Top 10 Stocks That Matter Most To Hedge Funds Per Goldman Sachs (Q4 2016)

Goldman Sachs' quarterly hedge fund trend monitor outlines what stocks matter most to hedge funds.  Here's the list as the fourth quarter 2016:


Top 10 Stocks That Matter Most To Hedge Funds: Q4 2016

- Alphabet (GOOGL / GOOG)

- Facebook (FB)

- Amazon.com (AMZN)

- Bank of America (BAC)

- Charter Communications (CHTR)

- Apple (AAPL)

- Microsoft (MSFT)

- Yahoo (YHOO)

- Time Warner (TWX)

- NXP Semiconductor (NXPI)


As you can see, it's quite tech-heavy.   The major exception is Bank of America (BAC), which was a consensus buy in Q4 among hedge funds we track in our newsletter.

For more on what stocks hedge funds have been buying & selling, check out the brand new issue of our premium newsletter that reveals the portfolios of 25 top funds.

Sir Chris Hohn Long Charter Communications: Sohn London Conference

We're posting notes from the Sohn London investment conference 2016.  Next up is Sir Christopher Hohn of Children's Investment Fund (TCI) who pitched a long of Charter Communications (CHTR).


Sir Chris Hohn's Sohn London Conference Presentation

TCI have already been invested in Charter for 3 years, but Hohn sees it as a multi-year investment. Charter is a public leveraged buyout which makes it an interesting special situation. It bought Time Warner Cable, a much bigger company, using a large amount of debt. Charter can compound at about 25% per year.

Cable companies are interesting because they should no longer be labelled as television businesses but as broadband businesses. Broadband businesses are a toll road on the internet.

Four reasons to like the business:

-    Telephone companies are not competitors to broadband providers

-    Digitization and cloud technology will change the capital expenditure profile reducing the intensity while the top line is growing.

-    Donald Trump will deregulate the sector leading to more pricing power and take away the regulatory risks.

-    Cable will also be a disruptor to wireless in the future.

There is a lot of upside still to come for Charter which is underestimated by the investment community. Nearly everyone needs broadband. Charter has the potential to double its customer base over time. Charter is 4x leveraged and TCI wants it to stay that way. In 2012, half the profits were coming from the TV business. Today only 22% come from TV. Hohn thinks that about 90% of the real value of the business is in broadband.

John Malone is the largest shareholder with about 20% of the equity and 25% of the voting rights. TCI own about 5% of the company. Malone is one of the world’s great investors with compounded returns of about 30% per annum. He is shareholder friendly and is committed to share buybacks.

Hohn always tries to find businesses that are protected from competition.  TCI have returned 17% per annum net of fees for the last 13 years using this approach. It is hard to break into the fiber broadband market. Google tried recently but have now essentially given up. The industry has effectively become a duopoly between Charter and Comcast (CMCSA), even then because they do different things they are monopolistic within their sectors. Charter has pricing power. It has been raising its pricing by 5% per year. Charter has 30% margins but these could rise to 50% or even 55%.

Risks: the TV business could decline, unbundling will come, wireless could be a threat.  Cable will be a disruptive player in wireless. Both Comcast and Charter will probably enter the wireless sector. He thinks Verizon may try to buy Charter in the future.

Be sure to check out the rest of the Sohn London conference presentations here.

What We're Reading ~ 11/30/16

Warren Buffett's meeting with University of Maryland students [UMD]

Is the next financial crisis on its way? [Steve Eisman]

A write-up on the impending Hilton (HLT) spinoff [Clark Street Value]

CBRE (CBG): industry deep dive to detect an emerging moat [Punch Card]

A look at Discovery Communications (DISCA/K) [Contrarian Edge]

Sustainable sources of competitive advantage [Collaborative Fund]

Why deep learning matters and what's next for AI [Algorithmia]

The unexpected genius of Facebook's Mark Zuckerberg [Fortune]

Google's online travel adventure upsets its biggest advertisers [Bloomberg]

A billionaire's dreams of creating a guns empire [NYMag]

If oil refiners crash, so will the economy [WSJ]

Mastercard, Visa set to reap spoils of India's war on cash [Bloomberg]

How Best Buy (BBY) fought Amazon [WSJ]

The evolution of media & entertainment: conversation with CEOs [YouTube]

How to get comfortable with being umcomfortable [Inc]

Why gut feelings may really help you make risky decisions [Washington Post]

Why stoicism is one of the best mind-hacks ever devised [Aeon]

Third Point's Q1 Letter: Playing Merger Arb & Pro Forma Situations

Dan Loeb's Third Point is out with its first quarter letter.  In it, they talk about how hedge funds have seen a lot of carnage as of late.

Specifically, they see the decimation in merger arbitrage land as an opportunity, writing, "many of these combined businesses should compound in value thanks to the benefit of synergies, modest financial leverage, and strong or improved management teams that have a history of successful capital allocation."

Their letter outlines their thesis on the following plays:

- Dow / DuPont
- ABInBev / SAB Miller / Molson Coors
- Time Warner Cable / Charter Communications
- Chubb / ACE
- Danaher

Embedded below is Third Point's Q1 letter:

What We're Reading ~ 9/9/15

The long road of proving yourself as an investor [Morgan Housel]

On the importance of journaling your investment thoughts [Safal Niveshak]

Prices have changed, not much else has changed [Aleph Blog]

Charts summarizing recent economic activity [Calafia Beach Pundit]

China to face tough economic conditions for up to 10 years [Nikkei Asian Review]

The case for keeping US interest rates low [FT]

A play on the student loan bubble: short Navient [SumZero]

Charter: John Malone's return to the US cable industry [Punch Card Blog]

Patrick Drahi positions himself to be a player in US cable [NYTimes]

Cable box rentals: a needless $19 billion industry [The Atlantic]

Is the high cost of live sports a tipping point? [Bloomberg]

James Tisch lecture on value investing [ValueWalk]

How the average US consumer spends their paycheck [CreditLoan]

Coming soon: Millennials married with children [WSJ]

Lone Pine Capital Almost Doubles Charter Communications Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding its position in Charter Communications (CHTR).  Per the filing, Lone Pine now owns 5.7% of the company with over 6.33 million shares.

This is a sizable increase from the around 3.3 million CHTR shares they owned at the end of Q1.  The filing was made due to activity on July 6th.

Charter has announced a takeover of Time Warner Cable (TWC) and Bright House.  They swooped in for the assets once it became clear that Comcast's (CMCSA) previous bid for TWC wasn't going to be approved by regulators and was called off.  Many investors seem to think, however, that CHTR's deal will go through.

As such, arbitrageurs have been going long TWC and shorting the corresponding amount of CHTR, driving down the price.  The deal spread on this was around 9% at one point but recently is closer to 6-7%.  Lone Pine saw this as an opportunity and almost doubled its stake. This stock been a consensus buy among hedge funds we track in our Hedge Fund Wisdom newsletter and has been flagged numerous times in past issues.

Per Google Finance, Charter Communications is "a provider of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers. The Company sells its video, Internet and voice services primarily on a subscription basis, often in a bundle of two or more services. The Company provides broadband communications solutions to business and carrier organizations, such as video entertainment services, Internet access, business telephone services, data networking and fiber connectivity to cellular towers and office buildings. Through its hybrid fiber and coaxial cable network, the Company offers its customers traditional cable video services, as well as advanced video services, Internet services and voice services. The Company’s voice services are primarily provided using voice over Internet protocol (VoIP) technology, to transmit digital voice signals over the Company’s systems."

What We're Reading ~ 6/10/15

Focus on the key variables of an investment [Base Hit Investing]

Bias from overconfidence [Farnam Street]

Robert Shiller: things are overvalued [Zero Hedge]

The most important concepts in behavioral economics [StockTwits]

A pitch on Charter/Time Warner Cable [Value Venture]

A look at Precision Castparts [Jnvestor]

Why did John Malone invest in Lions Gate? [Punch Card]

On the looming rental crisis in the US [SoberLook]

Weak consumer spending: the canary in the bear market coal mine [Mauldin]

How Tesla will change the world [Wait But Why]

The state of Chinese social media in 2015 [AdAge]

Why China is blowing an equity bubble [FT]

Xiaomi, China's new phone giant, takes aim at world [WSJ]

Coal woes are spreading but it still has fans [Economist]

Caesars: a private equity gamble in Vegas gone wrong [Fortune]

On the truly exceptional business [Value Investing World]

Japan's economy grows faster than estimated [Bloomberg]

Apple is the new king of bonds [Bloomberg]

What Twitter can be [lowercase capital]

Protections for late investors can inflate start-up valuations [NYTimes]

What We're Reading ~ 5/27/15

On investing in bad businesses [Aswath Damodaran]

10 non-investing quotes with great investing lessons [Clear Eyes Investing]

Kahneman: clients driven by losses, not gains [Think Advisor]

Mary Meeker's 2015 internet trends [Kleiner Perkins]

Qualcomm: the biggest bargain in large cap tech [Capital Observer]

Are declining businesses good shorts? [Young Money]

The ability to focus and make the best move when there are no good moves [Farnam Street]

Big cable is coming for big wireless [Bloomberg]

Charter's deal for Time Warner Cable is classic John Malone [FT]

Meet Altice founder Patrick Drahi [Venture Beat]

Inside the trillion dollar war on packaged food [Fortune]

What makes Danaher such a stock market star? [Bloomberg View]

Goldman on 7 trends that will reshape the auto industry [Bloomberg]

Sergio Marchionne: Detroit's chief instigator [NYTimes]

A look at Markel's Tom Gayner [WSJ]

Tech firms seek ways to fend off activist investors [WSJ]

'The Big Short' movie starts filming [WSJ]

Interview with Brunello Cucinelli, king of cashmere [PI]

Notes From Invest For Kids Chicago 2014: Ackman, Zell, Robbins & More

The sixth annual Invest For Kids Chicago just took place and featured hedge fund managers sharing their latest investment ideas to benefit local children's charities (100% of the money raised goes directly to the charities).  Below are links to notes from each speaker's presentation.  Enjoy!


Invest For Kids Chicago 2014 Notes

- Fireside Chat with Bill Ackman (Pershing Square)

- Larry Robbins (Glenview Capital): 4 long ideas

- Sam Zell's Fireside Chat 

- Mason Hawkins (Southeastern Asset Management): long Level 3 Communications 

- Wally Weitz (Weitz Investment Management): long Liberty Media

- Steve Kuhn (Pine River Capital): On Japan

- Nehal Chopra (Tiger Ratan Capital): long Actavis and Charter Communications

- Jonathan Kolatch (Redwood Capital): Puerto Rico Power Authority

- Mike Wilkins (Kingsford Capital): On Short Selling

- Emerging Managers: Nancy Prial (Essex) long iCAD

- Emerging Managers: Tim Hurd (Blue Spruce) long BlackRock 

Nehal Chopra Long Actavis & Charter Communications: Invest For Kids Chicago

We're posting up notes from Invest For Kids Chicago 2014.  Next up is Nehal Chopra of Tiger Ratan Capital.  She pitched two ideas: Actavis (ACT) and Charter Communications (CHTR).


Nehal Chopra's Invest For Kids Chicago Presentation

•    Started in FY09. Worked at Balyasny beforehand. Was seeded by Julian Robertson/Tiger.
•    Best ideas follow similar pattern: great management teams, high quality businesses. The power of compounding. Secret sauce is operational improvement and capital deployment.

Idea: Actavis (ACT)

•    Owned Forest Labs beforehand.
•    Brent Saunders joined from Forest Labs. Previous CEO of Bausch and Lomb. Brent Saunders turned it around and sold it.
•    At Forest over six months Brent executed a cost cutting program ($500MM), accretive transactions and then sold it for a 25% premium to Actavis. Made 100% return for shareholders. Now runs Actavis.
•    Rolled all of his stock ($100MM) into Actavis.
•    Chairman of Actavis (former CEO) not a slouch as well. 7.3x return.
•    Actavis is a diversified pharma company. Scale of large pharma with cost culture of a generics co. No looming patent cliff.
•    New breed of specialty pharma. Strong platform and distribution. Strong balance sheet strength and FCF generation. Benefits from a low tax rate.
•    Thesis is simple – strongly positioned across all markets which should drive substantial revenue growth. Cost cutting opportunities and debt to EBITDA at 3.5x allows for optionality. Lots of opportunities to deploy FCF into M&A and buybacks.
•    Everytime they buy a product, can drop it into the sales force bag, leads to higher margins.
•    $20+ earnings in FY16/FY17. Number could be closer to 22 to 23. 15x multiple leads to $350 plus target.
•    Actavis rumored to be in the running for Allergan or sold to Pfizer.


Idea: Charter Communications (CHTR)

•    Owned by Paul Allen, balance sheet/ op issues declared bankruptcy. Emerged in 09. Tom Rutledge joined as CEO. Excellent operator.
•    What is Charter today? Two man band, Operator: Tom Rutledge and savvy deal making of John Malone.
•    Malone owns 25.5% through Liberty Media (Liberty Broadband).
•    Rutledge has led CHTR to increase rev per customer, digital penetration, Video ARPU and Products per User. Poured lots of cash into maintenance capex to upgrade/fix network which wasn’t maintained in bankruptcy.
•    April entered into a series of transactions with Comcast. Bought former TWC assets including 1.5MM subs for $7.7B, swapping 1.7MM subs with Comcast, and will also managed Greatland (33% stake) with 2.5MM subs. Receives a mgmt fee for Greatland.
•    Charter is going from 4MM subs to 8MM subs. Many which were undermanaged, allowing Tom Rutledge to manage.
•    Bull case is operational improvements, cash flow generation and capital deployment (buyback/M&A). Levered equity returns and favorable tax position.
•    EBITDA going from $3.5MM in EBITDFA/ $8 - $9MM in FCF and 4.4x net debt, to $5.5B in EBITDA, $18 - $22 in FCF per share, net debt at 4.5x and trades at an implied 7x FCF.
•    Risks are leverage, Google fiber, timing uncertain.


Be sure to check out the rest of the hedge fund presentations from Invest For Kids Chicago here.

What We're Reading ~ Analytical Links 10/15/14

Berkshire Beyond Buffett: The Enduring Value of Values [Lawrence Cunningham]

On spectrum value and a case for Verizon [Bronte Capital]

Importance of ROIC: A glance at the last 42 years of Wells Fargo [Base Hit Investing]

Building the perfect investor [Millennial Invest]

A look at the potential future for the cable industry [GlennChan]

Pay TV's new worry: 'shaving' the cord [WSJ]

Six figure incomes - and facing financial ruin [WSJ]

T-Mobile's stock slump offers buying opportunity [Yahoo]

On how Buffett's portfolio managers are faring [Fortune]

Why millennials are shunning cars [Washington Post]

The freelance economy and word of mouth [HBR]

What We're Reading ~ Analytical Links 4/9/14

On unsentimental investors [Ritholtz]

The best and worst thing about investing [Reformed Broker]

Wall Street's brightest minds reveal the most important charts in the world [BusinessInsider]

Dollar General (DG) annual valuation [ModernGraham]

In scrutiny of cable merger, internet choice will be crucial battlefield [NYTimes]

Report on the performance of controlled companies [IRRC Institute]

Bank of America (BAC) has more upside [Barrons]

What investors need to know about rising rates [BlackRock]

What We're Reading ~ Analytical Links 2/12/14

The single best metric: EV/EBITDA [Crossing Wall Street]

Why margin debt matters [Seeking Alpha]

What I learned at the mall about investing [Institutional Investor]

Half of Americans can't raise $2k in 30 days [Time]

Get ready for a long proxy fight over Time Warner Cable [Dealbook]

John Maynard Keynes' own portfolio not too dismal [NYTimes]

Don't believe the tech bubble hype [Andreessen Horowitz]

US switching from credit card signatures to PINs, but banks need to get on board [Verge]

Investor group targets Ocwen's mortgage servicing practices [FT]

Microsoft's mobile muddle [Stratechery]

Two notable mutual fund trends [AAII]

Why ADT is appalling [Herb Greenberg]

How Mulberry got squashed in fashion's squeezed middle [The Guardian]

Coca Cola: glass less than half full [FT]

On an upturn in capital spending [FT]

NYU Stern Evaluation Investment Newsletter: Roderick Wong, Aswath Damodaran, James Rosenwald & More

Today we wanted to share the inaugural issue of NYU Stern's student-run investment newsletter: Evaluation.  It features interviews with Professor Aswath Damodaran (whose work we've linked to many times), James Rosenwald of Dalton Investments, as well as Roderick Wong of RTW Investments, among others.

This newsletter differs from others in that it is geared toward those early on in their careers or those looking to get into investing/research.

The interviews in this first issue take you inside the lives of established portfolio managers, young buyside alumnus, young sell-side alumnus, and academics. 

Lastly, it also features two investment pitches from students: long Charter Communcations (CHTR) and short Peugeot (ENXTPA:UG).

Embedded below is NYU Stern's inaugural student newsletter:


 

What We're Reading ~ Analytical Links 6/5/13

The new R&D: Repurchases and dividends [Reformed Broker]

A macro update [Micro Fundy]

The long case on Altisource Portfolio Solutions (ASPS) [Seeking Alpha]

A look at Charter Communications (CHTR) [Brooklyn Investor]

Jeff Gundlach: short Chipotle and avoid everything Apple [Covestor]

Beware the hidden costs in tech [Barrons]

A bastardization of the process [Research Puzzle]

Buffett's Berkshire buys small Virginia newspaper [CNBC]

Harvard's Kaplan says to succeed know what you want [Bloomberg]

Mavericks lecture: Liberty Media's (LMCA) John Malone [Youtube]

The power of habit investments [Zen Habits]

Ben Graham's "foolproof method of systematic investment" [Greenbackd]

It's time for objectors of Bank of America's MBS deal to make their case [Reuters]

Prince Alwaleed and the curious case of Kingdom Holding Stock [Forbes]

An 18-minute plan for managing your day [Harvard Business Review]

On money and happiness [Harvard Gazette]

Oaktree Capital Reports Reduced Charter Communications Stake (Sold to Liberty Media)

Howard Marks' investment firm Oaktree Capital filed a 13G with the SEC recently regarding shares of Charter Communications (CHTR).  Per the filing, Oaktree has reported a 2.20% ownership stake in CHTR with 2,225,882 shares.

This marks a reduction of 82% in their position size since the end of 2012.  The filing was made due to portfolio activity on May 1st.

This filing is largely a formality as it's already been reported that John Malone's Liberty Media (LMCA) has acquired a 27.3% stake in CHTR, buying from Apollo Management, Oaktree Capital and Crestview Partners.  That deal encompasses around 26.9 million shares and 1.1 million warrants for $95.50 per share.  The deal closed in the first half of the second quarter.

In other ownership activity, we also highlighted how Steve Mandel's Lone Pine Capital added to its CHTR stake this year.

Per Google Finance, Charter Communications "provides cable services in the United States, offering a range of entertainment, information and communications solutions to residential and commercial customers. Its infrastructure consists of a hybrid fiber coaxial cable plant passing approximately 12 million homes, with 98% of homes passed at 550 megahertz or greater and 98% of plant miles two-way active. A national Internet protocol (IP) infrastructure interconnects Charter markets."

For more on this hedge fund, head to commentary from Oaktree's Howard Marks.

Steve Mandel's Lone Pine Capital Adds to Charter Communications (CHTR) Position

Steve Mandel's hedge fund Lone Pine Capital filed a 13G with the SEC regarding its position in Charter Communications (CHTR).  Per the filing, Lone Pine has revealed a 7.1% ownership stake in the company with 7,216,285 shares.

This marks a whopping 2,100% increase in the number of shares owned since the end of the third quarter back in September of last year.  The filing was required due to portfolio activity on January 24th.

In other recent portfolio activity, we also detailed how Lone Pine ramped up its TripAdvisor stake as well.

Per Google Finance, Charter Communications is "a United States-based company that is engaged in the provision of broadband and cable communication services and solutions. The Company provides advanced video, including High-Definition programming and Digital Video Recorder service, high-speed Internet, and telephone services to approximately 5.2 million residential and business customers in 25 states."

For a rare look at insight directly from the Lone Pine manager, we've also posted up Steve Mandel's pitch on VeriSign.