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 ~ 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]

Larry Robbins' Presentation at Capitalize For Kids Sohn Canada

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Larry Robbins of Glenview Capital who pitched a few stock ideas.


Larry Robbins' Sohn Canada Presentation

Looks for companies with excess cash on the balance sheet (cost of cash capital is low), debt capacity (companies with tangible assets and good credit history to leverage up), incremental debt capacity (under levered relative to industry and can leverage up without jeopardizing current credit rating) and finally defensive growth which protects the investor if company takes on leverage.

Pitched LONG on Thermo Fisher Scientific (TMO), Danaher Corporation (DHR), Endo International PLC (ENDP), and Actavis (ACT), which all fall under the criteria mentioned above.

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.

Chuck Akre at Capitalize For Kids Sohn Canada Conference

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Chuck Akre of Akre Capital Management who presented four case studies.


Chuck Akre's Sohn Canada Presentation

He presented four case studies of companies who have a successful capital allocation record and high returns on tangible capital.  Quickly outlined Danaher (DHR), Colfax (CFX), and Berkshire Hathaway (BRK.A), however no specific recommendations were given.  It should be pointed out, however, that CFX has seen quite the drastic sell-off recently and it has been one of Akre's top holdings for some time.

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.