forcing the Fed to shut it off.  "It's an old story, we'll probably play it again."

"Rates have got to go up enough to either shut the economy down, and overwhelm from real money selling like we had in '07 those buybacks, or to make it economically less compelling for companies to issue debt and buyback stock, this is real simple."

On North Korea:  Unless it escalates into some military issue, it was a non-event and non-issue.  He thinks it will fade away.  The summit was anti-climactic.

Embedded below is the full half-hour video of Paul Tudor Jones' interview with CNBC:

Tuesday, June 12, 2018

PointState Capital Boosts Stake in The Medicines Company

Zach Schreiber's hedge fund firm PointState Capital has filed a 13G with the SEC regarding its position in The Medicines Co (MDCO).  Per the filing, PointState now owns 5.3% of the company with over 3.87 million shares.

This is up from the 3.7 million shares they owned at the end of the first quarter.  The filing was made due to portfolio activity on June 1st.

Per Yahoo Finance, The Medicines Company is "a biopharmaceutical company, provides medicines to treat acute and intensive care patients. The company markets Angiomax, an intravenous direct thrombin inhibitor used as an anticoagulant in combination with aspirin in patients with unstable angina undergoing percutaneous transluminal coronary angioplasty, and for patients undergoing percutaneous coronary intervention in the United States. It primarily focuses on developing Inclisiran, a lipid-lowering drug to reduce LDL-cholesterol (LDL-C) in patients with atherosclerotic cardiovascular disease or cardiovascular risk-equivalents. The company has collaboration agreements with Alnylam Pharmaceuticals, Inc.; SciClone Pharmaceuticals; and Symbio Pharmaceuticals Limited. The Medicines Company was founded in 1996 and is based in Parsippany, New Jersey."

Baupost Group Sells PBF Energy, FIles 13G on Colony NorthStar

Seth Klarman's hedge fund firm Baupost Group has filed a couple of 13G's with the SEC regarding shares of both PBF Energy (PBF) and Colony NorthStar (CLNS).

Baupost Sells PBF Energy

Per a 13G filing, Baupost Group no longer owns shares of PBF Energy (PBF).  The filing notes they sold the stake on May 31st.  They had previously owned a $268 million stake in the company as of the end of the first quarter.

Per Yahoo Finance, PBF Energy is "together with its subsidiaries, engages in the refining and supply of petroleum products. The company operates through two segments, Refining and Logistics. It produces gasoline, ultra-low-sulfur diesel, heating oil, diesel fuel, jet fuel, lubricants, petrochemicals, and asphalt, as well as unbranded transportation fuels, petrochemical feedstocks, blending components, and other petroleum products. The company sells its products in Northeast, Midwest, Gulf Coast, and West Coast of the United State, as well as in other regions of the United States and Canada. It also offers various rail, truck, and marine terminaling services, as well as pipeline transportation and storage services. PBF Energy Inc. was founded in 2008 and is based in Parsippany, New Jersey."

Baupost Files 13G on Colony NorthStar

Per a separate 13G, Baupost also now shows a 10.02% ownership stake in Colony NorthStar (CLNS) with over 49.68 million shares.  The number of shares they own is unchanged from the end of the first quarter, and so the percentage ownership of the company is likely what triggered the filing.

Per Yahoo Finance, Colony NorthStar, Inc. (NYSE:CLNS) "is a leading global real estate and investment management firm. The Company resulted from the January 2017 merger between Colony Capital, Inc., NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. The Company has significant property holdings in the healthcare, industrial and hospitality sectors, other equity and debt investments and an embedded institutional and retail investment management business. The Company currently has assets under management of $43 billion and manages capital on behalf of its stockholders, as well as institutional and retail investors in private funds, non-traded and traded real estate investment trusts and registered investment companies. In addition, the Company owns NorthStar Securities, LLC, a captive broker-dealer platform which raises capital in the retail market. The firm maintains principal offices in Los Angeles and New York, with more than 500 employees in offices located across 18 cities in ten countries. The Company will elect to be taxed as a REIT for U.S. federal income tax purposes. For additional information regarding the Company and its management and business, please refer to"

Tiger Global Boosts Sunrun Stake Again

In another slew of SEC filings, Chase Coleman's hedge fund firm Tiger Global has disclosed a further increased stake in Sunrun (RUN).  Per a 13G filing, Tiger now owns 12.8% of the company with over 13.93 million shares.

This is up from the 11.67 million shares we highlighted they owned just a few weeks ago.  A separate Form 4 filed indicates they were buying RUN shares on June 5th through 7th at weighted average prices of $12.3736 and $12.4824.

Per Yahoo Finance, Sunrun "engages in the design, development, installation, sale, ownership, and maintenance of residential solar energy systems in the United States. It also sells solar leads. The company markets and sells its products through direct channels, partner channels, mass media, digital media, canvassing, referral, retail, and field marketing. Sunrun Inc. was founded in 2007 and is headquartered in San Francisco, California."

ValueAct Capital Files Form 4 on Seagate Technology (STX)

Jeff Ubben's activist investment firm ValueAct Capital has filed a Form 4 with the SEC regarding its stake in Seagate Technology (STX).  Per the filing, ValueAct now owns over 22.4 million shares.

The filing notes they entered into forward purchase contracts with an exercise date of June 2nd, 2018 and expiration date of December 3rd, 2018.  In total, these contracts represented 946,100 shares and obligated ValueAct to purchase shares at varying prices with the bulk coming at $54.72.

This means ValueAct's total STX stake is up from the 21.45 million shares they owned at the end of the first quarter.

For more on this fund, we've also highlighted another stock they've been buying recently.

Per Yahoo Finance, Seagate Technology "provides data storage technology and solutions in Singapore, the United States, the Netherlands, and internationally. The company manufactures and distributes hard disk drives, solid state drives and their related controllers, solid state hybrid drives, and storage subsystems. Its products are used in enterprise servers and storage systems applications; client compute applications, primarily for desktop and mobile computing; and client non-compute applications, including various end user devices, such as portable external storage systems, surveillance systems, network-attached storage, digital video recorders, and gaming consoles. The company offers external backup storage solutions under the Backup Plus and Expansion product lines, as well as under the Maxtor and LaCie brand names available in capacities up to 120 terabytes. It sells its products primarily to original equipment manufacturers, distributors, and retailers. Seagate Technology plc was founded in 1979 and is headquartered in Dublin, Ireland."

Appaloosa Management & Senator Investment Group Send Letter to Allergan Board

David Tepper's hedge fund firm Appaloosa Management has sent a letter together with Alex Klabin and Doug Silverman's Senator Investment Group to the board of Allergan (AGN).  They previously sent letters to AGN's board on May 7th and April 23rd as well.

Here's the text of the latest letter:

"Letter dated June 5, 2018:Board of Directors
Allergan plc
Clonshaugh Business Technology Park
Coolock, Dublin, D17 E400, Ireland

Ladies and Gentlemen:

We write concerning the conclusions drawn from Allergan’s much-heralded strategic review, publicly outlined by Chairman and CEO Brent Saunders on May 30th. Like the rest of the investment community, we were underwhelmed by the Company’s half-hearted attempt to restore strategic momentum. The result of this process is all the more disappointing given our previous discussions and correspondence (attached hereto for reference). In view of this outcome, we are compelled to express our views publicly.

The token measures outlined in Mr. Saunders’ presentation betray the Board and management’s desire to cling to a status quo that has produced three years of steadily declining stock performance and a fire-sale market valuation. It is now clear that fresh thinking is absent from the current regime, thus explaining the market’s complete loss of confidence in the stock. To that point, we reiterate our strong suggestion that at a minimum the Company (1) split the office of CEO and Chairman; (2) retain a new Chairman or CEO from outside the Company; (3) replace at least two additional directors on the current Board; and (4) upgrade management personnel in critical operating units.

Concurrent with these measures, we renew our calls for the Company to stop hiding behind an arbitrary debt reduction target as an excuse to preserve the means to pursue a transformative M&A transaction. Prioritizing such flexibility at this time makes no sense given Allergan’s undervalued equity currency, its mixed M&A record and the market’s loss of confidence in the Company’s ability to deploy capital for the benefit of shareholders. More importantly, it will not address the Company’s malaise. Instead, it is time for Allergan’s management to concentrate on running a world class pharmaceutical and aesthetics business and forego thoughts of, or the exhilaration from, an ambitious acquisition strategy.

In our conversations, Chairman and CEO Saunders has been fond of repeating a famous quotation that “the definition of insanity is doing the same thing over and over again, but expecting different results”. Until Mr. Saunders and the Board heed this advice, adopt new governance and renew the Company’s operational focus, it appears that shareholders can expect Allergan’s stock price to continue to languish."