Friday, October 26, 2018

Invest For Kids Chicago Conference Notes 2018: Griffin, Zell & More

The Invest For Kids Chicago 2018 conference recently took place.  It featured investment managers sharing their latest ideas to benefit underprivileged children in the Chicago area.  Here's notes/summary of the event:

Notes From Invest For Kids Chicago 2018

Ken Griffin (Citadel Investment Group):  Took down risk in August.  Hasn't felt comfortable with lots of risk in about a decade.  Says there's lots to worry about and October has obviously thus far been volatile, but this is where portfolio managers can shine.  Sees lots of opportunity for Citadel in commodities.  Says to hire great people then delegate.

Sam Zell (Equity Group Investments):  Macro commentary, lots of uncertainty about next month's elections.  Long cash, maybe gold?  He thought we were in the 8th inning a few years ago, elections have since taken us into extra innings.

Christopher James (Partner Fund Management):  Long Intuit (INTU).  Known for its TurboTax and QuickBooks products, proprietary datasets are where the real value is.  Big Data + Workfroce 2.0.  New "One Intuit" ecosystem driving value as well.  People trust the company, are opting into data sharing.  INTU has underappreciated upside and is partnering well with a range of other fintech companies.

Mark Lampert (BVF Partners):  Long Idorsia (IDIA-CH), spin-off from Actelion done in conjunction with Actelion's sale to Johnson & Johnson.  Founders/owners of co are exemplary scientists and business operators.  Invested $525 million into Idorsia, more open market purchases recently.  Insider purchases stand out as among biggest in industry.  Thesis is to co-invest with the Clozels, the founders.

Vivian Lau (One Tusk Investment Partners):  Long Bombardier.  Prior management made a ton of mistakes.  Co has a strong backlog and good long-term demand.

Daniel O'Keefe (Artisan Partners):  Long Dentsply (XRAY).  Depressed earnings/multiple.  Co is growing, has good margins and ROIC.  Says dental spending is seeing secular, long-term growth.  180 million Americans are missing at least one tooth.  XRAY historically trades low-to-mid 20's P/E but has recently been mid-to-low teens.  They overpaid for Sirona, failed merger integration, and have had 4 CEO's in 3 years.  Thinks margins should revert, sees FY19 op margin at 17-21%, EPS at $2.30 to $2.80, stock worth $41-71, currently trades $35.

John W. Rogers Jr. (Ariel Investments):  Long Stericycle (SRCL), long Madison Square Garden (MSG), MSG Networks (MSGN).  People will probably still want to watch live sports, they own very valuable sports rights in a world class city.

Vivien Azer (Cowen & Co):  Long Canopy Growth (CGC/Weed).  Says it's a once-in-a-career disruption and only a matter of time.  Consumer packaged goods companies are getting into the sector.  Target price: C$82.00, 30x sales in three years.

Jeremy Schiffman (Palestra Capital):  Long Airbus.  In the good part of the cycle, about to get even better.  Higher margins to follow: op margins going to mid-teens in next three years.  Worth 180 Euros per share in three years.  Stock buyback is possible next year.  40,000 new aircraft deliveries worldwide in the next decade.  FCF heading from under 3bn Euros to 8bn Euros.  Short U.S. Trucking: (Wener, Knight-Swift, Heartland): good part of cycle right now but about to get a lot worse.  60 PMI likely to mean-revert to 50 or lower; if 40, short makes a lot of money.

Philip C. Ordway (Anabatic Investment Partners): Long Alaska Airlines (ALK).  Advantages from cost structure, customer loyalty, and markets/routes.  Attractive margins and returns on capital.  Current valuation = very low expectations. Secret sauce is Alaska's credit cards: loyalty program generated ~$1 billion of CFFO in '17. Operating margins ~40-50% with zero capital required, membership growing 10-12% per year. Bank of America pays Alaska every month based on members' credit card usage.  Co's integration of Virgin America almost complete, sees FCF >$2 bn in next 3 years. ALK 10% FCF yield, 9x P/E.

Constance Freedman (Moderne Ventures):  Long Fujifilm.  Venture capitalist looking to invest in old industries undergoing technological transformation.  3d printing, augmented reality, digital transactions are technologies applicable to many markets.  Document solutions, healthcare, imagine segments all use disruptive technologies.  Undervalued today relative to peers.  Revenue and profit growth from healthcare and imaging.  Sees 15x E 2018 EPS, 6% ROE

For more recent investment conference coverage, head to our summary of the Great Investors Best Ideas (GIBI) Dallas Conference

Thursday, October 25, 2018

Sohn London Investment Conference 2018: Only a Month Away

The 7th annual Sohn London Investment Conference is only a month away.  It will feature Europe's leading hedge fund managers sharing their latest investment ideas to benefit the Sohn Conference Foundation for the treatment and cure of paediatric cancer.  If you're in the UK or Europe, this is always a great event to attend.

To learn more about the event and to register, head to:

Sohn London 2018 Speakers List

Adrian Croxson, OZ Management

Per Lekander, Lansdowne Partners

Andrew Dickson, Albert Bridge Capital

Maxime Franzetti, Mubadala Capital

Bernie Ahkong, UBS O'Connor

Andy Brough, Schroder Investment Management

Dureka Carrasquillo, Canada Pension Plan Investment Board

BenoƮt Colas, PrimeStone Capital

Rachel Reutter, J O Hambro Capital Management

Vikram Kumar, Kuvari Partners

Luke Newman, Janus Henderson Global Investors

Professor Richard J. Gilbertson, Li Ka Shing Professor of Oncology, University of Cambridge

Conference Details

When:  29th November 2018

Where:  London Marriott Hotel, Grosvenor Square, London W1K6JP, United Kingdom

Schedule:  11:30 Registration and lunch buffet, 12:30 Speakers, 13:45 Break and further refreshments, 14:30 Speakers and Idea Contest, 15:45 Break, 16:30 Speakers, 17:30 Networking drinks

This year also includes the inaugural Sohn Women's Brunch, which will bring together a number of the most senior women in finance.

You can register for the conference by clicking here.

Pershing Square Starts Hilton Stake Again

Bill Ackman's investment firm Pershing Square Capital Management today revealed that they've started a new position in Hilton (HLT).  Pershing now owns a 3.7% stake, or around 10.9 million HLT shares.

This isn't the first time Pershing has owned HLT shares in recent memory.  They sold their previous stake in Q2 of 2017 after the company split itself up into a real estate company, an asset light management company, and a timeshare business.

This time around, they've bought HLT, which is just the asset light hotel management business.  This year, HLT shares have dropped from a high of $87.62 to a low of $63.76 before slightly rebounding to current levels of around $67.

For more on this fund, we've also highlighted their Pershing Square's new position in Starbucks (SBUX) and thesis presentation.

Summary of Great Investors' Best Ideas Conference (GIBI) Dallas 2018

The 2018 Great Investors' Best Ideas (GIBI) Dallas Conference recently concluded with proceeds benefiting The Michael J. Fox Foundation for Parkinson's Research and the Vickery Meadow Youth Development Foundation.  Here's a brief summary of the event:

Great Investors Best Ideas Dallas Conference 2018

Lee Ainslie (Maverick Capital) talked with Lee Hobson (Highside Capital) about quantitative investing and utilizing its features to replicate various typical fundamental processes: screening companies, position sizing, data sets.  Maverick has been focused on the intersection of man and machine, instead of simply one versus the other.  Didn't pitch any individual names.  Maverick has launched four quant funds over the past few years that have higher turnover, in addition to their fundamental hedge fund.

Jim Grant (Grant's Interest Rate Observer):  Likes municipal closed end fund BlackRock Investment Quality Municipal Trust (BKN), says trading at 13% discount.  Also recommended shorting Matthews International (MATW) due to aggressive accounting, as well as fighting secular trends like the shift to cremation.

Ray Nixon Jr (Barrow, Hanley, Mewhinney & Strauss): Pitched General Electric (GE), sees valuation around $12 on a sum of the parts basis.  Obviously there's been a lot of volatility in this name.

Lisa Hess (SkyTop Capital): Bullish on the electric vehicle shift.  Pitched Sherritt International debt: 7.875% 2025, as well as Aumann in Germany, a copper coil play.  Also mentioned that Tesla (TSLA) is a religion, not a stock.

Michael Price (MFP Investors):  Bullish on AT&T (T) as well as Intel (INTC).

Marc Cohodes (Former Managing Director of Copper River Management):  Negative on MiMedx Group (MDXG).  Also mentioned Intec Pharma (NTEC) as a long.

Richard Mashaal (Senvest Management): Paramount Resources (Canadian E&P), sees a double or triple in next 1-1.5 years.  Cited increased production and hidden assets as reasons for bullishness, also thinks multiple could re-rate.

Ken Hersh (George W. Bush Presidential Center):  e-Sports is a huge business in early innings.  Sees 280 million fans going to 550 million in next 4-5 years.  Plays on the trend include Amazon (AMZN) due to their ownership of streaming platform Twitch, game maker Activision Blizzard (ATVI), and graphics card maker nVidia (NVDA).

Roger Staubach (Former Executive Chairman JLL Americas):  "Adversity reveals genius and prosperity conceals it."

Stay tuned in the next few weeks as we'll be covering a ton of investment conferences.

Third Point's Campbells Video: Empty the Can

As we've detailed previously, Dan Loeb's hedge fund firm Third Point is long Campbells (CPB) and has an activist position as they seek to replace the entire board.  We've posted their presentation on Campbells before. 

Now, Third Point has released a short 4-minute video regarding their campaign and the problems at Campbells and they continue to use the hashtag: #RefreshTheRecipe.

Embedded below is Third Point's video: "Empty the Can"

Wednesday, October 24, 2018

What We're Reading ~ 10/24/18

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

Fortune's Future 50 list: companies with best prospects for long-term growth [Fortune]

On shallow risk versus deep risk [A Wealth of Common Sense]

On Netflix's pricing power [Intrinsic Investing]

The quality of quantity at Netflix [FT Alphaville]

The economic cycle that just won't end [Morningstar]

Profile of businessman Tilman Fertitta [SBNation]

Louis Vuitton, Chanel most valuable brands but Gucci is gaining [Business of Fashion]

Amazon sets sights on the $88 billion online ad market [NYTimes]

How car ownership is changing rapidly in India [Economic Times]

Where to invest when US equities are overvalued [Mutual Fund Observer]

Viking Global Starts Position in Berry Global Group

Per a 13G filed with the SEC, Andreas Halvorsen's hedge fund firm Viking Global now owns 5.5% of Berry Global Group (BERY) with over 7.19 million shares.

This is a newly disclosed position for the firm as they did not own any shares as of the end of the second quarter.

The filing was made due to portfolio activity on October 12th.  Berry Global was previously known as Berry Plastics.

Per Yahoo Finance, Berry Global "manufactures and distributes engineered materials, nonwoven specialty materials, and consumer packaging products. The company operates through three segments: Engineered Materials; Health, Hygiene & Specialties; and Consumer Packaging. It offers engineered materials, including stretch and shrink films, and converter films; trash-can liners and food bags; cloth and foil, splicing and laminating, flame-retardant, vinyl-coated and carton sealing, electrical, double-faced cloth, masking, mounting, OEM, and medical and specialty tapes; and food and consumer films, retail bags, and polyvinyl chloride films. The company also provides components for baby diapers and other absorbent hygiene products, feminine hygiene products, medical garment materials, substrates for dryer sheets, household cleaning wipes, filters, protective house wraps, and specialty agriculture and industrial products; components for adult incontinence, surgical drapes, face masks, corrosion protection, cable wrap, geosynthetics, and specialty filtration products; and a range of products for baby care, infection prevention, and food and household packaging. In addition, it offers containers; foodservice products, such as thermoformed polypropylene and injection-molded plastic drink cups and lids; closures and over caps comprising continuous-thread and child-resistant closures, as well as aerosol over caps; bottle and prescription containers; and extruded and laminate tubes"

Tiger Global Buys More Apollo Global Management Shares

Chase Coleman's hedge fund firm Tiger Global has filed a Form 4 with the SEC regarding its position in Apollo Global Management (APO).  Per the filing, Tiger was out buying shares on October 22nd and 23rd.

In total, Tiger bought 815,000 shares at weighted average purchase prices of $29.57, $28.421, and $29.365.  After these purchases, they now own over 35.23 million APO shares.

For more on this hedge fund, we recently highlighted other Tiger Global portfolio activity here.

Bruce Berkowitz Reduces Sears Position

Bruce Berkowitz's Fairholme Capital has filed a 13G with the SEC regarding its position in Sears Holdings (SHLD).  Per the filing, Fairholme now owns 4.2% of the company with over 4.57 million shares.

This is a sizable decrease from the previous 17.42 million shares Fairholme reported owning at the end of the second quarter.  The most recent filing was due to portfolio activity on October 15th. 

Sears recently filed for bankruptcy and Berkowitz has ridden this investment all the way down, making it one of his biggest mistakes.

Monday, October 22, 2018

Graham & Doddsville Fall 2018 Issue: Tweedy Browne, Greenhaven Road & More

Columbia Business School has just released the Fall 2018 issue of its Graham & Doddsville newsletter.  In it, they interview members of Tweedy, Browne Company such as Roger De Bree, Andrew Ewert, Frank Hawrylak, Jay Hill, Amelia Koh, Tom Shrager, John Spears, and Bob Wyckoff.  They also interview Scott Miller of Greenhaven Road Capital.

Additionally, the issue also includes student investment pitches such as long (JD) and long Qorvo (QRVO)

Tweedy Browne Buys Baidu, Sina, AutoZone

Tweedy recently bought some Chinese equities: search engine giant Baidu (BIDU) and Sina (SINA), which owns Weibo, a popular social media business.  They like the profitable advertising business models but have smaller position sizes due to various risks.

Domestically, Tweedy also purchased shares of AutoZone (AZO):  "If you lookover the previous 11-yearperiod, its intrinsic value grew by 16% per annum, with a significant percentage of that growth driven by share buybacks. The historical record also revealed a stable and defensive business. Same store sales at AutoZone have grown in 19 out of the last 20 years, including in 2008 and 2009.AutoZone has also historically produced high returns, with a 14% ROA (return on assets) and a roughly 30% lease adjusted ROIC (return on invested capital)."

Greenhaven Road Long Etsy, Fiat, Yelp

Greenhaven Road's founder talks about his positions in Etsy, (ETSY), Fiat Chrysler (FCAU) and Yelp (YELP). 

On Fiat, he notes: "Fiat Chrysler is reducing the low margin fleet business by getting out of sedans and focusing on SUVs, aligning themselves with customer preferences and higher margins.They are also going to either spin off or sell their parts division. If you backout the parts business, you're getting the core business for less than 3x earnings excluding net industrial cash and the parts business. That’s an attractive multiple for a growing earnings stream and a business that should remain profitable even if US new car sales decline by 30%."

Graham & Doddsville New Fall 2018 Issue

Embedded below is the new issue:

You can download a pdf copy here.