Julian Robertson Calls Environment 'Precarious,' Likes Ulta Salon, Delta & Others

Tiger Management's Julian Robertson was on CNBC last week and we wanted to highlight some of his comments from the transcript.  Stocks Robertson mentioned in the interview that he likes include Ulta Salon (ULTA), Delta Airlines (DAL), WuXi Pharma (WX), DigitalGlobe (DGI) and Norwegian company Schibsted,


On the economic landscape: "Well, I would-- characterize it as precarious. And-- I think everyone knows that. And-- I think that-- rather than just sitting back and-- saying, "What if this happens or that happens"-- we go ahead and find good companies and invest in them and-- bad companies and-- them."


On Ulta Salon (ULTA): "But I do see sweet stocks that I really love and like and-- think are going to do well. And-- one is-- a company that-- probably makes that beautiful toenail polish you've got on. A company called Ulta. And it has just beautiful beauty salons all over the country.  And it sells all the great products. And it's growing-- probably at 25%-- or so, will grow that way over the next three or four years. This year won't be quite that good. But-- it is just amazing what's happened. And-- how well they've caught this great movement. And-- we've interviewed a lot of women and Ulta is where they're going."


On what he looks for when picking stocks:  "Well, I-- one of the things that I'm particularly interested in is-- stocks and who's already picked them. And-- we've had some really good people here who have excelled in certain fields and-- I love to see really what they had bought recently. And-- Ulta is one of those stocks. And-- I think it's going to be a real good one for next year, so."


On the market: "That's really the way I'm looking at stocks primarily now. I think we're in the middle of a kind of a bubble market, where it's going to take something-- bubble-like to happen. And-- prick the bubble and we'll probably have pretty bad-- reactions to the breaking of the bubble. But-- probably not right now. And somehow I think we'll wallow through the political and fiscal crisis we have in front of us. And then we'll sort of see what happens ... I think the market is reasonably -- yes, is fully valued."


On DigitalGlobe (DGI):  "Digital Globe is I think a really great company. And it's had its virtual monopoly in the area where it is. And-- I think they're really these satellites that are up flying around are-- it's a great business to be in."


On WuXi Pharma (WX): "This year one of our best stocks has been-- a Chinese company which-- disintermediates-- PhDs. In other words, instead of getting a U.S. PhD for maybe-- $20,000 a month, you get a Chinese PhD for-- $3,000 a month.  And-- it's a company that's named Wuxi that supplies the really good Chinese researchers. And-- I've been in that stock for several years and it's just been lately that it's started to do anything. And I don't know why that is or was or anything. But it's been a really good performer of late-- Wuxi.  you're buying-- something at a fifth the price you were paying before. And-- you figure that's going to work at some time. And these Chinese PhDs are really well-trained and very, very good and-- Wuxi is able to come up with good ones."


On Twitter's IPO: "I don't plan to be (a buyer of the IPO).  That isn't to say that I won't.  But I don't expect to at this point.  I think social media is very long-lasting.  I just don't know the particular thing with Twitter."


On the airlines:  "Well, we're beginning to put some money in the airlines. And-- I mean, Delta airline, the airlines have been weeded down. And-- Delta Airlines (DAL) a very good story. I mean, it's at a very reasonable price and it's a good airline. I've talked to you about Ryanair (RYAAY), which is a low-cost producer in the world. I think that-- area is something to look at. And there-- they-- there have been-- I think some really interesting moves made in that industry.  Seems so much (consolidation) that I think it will slow down from here."


On Europe:"I think a lot of smart Europeans think that Europe has bottomed. And I-- I've been hearing that increasingly. And-- I-- I'm not completely sure of that. But-- it's certainly better than it was."


On Schibsted: "Schibsted is a very interesting company. We came upon-- Schibsted-- it was-- we had-- a model we were setting up on-- newspaper stocks. And Schibsted had come out as being wildly overpriced. And then we went into it in thorough detail and-- although it's true that-- Schibsted had still had its papers, it had gone tremendously into internet products.  And-- it is really an internet-- producer-- media producer of internet products-- throughout the world now and-- is going to grow at very rapid rates for the next several years. And-- so I think Schibsted is quite a terrific-- Norwegian company."


On his success: "(What) I've done is-- hired really good people and never been self-conscious of hiring people that were smarter than I am. And-- it's been fun for me to work with them and-- to play with them in all that we've had together. And-- so that's the secret sauce."


On being long or short this market:  "Well, I think you have to have kind of-- a little more--sort of lean towards-- being conservative in a market like this. It's just-- gotten a little too -- I would say raising cash or going short."

Corsair Capital's Thesis on Acacia Research (ACTG): Q4 Letter

Jay Petschek and Steve Major's hedge fund Corsair Capital is out with its Q4 2012 letter to investors.  In it, they provide an investment thesis write-up on one of their core picks: Acacia Research (ACTG).

Updates on Portfolio Holdings

They also provide brief updates on some of their other positions such as DigitalGlobe (DGI), which received approval for its acquisition of GeoEye.  They feel the combined entity will "yield significant revenue, expense, and capital synergies and should outperform for many years, as demand for its mapping products and services grows."  You can view Corsair's analysis of DigitalGlobe which was penned before the GEOY takeover.

Additionally, Corsair continues to like Chicago Bridge & Iron (CBI).  The hedge fund originally invested in Shaw Group, which CBI bought out.  They see CBI earning around $5.50 per share in cash earnings by 2014.

Acacia Research Thesis

This company essentially helps monetize underutilized patents and Corsair feels they fill a big gap as the majority of patents are held by small businesses or individual inventors who lack the wherewithal to protect/enforce these patents.  Corsair bought in November and think shares could trade over $40 per share, deserving a 15x multiple.

Embedded below is part of Corsair Capital's Q4 letter with their investment thesis on Acacia Research Corp:




For more hedge fund letters, we also posted up excerpts from Children's Investment Fund Q4 letter.

Corsair Capital's Investment Thesis on DigitalGlobe: Q2 Letter

Jay Petschek and Steve Major's Corsair Capital is out with its Q2 2012 investor letter.  In it, they outline their investment thesis on a core position: DigitalGlobe (DGI).  Additionally, they provide updates on Six Flags (SIX), Innophos (IPHS), Aperam (APAM), and TNS (TNS).

Corsair's DigitalGlobe Thesis

Note: the below was written before the announcement that Digital Globe would be merging with GeoEye (GEOY).  Under the terms, GeoEye shareholders will elect either 1.137 shares of DigitalGlobe and $4.10 per share in cash, or 100% of the consideration in cash ($20.27), or 100% of the consideration in stock (1.425 shares of DGI for each share of GEOY owned).  The transaction marks a 34% premium to to GEOY's previous closing price.

For those interested, here's Corsair's original DGI thesis:

One of the hedge fund's core positions is US satellite imaging company, DigitalGlobe (DGI), which provides real-time and archived images from 3 satellites.  DGI co-developed Google Earth as well as Apple's new Maps product.  The company received a takeover offer from competitor GeoEye (GEOY) for $17 per share but DGI rejected it.

Corsair sees strong leadership and expects the company to create value via dividends, share repurchases and "disciplined M&A."  The government effectively represents 50% of their revenue, so that is certainly a risk and is why the stock sold off so hard in February (government spending cuts).  Corsair's view was that the stock already reflected a worst-case scenario and 2012 is a transformational year.  You can read their full case in the letter below. 


Unrelated, but also worth highlighting from the letter: they cite Jim Grant of Grant's Interest Rate Observer, pointing out a potential contrarian signal for equities, noting that "this is the first time in 12 years that pension managers are putting more money into fixed income securities than equities, whereas, just a few years ago they were putting twice as much into equities than in bonds."

Embedded below is Corsair Capital's full Q2 letter:




For more on this hedge fund, head to Corsair's thesis on SunCoke Energy.