Viking Global Takes aTyr Pharma Stake

Andreas Halvorsen's hedge fund firm Viking Global has filed a 13G with the SEC regarding shares of aTyr Pharma (LIFE). Per the filing, Viking now owns % of the company with over 2.93 million shares.

This is a newly disclosed equity position and the filing was made due to activity on August 31st.  aTyr Pharma recently issued a press release stating that they'd raised $45 million in equity financing, with Viking purchasing a block of non-voting Class X Preferred Stock at $13.25 per share, each which converts into 5 shares of common stock with various conditions.

We've highlighted previous portfolio activity from Viking Global here.

Per Google Finance, aTyr Pharma is "a clinical-stage biotherapeutics company. The Company is engaged in the discovery and clinical development of medicines for patients suffering from severe, rare diseases using its Physiocrine biology, a discovered set of physiological modulators. The Company focuses on the development of Physiocrine-based therapeutics for the treatment of rare diseases, including facioscapulohumeral muscular dystrophy (FSHD) and limb-girdle muscular dystrophy (LGMD) 2B. The Company is developing Resolaris, an intravenous protein therapeutic for the treatment of rare myopathies with an immune component (RMICs). The Company is investigating Resolaris in patients with LGMD2B. The Company is conducting approximately three open label trials in patients with early onset FSHD, in adult patients with FSHD or LGMD2B and a long-term extension study in adult patients with FSHD. The Company has not generated any revenues."

What We're Reading ~ Analytical Links 4/17/13

A new site aggregating conference call transcripts [ConferenceCallTranscripts.org]

Intel (INTC): Anatomy of a tech value trap [Reformed Broker]

Why equity long/short investing is not dead [HFIntelligence]

Sticking to a plan in the face of emotional volatility [Abnormal Returns]

Rare interview with Liberty Media's (LMCA) John Malone [CNBC]

Jeremy Grantham on how to play resource scarcity [Advisor.ca]

Aereo has TV networks circling the wagons [NYTimes]

The death of value investing [Business Insider]

Thermo Fisher (TMO) nears deal for Life Technologies (LIFE) [Reuters]

On Dish Network's (DISH) bid for Sprint Nextel (S) [Bloomberg]

Interview with Markel's (MKL) Tom Gayner [GuruFocus]

Diabetes in Mexico: eating themselves to death [The Economist]

Top 5 websites capturing larger share of real estate traffic [Inman]

As big investors emerge, Bitcoin gets ready for close-up [Dealbook]

Why Larry Robbins Likes Life Technologies (LIFE): Stock of the Week

This week's stock is Life Technologies (LIFE).  Larry Robbins' hedge fund Glenview Capital has held LIFE as a core position for a while now, so it's worth examining what they see in the name.  And if you missed them, scroll through all previous stock of the week posts here.

At the end of 2011, LIFE was Glenview's largest disclosed US equity long.  At that time, they were also the second largest institutional owner of the company's shares.

We covered Glenview's thesis on LIFE back in 2011 as it's been a core holding for the hedge fund.  Back then, Robbins argued that the company was cheap on a valuation basis and was likely to grow EPS 20% over the next few years.  He also pointed out that the company's free cashflow was 91% of EPS and its dominant market share versus competitor Illumina (ILMN).


Below we'll hear an opinion from Tsachy Mishal, portfolio manager at TAM Capital Management.

About a year ago I attended an investment conference where Larry Robbins of Glenview Capital made a compelling case for Life Technologies. It was the best investment pitch I heard that day and I left wanting to do more research on the stock. After researching the company on my own, the stock seemed interesting but I was not as excited as Larry Robbins was about it. A year later the stock is sitting more than 10% lower and I have decided to take a fresh look.  

Life Technologies is a life sciences company that sells equipment and consumables to pharma & biotech companies, hospitals, universities, labs etc.  The bulk of their revenue is in consumables which is a high margin, recurring business. The enterprise value (EV) is $10.3 billion and the free cash flow (FCF) in 2011 was $704 million and is expected to grow to well over $800 million by 2013. Life Technologies trades at an EV/FCF ratio of 14.5 times. Considering that revenue is supposed to grow in the low single digits this seems like a fair multiple. 

The bull case is that the multiple does not take into consideration a valuable asset that is currently not generating much revenue and earnings. Life Technologies purchased a company called Ion Torrent for $725 million. They make a genetic sequencer that competes with Illumina's (ILMN) technology. Illumina recently rejected a $6 billion bid from Roche and likely could have demanded more. While Ion Torrent is a distant second they are growing rapidly. Life Technologies is getting little credit for this product line in its valuation.

What I Like:

- It is very likely that Ion Torrent is worth considerably more than the $725 million LIFE paid for it

- Once one considers the value of Ion Torrent and what free cash flow will look like in a couple of years the valuation on Life Technologies seems attractive.

- Life Technologies will benefit from the secular trend in the aging of the population, biologics, and genetic technology.


What I Don't Like:

- LIFE derives 45% of its revenue from the government and education sector.  I am always hesitant to buy companies where the customers are in trouble.  With bulging deficits, these are not the ideal customers.

- I am going to preface this by saying that I have never met the management of LIFE and did not do much research on them.  For all I know, they might be the most honest people out there.  That said, I always get nervous when a management team comes from GE.  There is nothing scarier than waking up one morning and finding out a company you own has been aggressive in their accounting.  That happens too often with GE management teams.


The bull case on Life Technologies is dependent on the value assigned to Ion Torrent. While I recognize that Ion Torrent is a valuable asset, it is not the type of asset that I typically buy. I am a value investor and Ion Torrent is a growth asset that sells at a growth multiple. Since the upside in the stock is dependent on this asset I will once again pass on Life Technologies.


If you missed them, be sure to also check out previous stock of the week posts:

- Why Steve Romick Owns WellPoint

- Why David Einhorn Owns Dell

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.

We've been using Insider Trade Reports for months now and it's a very useful resource for investors so take advantage of the discount.

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.

Glenview Capital Files 13G on Life Technologies (LIFE)

Larry Robbins' hedge fund Glenview Capital has filed a 13G with the SEC regarding shares of Life Technologies (LIFE). Due to portfolio activity on November 19th, Glenview has disclosed a 5.1% ownership stake LIFE in with 9,450,612 shares. This marks a 17% increase in Robbins' position size since September 30th, as his hedge fund owned 8,077,282 shares at the end of the third quarter.

Robbins is obviously fond of this name and recently pitched it at the Invest For Kids Conference in Chicago. You can see notes from his presentation here. In summary, he sees Life Technologies trading at an attractive valuation and thinks the company should buyback shares. In terms of other recent activity out of the hedge fund, we also detailed how Glenview increased its position in Punch Taverns.

Taken from Google Finance, Life Technologies (formerly Invitrogen Corporation), "incorporated 1989, is a biotechnology tools company. The Company delivers a range of products and services, including systems, instruments, reagents, software, and custom services. Its range of products includes technologies for capillary electrophoresis based sequencing, sequencing, patient care report (PCR), sample preparation, cell culture, ribonucleic acid (RNA) interference analysis, functional genomics research, proteomics and cell biology applications, as well as clinical diagnostic applications, forensics, animal, food, pharmaceutical and water testing analysis."

Notes From Invest For Kids Conference: Ackman, Robbins, Whitney, Zell

The Invest For Kids Conference took place last week in Chicago and was a resounding success, raising over $1 million to benefit local children. We wanted to post up a quick summary of the event, including in-depth notes below from the prominent hedge fund managers that presented. Speakers included Bill Ackman (Pershing Square), Larry Robbins (Glenview Capital), Meredith Whitney, and more. Here are some of their latest investment recommendations:

Bill Ackman of Pershing Square Capital Management: Instead of doling out equity specific investment advice, Ackman instead turned to real estate. At the conference, he proclaimed his bullishness on the housing market and said to buy single family homes, citing home affordability at its highest level in many years. The low interest rate environment obviously helps this but he cautions rates won't stay low for long. This is the same recommendation as John Paulson who said to buy housing recently as well. Stay tuned next week as we'll examine Ackman's latest portfolio in our newsletter, Hedge Fund Wisdom. For our recent posts on the manager, head to Ackman's potential thesis on JC Penney (JCP).

Meredith Whitney of Whitney Advisory Group: Whitney harped on the issues found on the state and local government level regarding their fiscal problems. In short, she feels that municipalities are in trouble, especially New Jersey, Illinois, Massachusetts, and Michigan.

William Browder of Hermitage Capital: Browder focused on emerging markets and an inflationary environment. As such, he tossed out Koza Gold as an idea, a miner in Turkey. He cites their cheap valuation and cheap production costs at $320 an ounce. He also recommended Renhe Commercial Holdings, a shopping mall developer in China.

Larry Robbins of Glenview Capital: Robbins has been presenting the case for McKesson (MCK), Express Scripts (ESRX), and Life Technologies (LIFE) as of late. This conference was no different as he again pointed out the attractiveness of each investment. ESRX is well positioned for the generic drug boom in 2012 and Robbins likes their $6 billion in cash. He fancies LIFE due to its valuation and thinks the company should buyback shares. MCK is attractive due to the company's use of cash to accelerate EPS growth. He also cautioned about mortgage put-backs and appears to be short two banks with high exposure there. Head to our Hedge Fund Wisdom newsletter to view the rest of Glenview's portfolio. We also recently detailed how Glenview increased its position in Punch Taverns.

Joshua Friedman of Canyon Partners: Friedman's suggestion was to play the Lehman Brothers bankruptcy but cautions that it's a complex situation, to say the least. More detailed thoughts are found below.

John W. Rogers of Ariel Investments: Rogers offered three ideas: CBS (CBS), Viacom (VIA), and Gannett (GCI), the last of which he likes the best. He believes a natural move for CBS would be to go private later on as Sumner Redston ages. He also believes Redstone could push VIA private as well. Of the two, Rogers says VIA is cheaper and has solid upside. On GCI, Rogers argues that despite the unpopular print media business, he has been buying on the way down. In a sense, this is an economic recovery play as ad sales pick up.

Doug Silverman of Senator Investment Group: Possibly the most telling information from Silverman's presentation was the fact that they had previously focused on credit the past few years but are now focused on value equities. In terms of specific recommendations, Senator likes rental car companies at present. He referenced the bidding war for Dollar Thrifty (DTG) and sees consolidation in the space. Senator owns 6% of Avis Budget (CAR) and then a lot of Hertz (HTZ) shares as well. You can read his detailed thoughts below.


Numerous other speakers presented at the Invest For Kids Conference and we highly recommend reading the full set of notes attached. Embedded below are the notes, courtesy of Simoleon Sense:



You can download a .pdf copy here.

Overall the second annual conference was a resounding success, raising over $1 million to benefit local children. And, the various hedge fund managers that spoke presented some interesting investment ideas.