Senator Investment Group Boosts MGM Resorts Stake

Alex Klabin and Doug Silverman's hedge fund firm Senator Investment Group has filed a 13G with the SEC regarding its stake in MGM Resorts International (MGM).  Per the filing, Senator now owns 5.57% of the company with 31.5 million shares, which includes 22 million shares of stock issuable upon exercise of call options.

This is an increase of over 24 million shares since the end of the second quarter when they only owned 7.5 million shares.  The filing was made due to activity on September 12th.

For more on this hedge fund, we posted up another stock Senator had been buying.

Per Google Finance, MGM Resorts International "owns and operates casino resorts. The Company operates in two segments: domestic resorts and MGM China. Its domestic resorts segment consists of non-gaming operations, including hotel, food and beverage, entertainment and other non-gaming amenities. Its casino operations feature a range of slots, table games, and race and sports book wagering. Its MGM China’s operations consist of the MGM Macau resort and casino, and the development of an integrated casino, hotel and entertainment resort on the Cotai Strip in Macau. Under its resort operation, the Company's casino resorts offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. It owns Primm Valley Golf Club at the California/Nevada state line and Fallen Oak golf course in Saucier, Mississippi, among others. It owns and manages CityCenter Holdings, LLC, located between Bellagio and Monte Carlo."

Rick Rieder's Presentation at Invest For Kids Chicago 2013

Next up in our notes from Invest For Kids Chicago 2013 is Rick Rieder of BlackRock.


Rick Rieder's Presentation at Invest For Kids Chicago

•    21 years at Lehman; Fixed income analyst hall of fame
•    Upside value of FI is muted to say the least
•    Talk on convert – fundamental value of significant proportion
•    Investment regime is changing
•    2003 to 2007 – leverage built up
•    2008 to 2013 – Fed saving system
•    Rebooting system back to “2003 or 2004”
•    Growth in the next few years has exogenous for moderate growth for next 2 to 3 years
 •    Expect moderate growth framework for next few years
•    Low rate framework
•    Buying a lot of agency mortgages
•    Can re-lever US balance sheets
•    Cost of equity versus BBB yields is very wide
•    Investors are forcing CEOs to return capital
•    Dividend to CapEx has also growth so ST growth for equity price but LT underinvestment
•    Need for interest income in market yet not enough assets so investors are forced out the rick curve to equities
•    Converts provide upside convexity, income, and the ability to leverage volatility(options are priced cheap due to volatility being held on the Fed’s balance sheet)
•    Likes DR Horton, MGM, and Ford converts
•    Also works in Europe & Asia 


Check out the rest of the hedge fund presentations from Invest For Kids Chicago here.

Grey Owl Capital on Investing in a Low-Return Environment: Q1 Letter

Jeff Erber and Grey Owl Capital are out with their Q1 letter to investors and in it they highlight how they're approaching investing in a low-return environment.  They're employing a three-pronged attack as follows:


1. Look for undervalued securities:  They've been "high-grading" their portfolio by buying cheaper, high quality US names.  This is a concept long echoed in commentary from Oaktree's Howard Marks as well as GMO's Jeremy Grantham for the past few years as rates have remained low for a prolonged period.

Here's what individual names Grey Owl's been trading in:

New stakes: Pepsico (PEP), Blackrock (BLK), BMC Software (BMC), and Excelon (EXC)
Added to existing stakes: eBay (EBAY)
Exited: Apollo Residential Mortgage (AMTG) and Western Union (WU)
Trimmed: Apollo Group (APOL), Bridge Point Education (BPI), Market Vectors Gold Miners (GDX), Lexmark (LXK), and Transocean (RIG).


2. Invest in short dated high-yield fixed income:  Given that the Fed has in the past signaled potentially raising rates in 2013, this short-dated approach makes sense.  They've purchased the following bonds (with full write-ups on each stake in the below letter):

MGM Resorts 6.75% 9/2012 - purchased in December 2011
CSC 5.5% 3/2013 - purchased in January
Western Alliance Bancorp 10% 9/2015 - purchased in early April


3. Hold plenty of dry powder anticipating better opportunities: This might look counterintuitive at first glance given that holding cash earns you practically nothing, especially in a low yield environment.  However, consider that many hedge fund managers often hold cash as a hedge and as a utility to deploy when better investment opportunities arise. That's exactly what Grey Owl has done as they've deemed the current set of opportunities less desirable and they think better prices to buy at lie ahead.


Embedded below is Grey Owl Capital Managment's Q1 letter & you can download a .pdf here:




For more investor letters we've posted up Dan Loeb's Third Point Q1 letter as well as Passport Capital's letter.

Jim Chanos: "Long Corruption and Short Property in China"

Hedge fund manager and renowned short seller Jim Chanos of Kynikos Associates was interviewed on CNBC today from the Delivering Alpha conference. Chanos is known for his short of Enron before it collapsed.

Recent Portfolio Activity

Chanos says that "we're long corruption and short property in China." As such, he's long the Macau casinos. He didn't name names but obviously Wynn (WYNN) has a large presence there via Wynn Macau (1128.HK), as does MGM (MGM) and SJM Holdings (0880.HK), controlled by the family of Stanley Ho.

Conversely, we originally detailed how he was also shorting the property developers in the country.

In the past month, Chanos has pressed his shorts in the renewables sector (green energy) and in particular, solar. We covered Chanos' presentation at the Ira Sohn Conference where he said he was short First Solar (FSLR) as well as wind power play Vestas (CPH: VWS).

Chanos also noted that his fund is not short US banks.

Email readers come to the site to watch Chanos' interview embedded below:



Chanos will be presenting his newest investment ideas at the Value Investing Congress in New York on October 17th & 18th and Market Folly readers can register here.

John Paulson's Hedge Fund Starts New Positions in MGM Mirage, Apache, Mylan & More: 13F Filing Q1 2010

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up is John Paulson's hedge fund Paulson & Co. Before becoming a hedge fund 'rockstar' due to his wildly successful bet against subprime, Paulson managed a seemingly mediocre merger arbitrage fund. So while Paulson has since started other hedge funds focused on other strategies (Recovery Fund, etc), keep in mind that many of the equity positions listed below are related to his core arbitrage strategy. Also, please note that Paulson's massive stake in exchange traded fund GLD is merely a hedge to his fund share class that is denominated in gold.

For more on Paulson's big trade, Wall Street Journal columnist Gregory Zuckerman detailed the impressive wager in the book, The Greatest Trade Ever (one we highly recommend reading). Such amazing performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings in the past.

In recent portfolio activity that has occurred after these filings, John Paulson's fund has disclosed a new stake in American Capital (ACAS) as well. Paulson has been in the spotlight in recent months due to the controversy surrounding Goldman Sachs and the subprime mortgage trade and he cleared the air with his recent letter to investors. Nowadays, Paulson has found his next big bet: a wager against the US dollar. He is executing this via his new gold fund.

The positions listed below were Paulson & Co's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
MGM Mirage (MGM)
Apache (APA)
Mylan (MYL)
Family Dollar Stores (FDO)
Devon Energy (DVN)
Novell (NOVL)
Novagold Resources (NG) ~ we already covered how Paulson was set to buy NG shares
Supermedia (SPMD) ~ we previously detailed this stake as well
DEX One (DEXO)
Smith International (SII)
Boyd Gaming (BYD)
Randgold Resources (GOLD)
Bank of America (Warrants)
Iamgold (IAG)
Beazer Homes (BZH)
Barrick Gold (ABX)
First Midwest Bancorp (FMBI)
Beazer Homes (BZMD)


Increased Positions
Hartford Financial (HIG): Increased position size by 363.6%
Apollo Group (APOL): Increased by 93%
XTO Energy (XTO): Increased by 30%
Bank of America (BAC): Increased by 11%


Reduced Positions
Mead Johnson Nutrition (MJN): Reduced position size by 50%


Positions They Sold Out of Completely
Sun Microsystems ~ inactive, merger completed
Philip Morris International (PM)
Pepsi Bottling Group ~ inactive, merger completed
IMS Health (RX)
Bank of America Preferreds (BAC-S)
Liberty Entertainment (LSTAV)
Burlington Northern Santa Fe ~ inactive, merger complete
Kraft Foods (KFT)
PepsiAmericas ~ inactive, merger complete
Encore Acquisition ~ inactive
Fifth Third Bancorp (FITB)
Chattem ~ inactive
Dr Pepper Snapple (DPS)
Valley National (VLY)
New York Community (NYB)


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. SPDR Gold Trust (GLD): 16.2%

2. Bank of America (BAC): 14.2%

3. Citigroup (C): 9.7%

4. Anglogold Ashanti (AU): 7.8%

5. Comcast (CMCSA) 3.9%

6. Suntrust Banks (STI): 3.8%

7. Boston Scientific (BSX): 3.4%

8. Capital One (COF): 3.3%

9. XTO Energy (XTO): 2.9%

10. Kinross Gold (KGC): 2.7%

11. Wells Fargo (WFC): 2.6%

12. MGM Mirage (MGM): 2.3%

13. Hartford Financial (HIG): 1.7%

14. Apache (APA): 1.6%

15. JPMorgan Chase (JPM): 1.5%


The majority of Paulson's portfolio activity in the first quarter centered around brand new positions or closing positions entirely; there were very few partial adjustments. In terms of new stakes, his position in MGM Mirage is sizable at their 12th largest US equity long. Sticking with the gaming sector, they also started a new position in Boyd Gaming (BYD). We highlight Paulson's new Novell (NOVL) play because this stock seems to currently be 'in play' as hedge fund Elliott Management made a bid for the company at $5.75 (most likely to drum up other bids) and now there are supposedly a bundle of private equity firms interested in NOVL. Lastly, we've been highlighting that numerous hedgies added Family Dollar (FDO) in the first quarter, and Paulson is one of those firms.

Paulson also continues to own a few of the stocks on Goldman Sachs' VIP list such as Bank of America, Pfizer, and JPMorgan. In terms of positions Paulson & Co sold out of, we see that these stocks were mainly in companies that completed merger transactions. This obviously reflects Paulson's core arbitrage strategy. Lastly, the fact that Paulson & Co hold such a large position in SunTrust Banks intrigued us solely because we've seen Warren Buffett sell STI and David Tepper's Appaloosa Management trim their STI stake.

Assets reported on Paulson's 13F filing were $21.1 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, and Dan Loeb's Third Point. Be sure to check back daily for new hedge fund updates.