What We're Reading ~ 4/20/16

The Great Minds of Investing [William Green]

On simplicity versus complexity in investing [Reformed Broker]

Capital allocation - defining what is good and what is bad [Value and Opportunity]

Why we think we're better investors than we are [NYTimes]

Billing by millionths of pennies, cloud computing takes in billions [NYTimes]

Inside Amazon's cloud computing infrastructure [DataCenter Frontier]

Inside the nondescript building where trillions trade each day [Bloomberg]

The Energy Transfer - Williams poker game [SL-Advisors]

Kinder Morgan: asymmetric upside potential [Value and Opportunity]

India's thirst for oil is overtaking China's [Bloomberg]

HDR is TV's next big format war [CNET]

Profile on Google's Sundar Pichai [Buzzfeed]

How Jeff Bezos became a power beyond Amazon [Fortune]

Inside the house that Jack Ma built [Bloomberg]

The billionaire behind Walgreens' quest for global dominance [Fortune]

Media websites battle faltering ad revenue [NYTimes]

Ugg: the look that refused to die [The Guardian]

Critical things successful people do every day [Linked In]

What We're Reading ~ Analytical Links 2/5/13

M&A world: stacks of corporate cash looking for deals [All About Alpha]

Taking money off the table to diversify emotionally [Abnormal Returns]

Looking at annual trends in shareholder activism [Activist Insight]

Observations of individual stock returns 1983-2006 [Longboard]

Time Warner breaks out HBO results [Barrons]

Will Valeant overdose on acquisitions? [Herb Greenberg]

FCC chief tells Sprint chair he is skeptical of T-Mobile deal [Reuters]

Cable TV mogul looks to add Formula 1 to sports bag [NYPost]

Taking a look at Kinder Morgan [Glenn Chan]

Did Google really lose on its original Motorola deal? [Dealbook]

Nestle looking at selling even more assets? [Reuters]

Top destinations for foreign investment dollars [Business Insider]

Lone Pine Capital Files 13G on Kinder Morgan: A Quick Look at the Warrants

Steve Mandel's hedge fund firm Lone Pine Capital recently filed an amended 13G with the SEC on shares of Kinder Morgan (KMI).  Per the filing, Lone Pine has disclosed a 9.1% ownership stake in KMI with 71,780,836 shares.

Their ownership stake is actually comprised of just over 17.6 million shares of common stock and over 54.1 million Kinder Morgan warrants (explained below).  This means that their actual position size remains unchanged since the end of the second quarter when they filed their 13F with these same totals.
 
It's worth noting that their stake in Kinder Morgan came by way of the El Paso merger.  Lone Pine originally had a large stake in EP and when the company completed its deal, Mandel's firm received KMI shares, cash and KMI warrants (KMI-WS or KMIIV depending on broker).

Due to the deal, KMI now expects its dividend per share to grow at an average annual rate of 12.5% through 2015, according to their recent announcement.


Kinder Morgan Warrants

Lone Pine owns just over 54.1 million warrants as of this most recent disclosure and this is the same amount of warrants they've owned since the second quarter.

Since completion of the merger between EP and KMI, the warrants have doubled in value to $3.86 while KMI shares are up around 7%.  A warrant gives the owner the right to buy 1 share of KMI at $40 and they expire in May 2017 (KMI currently trades just over $35).

Kinder Morgan in the past announced they were buying back $250 million in warrants.  In their Q3 conference call, they mentioned they have bought back $138 million worth of warrants and will continue to buy up until the $250 million mark.

At the end of Q2, Lone Pine was the largest institutional holder of these warrants.  Other large owners at the time include Brookside Capital, Soroban Capital, Hound Partners, Hutchin Hill Capital, Tiger Management, King Street Capital, Eton Park Capital, and Farallon Capital among many more. 

Lone Pine is also the sixth largest institutional holder of KMI common stock as well.  So, it will be interesting to see what Lone Pine does with their various KMI positions in the future and whether or not other major hedge funds continued to hold in Q3.


About Kinder Morgan

Per Google Finance, Kinder Morgan "owns and manages a diversified portfolio of energy transportation and storage assets. The Company operates in five business segments: Products Pipelines-KPM, Natural Gas Pipelines-KMP, CO2-KMP, Terminals-KMP and Kinder Morgan Canada-KMP."


For more from this hedge fund, we've detailed Lone Pine's portfolio activity here.

Delivering Alpha Best Ideas Panel: Cooperman, Chanos, Feldstein & More

CNBC and Institutional Investor's Delivering Alpha Conference is going on today and we wanted to aggregate the highlights.  The "best ideas" panel included Omega Advisors' Leon Cooperman, Kynikos Associates' Jim Chanos, BlueMountain Capital's Andrew Feldstein, Queen Anne's Gate Capital's Kathleen Kelley, and BlackRock's Robert Kapito.

From the conference, we've also posted up the global opportunities panel as well as the chasing yield panel.


Leon Cooperman (Omega Advisors):  He pitched going long US stocks and called them the best house in the financial neighborhood, a tune he has been singing for well over a year.  However, he did make an excellent point that the maximum "pain trade" is going higher as tons of people are sitting on large sums of cash earning nothing. 

As for specific names he likes: Capital One (COF), Express Scripts (ESRX), Halliburton (HAL), Gannett (GCI), Kinder Morgan (KMI), MetLife (MET), Qualcomm (QCOM), Watson Pharma (WPI) and Western Union (WU).  He also likes AIA Group (1299.HK) traded in Hong Kong.

The Omega Advisors founder also continued to bash bonds, saying "buying US bonds right now is like walking in front of a steam roller and picking up dimes.  It's just not a good policy."

As far as the election goes, he thinks that if Romney wins, the market will spike by 150 points, but if Obama wins, it drifts lower. For more from the Omega man, we just posted up Leon Cooperman on 14 attributes that make a good portfolio manager.


Jim Chanos (Kynikos Associates):  The noted short-seller was out again negative on tech companies.  He mainly pitched the bear case on Hewlett Packard (HPQ), calling it a value trap.  We just recently highlighted Chanos' presentation on global value traps where HPQ was highlighted among other names.

He says that "when you lose the paradigm shift, you spend an awful lot of money defending what you have."  He compared HPQ to Eastman Kodak as the company is in declining businesses.

Chanos also touched on how instead of giving cash back to shareholders, companies will make value-destroying acquisitions.  He cited HPQ's buy of Autonomy last year.  The Kynikos man argues that HPQ has overspent on acquisitions and they're hiding research & development expenditures through them.

He's also negative on Dell (DELL) saying that the company finances its subprime customers (financing their revenue growth).  For more on Chanos we just recently posted up his thoughts on the psychology of short selling.


Andrew Feldstein (BlueMountain Capital):  He likes less liquid credit, angling for 8-12% returns over a 3-7 year time horizon.  He says you have to be patient as this opportunity is available due to everyone's obsession with liquidity (i.e. don't put your money here if you don't have an appropriate time horizon).  He mentioned bonds such as Prospect Medical if you can buy and hold.  Feldstein also mentioned he's less excited about legacy distressed assets in Europe.


Kathleen Kelley (Queen Anne's Gate Capital):  Formerly of Tudor and Kingdon, she pitched two ideas: short the British pound (against long US dollar) as well as short platinum, targeting 20-30% moves to the downside.  She wants to be long the USD against the sterling because the USD can be a commodity currency.

She also likes shorting platinum as there's an oversupply due to slowing Euro auto sales.  At the Ira Sohn conference two months ago, Ospraie's Dwight Anderson pitched going short platinum as well (in addition to going long palladium).


Robert Kapito (BlackRock):  He's going for the "income hog" approach by focusing on equity dividend funds, dividend stocks like AT&T (T), Verizon (VZ), Merck (MRK), Johnson & Johnson (JNJ), high yield bond funds (or individual issues from Sprint, Ally) and municipal bonds such as the San Francisco Airport, New Jersey Tolls.  He thinks that default worry surrounding munis is "overrated."


Sources: Notes sent by readers, II's blog, @iimag,  @ldelevingne, @footnoted, @aarontask

For more from Delivering Alpha, head to the global opportunities panel (featuring Richard Perry) as well as the hunt for yield panel (featuring Marc Lasry)

Lone Pine Capital Discloses Kinder Morgan Stake Via El Paso Deal

Steve Mandel's hedge fund firm Lone Pine Capital filed a Form 3 and 13G with the SEC regarding shares of Kinder Morgan (KMI).  The hedge fund now owns a sizable chunk of common stock and warrants that they received via their previous position in El Paso (EP).

As pointed out in our new issue of Hedge Fund Wisdom two weeks ago, El Paso was Lone Pine's largest disclosed US equity holding as they were playing the risk arbitrage there.  EP was acquired by Kinder Morgan in a stock/warrant/cash deal.

Lone Pine has now disclosed a 12.9% ownership stake in the company with 71,780,836 shares.  This is represented by 17.6 million shares of common stock and 54.1 million shares via warrants.  The warrants have an expiration date of May 25th, 2017 and a conversion/exercise price of 40.

Numerous other prominent hedge funds were playing this arbitrage as well, so it will be interesting to see who holds on to the new entity (KMI) and who sells their position.  Our premium newsletter drew attention to the sizable stakes in El Paso by Lone Pine, Farallon Capital, Paulson & Co, Omega Advisors, JANA Partners, and Third Point.

Per Google Finance, Kinder Morgan "owns and manages a diversified portfolio of energy transportation and storage assets. The Company operates in five business segments: Products Pipelines-KPM, Natural Gas Pipelines-KMP, CO2-KMP, Terminals-KMP and Kinder Morgan Canada-KMP. The Company through Kinder Morgan Energy Partners, L.P. (KMP) operates or owns an interest in approximately 37,000 miles of pipelines and approximately 180 terminals. These pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide and other products, and its terminals store petroleum products and chemicals, and handle such products as ethanol, coal, petroleum coke and steel."

In other portfolio activity from Mandel's firm, we've highlighted how Lone Pine has been buying Ulta Salon.

Insider Buying: CEO's Buying Stock En Masse

There has been an increased amount of insider buying over the past few days. But what caught our eye in particular was the vast amount of CEO's that were buying.

To pull all this data, we used Insider Trade Reports who says that "over four decades of academic research has shown that by following in the footsteps of company insiders and buying the stocks that they are buying, you can outperform the market by 6% to 10.2% per year."

As CEO's bought into the recent market sell-off, it's clear they believe the market was undervaluing their companies.

List of Recent CEO Insider Buying

- Six Flags Entertainment (SIX) CEO buys $2,499,189 worth

- Morgan Stanley (MS) CEO buys $2,062,070 worth

- Fifth Street Finance (FSC) CEO buys $2,014,323 worth

- Huntsman (HUN) CEO buys $1,137,270 worth

- WMS Industries (WMS) CEO buys $1,000,224 worth

- General Growth Properties (GGP) CEO buys $856,489 worth

- Kinder Morgan (KMI) CEO buys $679,621 worth

- First Industrial Realty Trust (FR) CEO buys $642,000 worth

- Winthrop Realty Trust (FUR) CEO buys $589,550 worth

- Tupperware Brands (TUP) CEO buys $507,045 worth

- Life Technologies (LIFE) CEO buys $420,000 worth

- Greenbrier Companies (GBX) CEO buys $268,705 worth

- Kansas City Southern (KSU) CEO buys $253,050 worth

- AK Steel (AKS) CEO buys $199,030 worth


We're proud to announce that Market Folly readers receive a special 33% discount on Insider Trade Reports' annual subscriptions and a 25% discount on monthly & quarterly subscriptions.

You can choose how often you receive insider buying/selling alerts (daily, weekly, high conviction reports) which is a great feature. They also have a proprietary scale that measures the significance of each transaction with commentary to provide context.

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