Glenview Capital Q4 Letter on McDonald's, T-Mobile, Auto Dealers & More

Larry Robbins' hedge fund firm, Glenview Capital, is out with its fourth quarter letter to investors. Glenview's Opportunity Fund returned 25.25% net in 2014. 

In the letter, Robbins outlines his thesis on auto dealers (Group 1 Automotive ~ GPI), Flextronics (FLEX), McDonald's (MCD), PHH (PHH), T-Mobile (TMUS), and pharma roll-up plays like Actavis (ACT) and Endo (ENDP).


Glenview's Q4 Letter Takeaways

On McDonald's (MCD):  This is a new stake for Glenview and they feel there's basically 5 ways to make a 'happy meal' to help the company: operational turnaround, SGA rationalization, refranchising, additional leverage, and real estate.  They feel this could trade as high as $169 (currently trades around $99.)

On MCD, Robbins writes, "Fundamentally, McDonald’s has a number of characteristics that we look for in good businesses. Approximately 75% of EBITDA is driven by royalties and rent, which is a secure, stable earnings stream free of operating leverage. Food, in general, is a defensive end market, and McDonald’s positioning at the value end of the spectrum provides further insulation from material cyclicality as evidenced by positive same store sales in the U.S. and positive consolidated EPS growth in every year throughout the last recession."


On T-Mobile (TMUS): Glenview has owned this company since 2013 but bought more shares in December 2014.  They feel the company has a few positive things going for it to continue its growth: aggressively going after new subscribers, deploying spectrum to address new customers, and seeing positive FCF generation this year. 

They also like that the company is a "key strategic asset" and that their parent company Deutsche Telekom is looking to sell.  Glenview feels TMUS could either: try to tie-up with Dish Network and their spectrum, seek a sale to a foreign buyer, or again try to merge with Sprint once a new political administration takes office in 2016.


Embedded below is Glenview's Q4 letter:



For more from this hedge fund, yesterday we posted up some more of Glenview's recent portfolio activity.

Glenview Capital Discloses Group 1 Automotive Stake

Larry Robbins' hedge fund firm Glenview Capital has just filed a 13G with the SEC.  They've disclosed that they now own 6.24% of Group 1 Automotive (GPI) with over 1.5 million shares.

This is a newly revealed stake and the filing was made due to activity on July 31st.

For more from this hedge fund, check out Larry Robbins at the Delivering Alpha conference.

Per Google Finance, Group 1 Automotive is "an operator in the automotive retailing industry. Through its operating subsidiaries, it markets and sells a range of automotive products and services, including new and used cars and light trucks; arrange related vehicle financing; service and insurance contracts; provide automotive maintenance and repair services, and sell vehicle part."

Eminence Capital Adds to Group 1 Automotive Position

Ricky Sandler's hedge fund Eminence Capital has filed a 13G with the SEC regarding Group 1 Automotive (GPI).  Per the filing, Eminence has revealed a 5.4% ownership stake in GPI with 1,312,745 shares.

This marks a 77% increase in the number of shares they own since the end of the second quarter.  The SEC filing was required due to portfolio activity on October 4th.

Eminence has been involved in other auto-related names and we've highlighted Sandler's position in Sonic Automotive recently as well.

Per Google Finance, Sonic Automotive is "an operator in the automotive retailing industry. Through its operating subsidiaries, it markets and sells a range of automotive products and services, including new and used cars and light trucks; arrange related vehicle financing; service and insurance contracts; provide automotive maintenance and repair services, and sell vehicle part. In June 2013, Group 1 Automotive Inc acquired Rountree Ford Lincoln. In October 2013, the Company acquired Joe Marina Honda in Tulsa, Oklahoma."