What We're Reading ~ Analytical Links 10/16/13

Being a long-term investor in a short-term world [The Big Picture]

Living in a low return world [Abnormal Returns]

The most important variable governing market prices [Minyanville]

Sears (SHLD) rally belies big worries about the retailer's prospects [Barrons]

In-depth look at Amazon's (AMZN) Jeff Bezos [BusinessWeek]

Pay TV: the future is not written [FT]

Takeaways from Liberty Media's (LMCA) analyst day [StreetInsider]

US cable companies home in on security [Reuters]

Scott Adams' secret to success [WSJ]

Iron Mountain (IRM) drops as Barclays says REIT conversion unlikely [Barrons]

How the Winklevoss twins found Bitcoin [Bloomberg]

Thoughts on Twitter's IPO & a good trade/bad investment [Aswath Damodaran]

Profile of Twitter & Square's Jack Dorsey [NewYorker]

Perry Capital's Investment Thesis on Iron Mountain (IRM)

Hedge fund Perry Capital's recent letter to investors outlines why they added to their existing position in Iron Mountain (IRM) in the second quarter. We also posted up Perry's thoughts on credit in another post. Regarding their equity stake in IRM, Perry writes,

"The company’s main business is physical document and data tape storage where it has the #1 market share. In part due to the urging of a shareholder, the company is engaging in a series of changes that should unlock value and drive returns to shareholders. We believe management’s commitment to the shareholders, new board appointments, reductions in capital expenditures, the recent sale of its non-core digital business, rationalization of its international operations, and potential conversion to a REIT all bode well for shareholder value creation. Along with the defensive nature of the business model, management has committed to return $2.2bn of cash to shareholders by 2013 (equal to one third of its market capitalization). This should provide adequate downside protection in an uncertain market environment."

Perry Capital 767 Fifth Avenue New York, NY 10153
212-583-4000 investorrelations@perrycap.com

Perry Capital: European Markets to Provide Credit Opportunity in Coming Months

Richard Perry's hedge fund firm Perry Capital returned -0.93% in the second quarter and is up 2.69% for the year. The firm now manages $8.6 billion and has used the market volatility to add to their positions in their highest conviction names.

In a past investor letter, we highlighted how Perry saw a growing amount of event-driven opportunities. Their second quarter letter to investors outlines why they sell existing positions:

1. more compelling opportunities are created by the markets
2. a position reaches value
3. our original thesis is refuted based on newly uncovered data.

Perry also writes, "we are comfortable holding higher cash levels when we see potential opportunities on the horizon. The European sovereign debt crisis could be the cause of the next market dislocation."


Credit Positions

The hedge fund's letter mentioned their position in preferred securities of government sponsored enterprises (GSE's) such as Fannie Mae and Freddie Mac. As 90-day delinquencies have been steadily declining, Perry feels the US taxpayers could recoup the $164 billion preferred investment. In the past we've pointed out how Michael Kao's Akanthos Capital Management likes GSE preferreds as well.

Perry also believes that peripheral European markets will be a 'robust' credit opportunity over the upcoming months. Additionally, Perry utilized the June sell-off to add "a small amount of structured credit to the portfolio with a particular focus on asset-centric instruments."


Equity Positions

The hedge fund sold their position in Equinox Minerals as Barrick Gold (ABX) purchased the company and after Zambian approval, Perry tendered its shares into the offer. They also exited their position in Swiss pharmaceutical company Actelion (ETR:ACT) after a failed attempt by an activist shareholder and a disappointing jury verdict.

They also added to their existing position in Iron Mountain (IRM). You can view Perry Capital's thesis on Iron Mountain here.


For more recent hedge fund letters, we've also posted up:

- Ivory Capital's thoughts on why value investing isn't working in this market

- Dan Loeb & Third Point's Q2 letter

- Oaktree Capital & Howard Marks' thoughts on the US debt ceiling

- Corsair Capital's Q2 letter

- David Einhorn & Greenlight Capital's letter