Peltz's Trian Fund Trims Family Dollar Stake

Nelson Peltz's activist investment firm Trian Fund Management has filed an amended 13D with the SEC regarding their position in Family Dollar (FDO).  Per the filing, Trian now owns 2.07% of the company with over 2.36 million shares.

This means they've reduced their position size by over 6 million shares since the end of the third quarter.  The filing was made due to activity on January 26th. 

FDO recently agreed to a deal with Dollar Tree (DLTR) and Trian has already reduced its investment.

What We're Reading ~ Analytical Links 8/27/14

Profile of Alibaba's Joseph Tsai [Bloomberg]

Carol Loomis' latest on BlackRock: the $4.3 trillion force [Fortune]

Profile of 108 year old investor Irving Kahn [Telegraph]

Lessons learned in 30 years of investing [What Works on Wall Street]

Share sleuth's investment checklist [Interactive Investor]

A look at Post Holdings [View From the Blue Ridge]

A look at WL Ross Holding Corp [Brooklyn Investor]

What makes Warren Buffett a great investor? [Farnam Street]

Amazon: not an e-commerce company [Stratechery]

The inside story of how Netflix came to pay Comcast for traffic [Quartz]

Morningstar: a force to be reckoned with [FT]

Nonprofit hospitals' earnings fall as costs outrun revenue [WSJ]

Interview with Burger King's CEO [Financial Post]

The company speeding a genetic revolution [Forbes]

Google's valuation: much cheaper now than 10 years ago [WSJ]

Family Dollar bidding war suggests 'peak dollar store' is here [Yahoo]

Match.com might not light IAC's fire [WSJ]

Peculiar habits of incredibly successful people [Morgan Housel]

Interview with venture capitalist Bill Gurley [Forbes]

Carl Icahn Takes Family Dollar Stake, Company Adopts Poison Pill

Activist investor Carl Icahn has taken a 9.39% stake in Family Dollar (FDO) per a filing with the SEC.  After disclosing his stake, shares jumped over 14%.

It seems Icahn's plan here is to get the company sold.  While private equity firms or Dollar General (DG) could be logical suitors, Family Dollar announced that they've adopted a shareholder rights plan.

Icahn is looking to talk to FDO's board so we'll see what comes of his activism.  While dollar stores have been popular plays among hedge funds, many long/short managers have preferred shares of DG (such as Lone Pine, Tiger Global, Glenview, Senator, Corvex and more). 

That said, Family Dollar's largest shareholder list as of the end of Q1 included Nelson Peltz's Trian Fund as well as Paulson & Co.

What We're Reading ~ Analytical Links 2/26/14

Excerpts from Warren Buffett's upcoming annual letter [Fortune]

A look at 2014's best online brokers [Stockbrokers]

On adapting as an investor [ReformedBroker]

Is value investing bred in the bone? [WSJ]

Don't fall in love with your stocks [Marketwatch]

On the MBA vs CFA debate [CNBC]

A pitch on Discovery Communications [SumZero]

American shoppers are making a giant shift to dollar stores [QZ]

Vodafone cable deals interest complicates possibility of AT&T deal [WSJ]

The internet is F'd [The Verge]

Social advertising economics [Morally Bankrupt]

On what Facebook's acquisition of Whatsapp really means [Benedict Evans]

A look at Spirit Airlines [NPR]

A conversation about young Wall Streeters [Dealbook]

Gross vs El-Erian: inside the showdown atop the world's biggest bond firm [WSJ]

Trian Partners Sells Danone & State Street, Trims Family Dollar & Ingersoll Rand Stakes: Q2 Letter

Nelson Peltz's investment firm Trian Partners recently released its second quarter letter.  In it, they detail that they sold out of their investment in Danone (DANOY) as well as State Street (STT).  Additionally, the firm mentions that it has recently trimmed its positions in Ingersoll Rand (IR) and Family Dollar (FDO).


New Mystery Investment

Peltz has built a new mystery position which he did not reveal in the letter.  He said that some of the above stakes were sold in order to partially fund their new mystery purchase.

Here's all they had to say about this new position:  It's "a company comprised of world class businesses where we see a path to superior value creation."

Andrew Ross Sorkin said that sources are pointing to Peltz acquiring a stake in DuPont (DD) back at the Delivering Alpha Conference last month, but Peltz didn't really confirm it when asked about it.

At any rate, here's their long portfolio composition by sector: 30% consumer staples, 28.1% consumer discretionary, 17.6% industrials, 13.9% financials, 10.4% basic materials, 0% other.


Other Highlights

Their Q2 letter also touches on their investments in PepsiCo (PEP) and Mondelez (MDLZ) and basically re-hash everything they laid out in their white paper on the companies which we highlighted recently.  Peltz also talked about his PEP & MDLZ stakes at the Delivering Alpha Conference too.

According to the letter, Trian also retains its positions in Lazard (LAZ), Legg Mason (LM), and Wendy's (WEN).  Their thesis on Legg Mason remains unchanged: "Better fund flows, strong free cash flow, and improving margins should allow the shares to be valued closer to peer averages."

In the second quarter, Trian's total firm assets hit an all-time peak of approximately $6.3 billion.  Net exposure finished the month at 100% net long (136.4% long and -36.4% short).

Nelson Peltz's Trian Fund Decreases Family Dollar Stake

Nelson Peltz's investment firm Trian Fund Management today filed an amended 13D with the SEC regarding shares of Family Dollar (FDO).  Per the filing, Trian has disclosed a 7.35% ownership stake in FDO with 8,444,597 shares.

This means that Trian has reduced the number of FDO shares they own by around 6%.  In total, they sold 524,260 shares at a price of $63.5090.  The 13G filing was reported portfolio activity on April 25th.

Per Google Finance, Family Dollar "operates a chain of more than 7,000 general merchandise retail discount stores in 44 states, providing primarily consumers with a selection of merchandise in neighborhood stores. The Company merchandise assortment includes Consumables, Home Products, Apparel and Accessories, and Seasonal and Electronics. A Family Dollar store is between 7,500 and 9,500 square feet, with an average of approximately 7,100 square feet of selling space."

In other recent activity from this firm, we recently highlighted Trian's new stakes in Mondelez and PepsiCo.

Trian Fund Sells Some Family Dollar (FDO)

Nelson Peltz's Trian Fund Management was the largest institutional holder of Family Dollar (FDO) shares at the end of the first quarter.  However, according to a recent Form 4 filed with the SEC, Trian has sold some shares.

Per the SEC filing, Trian's co-manager Ed Garden (who sits on FDO's board) sold 597,000 shares at prices between $69.75 and $70.71 on July 10th and 11th.  After these sales, Trian was left owning 9,369,201 shares.  We've posted up the firm's thoughts on FDO in Trian's Q1 letter.

Readers who have followed this name will recall that Trian actually made a bid to take the company private at $60 per share.  Many assumed this was posturing to induce other bids, which never materialized. 

A few months ago, we highlighted how Bill Ackman's Pershing Square sold out of FDO to allocate capital to more compelling opportunities.  While Trian has sold some shares, it could merely be profit taking as they're up on their position.

At the end of the first quarter, Family Dollar counted numerous institutional firms as top shareholders, including: Alan Fournier's Pennant Capital, Scout Capital, Dan Loeb's Third Point, Paulson & Co, and many more.  We'll have to wait and see who continues to own FDO when the second quarter filings are released in August.

Per Google Finance, Family Dollar is "operates a chain of more than 7,000 general merchandise retail discount stores in 44 states, providing primarily consumers with a selection of merchandise in neighborhood stores. The Company merchandise assortment includes Consumables, Home Products, Apparel and Accessories, and Seasonal and Electronics. A Family Dollar store is between 7,500 and 9,500 square feet, with an average of approximately 7,100 square feet of selling space."

For more from this investment firm, we've posted up Trian's recent presentation on Lazard.

Pershing Square Exits Family Dollar and Fortune Brands Home & Security Positions

Bill Ackman's hedge fund Pershing Square Capital Management just filed two separate 13G's with the SEC.  Both revealed that Pershing has completely sold out of its previous positions in Family Dollar (FDO) and Fortune Brands Home & Security (FBHS).

Each stock has seen material price appreciation and so this could simply be a case of harvesting profits to allocate capital to more compelling ideas.  Pershing exited FBHS on April 27th and FDO on April 19th.

For those interested, we've previously highlighted Ackman's case for FBHS as well as his FDO thesis.

While Pershing has exited its FDO position, Nelson Peltz's Trian Partners continues to be a large shareholder in the name.  They provided an update on the stake in their first quarter letter to investors:

"On March 28th, Family Dollar reported 2Q12 earnings which included EPS of $1.15, up 17% year over year, and comparable store sales growth of 4.5%. Family Dollar also increased the low end of its FY12 EPS guidance by $0.05 and issued 3Q12 comparable store sales growth guidance of 5% to 7%, marking acceleration in comparable store sales growth from the prior two quarters.

The company has also strengthened its management team yet again with the appointment of Mary Winston (previously with Giant Eagle, a $9 billion privately held grocery chain) as Chief Financial Officer on April 10th, a move we fully support. This management addition follows the September 2011 appointment of Mike Bloom as President and Chief Operating Officer. Mike has already made meaningful contributions to the company and we believe that investors and research analysts have rapidly come to appreciate the level of expertise and enthusiasm he brings to his role as a prime driver of operational improvements."

Stay tuned as we'll be posting more excerpts from Trian's letter in a separate post.

For more on Pershing Square's latest activity, we posted Bill Ackman's latest interview up today as well.

Dan Loeb Likes Portuguese Sovereign Debt: Latest Exposure & Positioning

Dan Loeb's Third Point Offshore Fund was up 1.5% for March and is up 6.5% for 2012. In the hedge fund's latest March exposure report, we see that Dan Loeb likes Portuguese Sovereign Debt, a position that had previously not been revealed.

Just last week we highlighted Loeb's comments at a distressed investing panel at Columbia Business School where he briefly mentioned he liked Portugal.

In March, that sovereign bond position was one of his top winners, along with Yahoo (YHOO), Family Dollar (FDO), Aveta, and Apple (AAPL). Loeb also recently engaged in a proxy fight with Yahoo and launched a website to raise investor awareness.


Third Point's Top Positions

1. Yahoo (YHOO)
2. Gold
3. Delphi
4. Eksportfinans ASA
5. Ally Financial

The fund's top holdings continue to be of distressed origination. Some of Third Point's losers from the month include: Barrick Gold (ABX), Genel Energy (LON:GENL), Gold, Volkswagen, and Ivanhoe Mines (IVN).


Latest Exposure Levels

Loeb's firm continues to enter 'risk on' mode as they are 38.5% net long equities (54.2% long, -15.7% short). This is slightly up from February's 36.7% net long exposure and way up from January when they were only net long 28.2%.

Their largest sector exposure continues to be technology via their activist YHOO stake. They are ever-so-slightly net short utilities.

In credit, Third Point is net long distressed by 7.6%, net long performing at 8.7%, net long asset backed securities at 14.5% and net short government at -13%. In total, they are 17.8% net long credit.

To read the investment theses behind some of their positions, head to Third Point's investor letter.

For more from Third Point's founder, head to lessons Dan Loeb has learned as an investor, our most popular post this year.

Trian Fund Management on Kraft, Family Dollar, & Wendy's (Investor Letter)

Nelson Peltz's Trian Fund Management finished 2011 up 3.9% in their Offshore Fund and up 5.6% in their Onshore Fund. Their year-end letter to investors touched on some of their largest investments:

On Kraft (KFT)

They established a new position in KFT during 2011 and their thesis was that scale "had become a vice, not a virtue" and they also thought it "offered a compelling risk-reward (one of the lowest forward earnings multiples in the packaged food space and an almost 4% dividend yield)."

The company announced it would split itself in two via a tax-free spinoff: a growth company (their global snacks business) and a cash company (a slower growth, North American grocery business). Trian believes this will lead to "reduced complexity; better resource allocation; margin expansion; and improved organic growth."

Bill Ackman's Pershing Square Capital also bought KFT in August.


On Family Dollar (FDO)

Peltz's firm first invested in mid-2010 and the thesis was that if operating metrics caught up to their closest competitor (Dollar General), the stock would trade higher. Trian offered to buy the company, but the board rejected the offer. Many investors thought this was a maneuver to invoke other takeover offers, but nothing materialized in that regard.

Since then, Family Dollar has implemented a new President, increased store openings, and renovated more stores. Bill Ackman also owns shares and has in the past laid out his FDO thesis.


On Wendy's (WEN)

Trian notes that the company divested its stake in fellow fast food chain Arby's in 2011 and it is now a pure play on the single Wendy's brand. The firm likes that the company's new menu items led to higher sales and that store level margins have improved.

In early December, Trian filed a 13D with the SEC that it was allowed to boost its ownership position in WEN to 32.5%, up from their 26.2% stake per an agreement with the company.


On Potential New Buys

In terms of other positions, the investment firm says that they expect to make 2-3 new core investments in 2012 as they've built a solid list of potential buys. Regarding what they're looking at, Trian writes:

"We like the large-capitalization profiles as these companies tend to be higher quality companies (companies with significant market shares, investment grade balance sheets, strong dividend paying capacity and attractive trading liquidity) where we attempt to minimize risk and maximize reward by making our investment at what we believe are attractive valuations and having a plan to make them more profitable."

Trian also believes the M&A landscape will pick up in the future.

For more from them, we've posted up Trian's bullish case for Tiffany & Co (TIF). And in recent portfolio activity from Nelson Peltz' firm, we've highlighted they've sold some H.J. Heinz (HNZ). They've done so largely because the company has traded at a premium to its competitors.

Bill Ackman's Pershing Square Buys $600 Million of Investments During August Volatility

Bill Ackman's hedge fund Pershing Square Capital utilized the market volatility in early August as an opportunity to buy stocks, according to their recent letter to investors. So what did they buy?

Ackman writes,

"We have often described stock market volatility as an opportunity for Pershing Square. Since the beginning of the month, the market, and to an even greater extent, most of our holdings went on sale. We took advantage of this favorable pricing to invest more than $600 million in existing investments including Fortune Brands, Kraft, Family Dollar, Citigroup, and two new commitments. In each case, the businesses continue to make progress that meets or exceeds our expectations making our additional investments that much more compelling. Unfortunately, for most of our remaining holdings we were restricted in purchasing more by virtue of our insider status, or other regulatory or corporate charter provisions that limit our ability to increase our ownership percentage."

After writing the letter (dated August 17th), Pershing Square received permission to increase its ownership stake in J.C. Penney (JCP) to 26.1% of the company, up from the 18.2% they currently own as well.

Pershing's New Investments

Ackman did not disclose the names of his two new investments, most likely because they were/are still acquiring their position. His letter states that they should be able to share more details about one of the positions in the upcoming months.

It would make sense that he could reveal one of them at the upcoming Value Investing Congress where he will be presenting investment ideas along with many other hedge fund managers (Market Folly readers: today is the LAST day for substantial savings to the event, click here for the discount).

Ackman's investor letter drops a hint that they bought an investment that broadly falls into the category of their old General Growth Properties (GGP) investment: i.e. a situation where they were able to buy GGP for less than a dollar per share and enhanced the probability of recovery for shareholders with their active intervention. Let the guessing games begin.

In early August we detailed how Pershing Square bought more Fortune Brands (FO), but now we know they were buying more than one stock.

For more excerpts from Pershing Square's recent letter to investors, we've outlined why Ackman bought more Citigroup, as well as Pershing's hedging strategy in this crazy market.

Notes From Leaders In Investing Summit: Leon Cooperman, Larry Robbins, Bill Ackman, Howard Marks & More

The CIO/CEO Leaders in Investing Summit took place on Tuesday at The Metropolitan Club of New York and featured presentations from numerous high-profile hedge fund managers.

The summit is a peer-only event only open to those investing third party capital. We're pleased to present notes from the event concerning specific investment ideas and/or commentary on the economy:


Leon Cooperman (Omega Advisors): The legendary hedge fund manager's talk centered on equities as the best house in the financial asset neighborhood. He argued that you need to believe four issues in order to have a positive view on today's market:

1. The U.S. is not another Japan and will not suffer a lost decade.
2. The European Central Bank (ECB) will act to stabilize Europe.
3. President Obama will move to the center.
4. The Middle East's turmoil leads to democracy and oil stays below $135.

Cooperman continued to voice his concern over employment. He also pointed out that the yield curve is quite steep and that the Federal Reserve is trying to inflate the country out of debt. Cooperman says inflation is not bad for stocks (see the best investments during inflation).

He argues that stocks are cheap trading at 13.6x relative to bonds and history. The Omega Advisors founder also thinks that bonds are 'screaming' to be shorted. Other hedge fund managers have also advocated shorting bonds. Don't forget that you can also hear Cooperman's latest investment ideas at the Value Investing Congress in October (click here for a discount).



Larry Robbins (Glenview Capital): Formerly of Cooperman's Omega Advisors, Robbins founded Glenview Capital. His presentation yet again focused on Life Technologies (LIFE). The company trades at a 11x P/E and is likely to grow EPS 20% over the next few years as they were able to grow EPS throughout the slowdown and 95% of their business grows with research spending.

Robbins highlighted free cashflow is 91% of EPS and that the company will have 80% market share versus competitor Illumina (ILMN). One could postulate that he's short ILMN as a hedge but when asked about it he said that he's "only here to discuss my longs."

And speaking of longs, he said some of his top holdings are Expedia (EXPE), Flextronics (FLEX), Xerox (XRX), and BMC Software (BMC) in technology. We've detailed the in-depth investment thesis on EXPE in the latest issue of our Hedge Fund Wisdom newsletter.

In general, Glenview looks for good businesses, low valuations, excess capital, a business that can succeed regardless of economic environment, and pricing power. Currently, Robbins thinks the economy will grow slowly and with heightened volatility due to excess government intervention.



Tom Russo (Gardner Russo & Gardner): The long-only manager is still bullish on China and pitched Nestle (NSRGY) at the event. His idea is simply to buy prominent international players and hold through the ups and downs. In the past, he's talked about how Nestle can invest large amounts of money in emerging markets and see high rates of return.

He is also still holding SAB Miller (LON: SAB) despite declining EBITDA margins as the company is now making acquisitions to make up for the lack of growth. Russo did not seem to like the Foster bid.



Howard Marks (Oaktree Capital): His presentation focused on the keys to success in a low return world. Marks focused on three key questions to ask yourself as an investor today:

1. Should we prepare for prosperity? He argued no because the economic recovery is faltering.

2. Should we worry about losing money or missing opportunity? For now, he says to be mindful of losing money.

3. What holds the key? Capital and nerve? Or discernment, discipline, risk control and selectivity? Marks argues the latter right now, saying that stocks are slightly cheap, but not by much.

Marks says that your choices today are as follows: invest for the long-term, go to cash, take more risk (chase yield), or find niches. Take your pick. Marks also brought up a good point that just because stocks are flat over a ten-year period doesn't mean they are a buy because the P/E was 30x ten years ago.

Oaktree recently filed for an initial public offering and Marks' recently released his new book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor which has received praise from legendary investors Warren Buffett and Seth Klarman.



Paul Singer (Elliott Associates): This hedgie's talk focused on the shape of the next crisis. He mentioned that all major banks are quite opaque and no one can truly analyze them, meaning the next crash could be even faster because the leverage is still there. He doesn't seem to be a fan of Bernanke.

Singer points out that the lesson was "sell first, move assets first, ask questions later." Those that took more time to do so got stuck and that is dangerous. He also believes that Dodd-Frank has made the system more brittle and thinks there should be NO financial institution that is too big to fail.

Lastly, he also mentioned that monetary policy has caused commodity inflation (Howard Marks also thinks this is the case).



Bill Ackman (Pershing Square Capital): Speaking on activist investing, Ackman said that you have to work *with* management. He cited his investment in J.C. Penney (JCP) as an example as the company has a new CEO who redesigned Target (TGT) then most recently headed Apple's (AAPL) wildly successful retail operation. He also says that the company has a big advantage by owning its own real estate and not paying rent. We've covered Ackman's JCP thesis here in-depth for more.

Concerning his recent investment in Family Dollar (FDO), Ackman said that Nelson Peltz's Trian Fund is driving the effort. The company has a bid on the table and is a prime leveraged buyout candidate. The vote is in January and management has to fix the company or sell it. We've also posted Ackman's presentation on FDO.

Ackman also talked about lessons he learned from his mistakes. He said that liquidity is very valuable and lack of it is a big opportunity cost. Also, he pointed out that as you get older, you further understand the opportunity cost of time. He likes to measure whether the potential return justifies the time and risk.

Citing his past failed investment in Borders (BGPIQ), Ackman said he underestimated the risk of technological change. He would rather invest in a good business than just good management. He said the limitation of his approach is that although the stocks he invests in are liquid, his concentrated stakes are not (Ackman also mentioned 27% of his fund was redeemed during the crisis).



Ron Gutfleish (Elm Ridge Capital): Gutfleish likes the defense sector and in particular, Lockheed Martin (LMT). He argues the company doesn't make bad acquisitions, pays a good dividend and does smart buybacks. While he admits to being "usually too early," the hedgie thinks that these stocks are very cheap no matter what you think about the defense sector.

The bear case there is very obvious, he notes, pointing to a budget under pressure. However, he argues that these companies generate huge cash flow during down cycles and deploy it in shareholder friendly ways.



Joel Greenblatt (Gotham Capital): Greenblatt's presentation focused on the 'big secret for value investors.' He was, of course, referring to his new value-weighted indexing method which is detailed in his new book, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success.

He argues that indexes have the flaw of market cap weighting. Evenly weighted, the SPX outperforms by 3% per year over the last 20 years. A value weighted index of 800 stocks beats the SPX by 7% a year.

Right now, Greenblatt says his statistics point to stocks being at about average valuations. Some of the stocks on his list right now include: Gamestop (GME), Wellpoint (WLP), and Intel (INTC). He says that these companies are trading at bargain prices either due to uncertainty or because they are troubled.




That sums up notes from the summit. Keep in mind that many of these hedge fund managers will be presenting investment ideas at the upcoming Value Investing Congress in October and Market Folly readers can receive a discount to the event by clicking here.

Bill Ackman's Presentation on Family Dollar (FDO)

At the recent Ira Sohn Conference, Pershing Square Capital's Bill Ackman presented Family Dollar (FDO) as his investment idea under the notion that it is a prime target for a leveraged buyout (LBO).

While we've presented notes from the hedge fund conference, today we present Ackman's actual presentation (powerpoint slides) from the event.

His presentation highlighted that the dollar store chain is like Walmart (WMT), but with more room to grow. Ackman points to the company's return on capital as attractive.

The hedge fund manager believes that FDO can benefit operationally by being taken private, citing KKR's past acquisition of Dollar General (DG) as a successful LBO in the space.

Since the presentation on May 25th, Ackman has doubled his position in FDO and now owns 8.9% of the company. Embedded below is the full presentation Ackman gave on why Family Dollar (FDO) is a compelling investment:



To see what else Ackman has invested in, sign-up for our Hedge Fund Wisdom newsletter.

Bill Ackman Buys More Family Dollar (FDO) & Fortune Brands (FO)

Bill Ackman's hedge fund Pershing Square Capital Management has been on a buying spree this week.


Fortune Brands (FO)

First, they scooped up shares of Fortune Brands (FO) on June 6th and 7th (and last week as well). In total, Pershing purchased 501,397 shares of FO at prices of $62.87 and $63 per share.

After said purchases, the hedge fund now owns 17,170,033 shares of Fortune Brands. This is an activist position for Ackman and we covered his initial 13D filing last year.

The thesis here centers on breaking up the company's collection of brands. Wheels are already in motion in this regard as FO seeks to become a pure-play on the spirits business and will spin off its other divisions.



Family Dollar (FDO)

Second, Ackman was also out buying even more Family Dollar (FDO). As we covered recently, Pershing initially bought FDO in the first quarter but as of June 9th now has a 8.9% ownership stake in FDO with 10,871,793 shares, almost doubling his position in recent weeks.

At the recent Ira Sohn Conference, Ackman laid out his FDO thesis and it is largely based on FDO being an attractive leveraged buyout candidate. As we've already detailed, Family Dollar actually received a bid to go private from its second largest shareholder, Nelson Peltz's Trian Fund. While they essentially offered between $55 and $60, shares currently trade around $52.75.

You can view the rest of Bill Ackman's portfolio by subscribing to our Hedge Fund Wisdom newsletter.

Bill Ackman Discloses Size of Family Dollar (FDO) Position

Two days ago at the Ira Sohn Conference, Pershing Square's Bill Ackman pitched shares of Family Dollar (FDO) as an attractive investment. At the time, however, no one knew the exact size of his wager. Now, we do.

In an amended 13F filed with the SEC, Pershing Square Capital Management disclosed ownership of 5,764,187 shares of FDO. At current prices of around $55.50, that translates into almost a $320 million investment. Compared to the rest of Pershing's disclosed holdings, this represents about a 5% position.

Keep in mind, though, that this only represents his ownership stake as of March 31st. Since then, Ackman has been buying more shares. At the Ira Sohn Conference on Wednesday, he even mentioned his hedge fund was out buying shares that day. So, it's tough to say exactly how much larger his position is, but it is at the very least slightly larger than what is reported above.

The hedge fund manager thinks shares of Family Dollar are worth up to $92 (including dividends) and sees it as an attractive target for a leveraged buyout. You can see see the rest of Bill Ackman's portfolio in the brand new issue of our Hedge Fund Wisdom newsletter that was just released.

And if you missed it, check out our notes from the Ira Sohn Conference as well as part 2 of our notes here for more hedge fund manager presentations.

Ira Sohn Conference Notes Part 2: Ackman, Einhorn, Eisman, Icahn, Greenblatt

This is part 2 of our ongoing coverage of presentations given by top hedge fund managers at the Ira Sohn Conference today. Be sure to check out part 1 of our notes from Ira Sohn which includes presentations from Dinakar Singh, Jim Chanos, Phil Falcone and more.

Part 2:


Steve Eisman / FrontPoint Partners: Eisman was profiled in Michael Lewis' great book, The Big Short as one of the big winners in the subprime trade. Last year at Ira Sohn, he said to short for-profit education stocks and that trade paid off as many stocks were down anywhere from 25% to 72% over the past year.

This time around, Eisman focused on US financials, asking "are financials dead forever?" He notes that credit quality is improved but interest margins will most likely continue to contract.

Eisman likes property and casualty insurers, citing the potential for commercial policy pricing to improve. He noted that his year has been particularly hard hit with natural disasters, leading to large insurance losses. He thinks P&C insurers are a 'buy' even if there's another big disaster.

He says the least risky way to play this is via insurance brokers like Marsh & McLennan (MMC), Willis Group (WSH), and Aon (AON). You can read an in-depth analysis of AON in the free sample of our Hedge Fund Wisdom newsletter (direct .pdf download link).

For riskier plays, Eisman points to pure reinsurers based in Bermuda and pulled up a list of them, the most well-known of which is probably Ace (ACE).


Bill Ackman / Pershing Square Capital: Ackman said to buy Family Dollar (FDO). He likes the dollar-store chain because it is like Walmart, but there's room to grow. He also notes the company's solid return on capital as they can build plenty of new stores. Many of Ackman's plays are retail or real estate focused and this one is no different.

FDO actually received a bid to go private from Nelson Peltz's Trian Fund, who offered between $55 to $60 per share in February. They are one of the largest shareholders, owning almost 8% of FDO's shares. Ackman believes that FDO is an attractive target for a leveraged buyout.

Ackman notes that Family Dollar has fallen behind competitor Dollar General (DG) ever since KKR bought DG and now FDO has to improve. The Pershing Square manager thinks shares will trade as much as 70% higher (FDO currently trades around $55 and Ackman thinks it's worth up to $92 including dividends). He also mentioned that his hedge fund was even buying shares today.

We also covered that Ackman started an activist position in Alexander & Baldwin (ALEX).


Joel Greenblatt / Gotham Capital: The value investor talked about the advantage of having a long-term investment horizon. He emphasizes investments that fall under the 'time arbitrage' classification. Market Folly readers will recall that Blue Ridge Capital's founder and hedge fund manager John Griffin also uses this approach. He classifies investments as either time arbitrage or catalyst driven.

Greenblatt's picks included a myriad of names, including: WellPoint (WLP), GameStop (GME), Intel (INTC), Walgreens (WAG), Nordstrom (JWN), Bed Bath & Beyond (BBBY), and Humana (HUM).

He also has a new book out entitled, The Big Secret for the Small Investor: A New Route to Long-Term Investment Success. You can also check out his recommended reading list here.


David Einhorn / Greenlight Capital: Einhorn's presentation laid out the bull case for life insurer Delta Lloyd (AMS: DL), traded in the Netherlands. This is one of his hedge fund's largest positions.

His second pick was Microsoft (MSFT). The tech giant has attracted lots of value investors as of late and you can view fellow hedge fund T2 Partners' presentation on MSFT here. Einhorn says the company still has a shot at the smartphone market with its partnership with Nokia (NOK). He also notes that it is trading at a discount as the market isn't giving them credit for their solid position in cloud computing.

Einhorn also said that CEO Steve Ballmer doesn't care what Wall Street thinks and that could possibly be a good thing. However, he conceded that Ballmer is "stuck in the past" and said that Ballmer's "continued presence is the biggest overhang on Microsoft's stock." It's very clear Einhorn wants Ballmer fired.

We've also detailed Greenlight Capital's recent letter to investors for insight into their new positions in Yahoo! (YHOO) and Best Buy (BBY).


Carl Icahn / Icahn Partners: The legendary rabblerouser began his presentation by saying he's made a fortune by studying natural stupidity. Icahn said that "activism" in the old-school sense of the word is dead; there aren't anymore true corporate raiders anymore. He says that there's tons of money to be made by shaking things up at a company.

He went on to talk about why he returned outside investor capital in his funds. He simply didn't want to be responsible for the losses of others like he was during the 2008 crisis. Icahn fears further problems will arise in the markets in a year or two. His pitch at the conference? His holding company: Icahn Enterprises (IEP).


Mark Hart III / Corriente Advisors: If you're unfamiliar with Hart, then all you need to know is that he created subprime mortgage and sovereign debt funds well before the crises happened, profiting handsomely from the events that followed.

In his speech, Hart said to short China and this isn't the first time he's made this case. He argues that it is a credit fueled bubble and there are many misconceptions out there. It seems his conviction is high here as he says that China's bust will be much larger than the Asian crisis in the 90's.

Hart argues that inflation will end China's credit growth. This isn't the first time we've seen this argument. Hedge fund Kleinheinz Capital has in the past said that inflation is the biggest threat to emerging markets. Coincidentally, both Kleinheinz and Corriente operate out of Fort Worth, TX. Lastly, Hart mentioned he was buying puts on the renminbi.


Jeffrey Gundlach / DoubleLine: He used an Andy Warhol car crash painting as an illustration for the housing market. He said that Bank of America $BAC is a proxy for the ABX and says it's going lower. Gundlach likes natural gas.

Interestingly enough, Gundlach said that gold is too heavy to carry around to use as a form of currency to pay for things. Instead, he said to use gems to protect against a crash and uncertainty because they are more portable, noting that you can carry a ruby in your shoe. Gundlach prefers holding cash or gems instead of gold or silver.

As an aside, it's worth noting that diamond prices have been heading higher in recent months. They are not a publicly traded commodity and high demand from India and China seems to be driving prices there.


Marc Faber / Gloom Boom & Doom Report: Faber is very clearly not a fan of Ben Bernanke. He says that the Federal Reserve Chairman is a student of history regarding the Depression, but that Bernanke unfortunately doesn't know what caused it. Faber notes that as the Fed prints more money, cash and bonds obviously aren't good investments. He also joked that if everyone at Ira Sohn complained, Bernanke would come in and drop a trillion dollars right there.

Faber said not to own US government debt, even if the deflationists end up being right. He is also an advocate of owning gold but not storing it in one place. Faber says you need to store gold all over the world in Australia, Switzerland, etc. He also disputed Gundlach's notion to own gems over gold and said people will always value gold, even if you're in a jungle or desert because everyone knows what it is.


Steve Feinberg / Cerberus: He pitched residential mortgage backed securities (RMBS) as a compelling opportunity and labeled them 'cheap,' given the high amount of underwater loans and depressed home prices.


Peter May / Trian Fund Management: Peter May of Nelson Peltz's Trian Fund pitched upscale jeweler Tiffany & Co (TIF), citing "enormous price appreciation" ahead. Catalysts for TIF include new store openings, vertical integration, new watches, and increased analyst coverage and he said shares could see $100 (they currently trade around $70.)


If you missed it, be sure to also check out part 1 of our notes from Ira Sohn featuring investment ideas from Jim Chanos, Phil Falcone, Dinakar Singh and more.

Nelson Peltz's Trian Fund: Latest Portfolio Activity

Nelson Peltz's Trian Fund Management recently filed an amended 13D with the SEC regarding shares of Tiffany & Co (TIF). Due to portfolio activity on January 20th, 2011, Trian has disclosed a 4.95% ownership stake in TIF with 6,260,809 shares.

Tiffany & Co (TIF)

This is a decrease in their position as they reported their recent sales in a Form 4 with the SEC. Peltz's firm sold TIF shares on January 18th, 19th, and 20th at weighted average prices ranging from $57.9484 to $59.2843, with the bulk of their sale coming at the latter price. In all, Peltz recently sold 600,000 shares of Tiffany & Co.

Trian originally filed its activist 13D on Tiffany back in February 2007. Their latest amended 13D contains standard boilerplate stating that they intend to continually review their investment.

Peltz's Background

Peltz is a well-known activist investor and takeover titan. Additionally, he is the former owner of Snapple and graces the Forbes' billionaire list. Interestingly enough, Peltz never received his college degree. He attended the Wharton School at the University of Pennsylvania, but left to work in his family's business of selling food.

He attributes one of his most valuable lessons to his father, who simply said, "get sales up and keep expenses down." He has obviously incorporated this advice into his everyday work with turning around companies. In potential targets, Peltz likes companies to have the following attributes: a good franchise, low leverage, and strong free cash flow. Peltz runs Trian with his business partner, Peter May, who has been with him since the Snapple days.

Wendy's Arby's Group (WEN)

Peltz's Trian also owns a sizable position in Wendy's Arby's Group (WEN) and the fast food company has just announced that it is putting the Arby's sandwich chain up for sale. Arby's originally merged with Wendy's back in 2008. Trian owns over 24% of the company.

In other portfolio holdings, Trian owns sizable chunks of Legg Mason (LM), H.J. Heinz (HNZ), Family Dollar (FDO), and State Street (STT). Given Peltz's background, it should come as no surprise that he mainly focuses on the food industry.

Head to our hedge fund portfolio tracking to see what stocks managers have been active in lately.

Per Google Finance, Tiffany & Co is "a holding company and conducts all business through its subsidiary companies. The Company’s principal subsidiary, Tiffany and Company, is a jeweler and specialty retailer whose principal merchandise offering is fine jewelry. The Company also sells timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories."

Per Yahoo Finance, Wendy's Arby's "through its subsidiaries, operates as the owner and franchisor of the Wendy's and Arby's restaurant systems."