Jeff Ubben & Paul Hilal: Future of Shareholder Activism Panel at Reuters Live

At the Reuters Live Newsmaker Event, a panel on The Future of Shareholder Activism featured Jeff Ubben of ValueAct Capital and Paul Hilal of Mantle Ridge and they were later joined also by Zach Oleksiuk of BlackRock and Richard Brand of law firm Cadwalader. 


Jeff Ubben (ValueAct Capital)

He said "The last fat pitch was financials in summer of 2016.  We're very late cycle."  He's seen some activity that's concerning to him where companies are just doing silly deals or allocating tons of money to stupid things.  He says the markets are loving it, but he's not.  He says he's had to be "Mr. No" in board rooms which is the kind of thing he has to do at tops, whereas at bottoms he needs to tell people to buy.  Ubben's got $3 billion in cash right now (manages $16 billion) and is clearly cautious.

Thinks Morgan Stanley's (MS) earnings will go from $2.50 to $4.50.  They've sold some shares but still own it.  Sounds like he only sold because shares have gone up so far so fast.

"One of the hardest things to do is refresh a board."  "The hedge fund activist is putting us on a very awful path.  These are guys with 1 year money and want 1 year returns.  The hedge fund activist is a big problem."

Thinks activist investing should be its own asset class.  You've got private equity with 10 year lockups, hedge funds mainly with 1 year lockups, so perhaps activist investors could slide in at 4-5 years.

Ubben also noted that he thinks large cap activist plays are 'treacherous' with high PEs and then not a lot of growth.  Argues that so much money flowing into alternatives has inflated things.  "Everything about Trump I think is inflationary."

"It's uncomfortable for directors to talk to shareholders" due to regulations (Reg FD).  "Boards are just ... ugh." Thinks this is a 'young' business (i.e. younger people have the energy to do the legwork) and doesn't think he'll be the portfolio manager of ValueAct in five years.  For more on this fund, we've highlighted recent ValueAct portfolio activity here.



Paul Hilal (Mantle Ridge)

Prior to founding Mantle Ridge, Hilal worked at Bill Ackman's Pershing Square.  Has a 5-year lockup at his fund with over $1 billion with a vehicle designed to hold 1 company.  Purposefully moved away from an annual payment structure and he gets paid at the end of the lockup if he's done his job and created value.

Argues longer lock-up helps when dealing with management as he's not just in for a quick hit.  He's been working with railroad CSX (CSX).  Hilal notes that "(Trump) likes the thought of a manufacturing renaissance here."  If a railroad can be a facilitator then that will be welcome by the administration.  Thinks it's very useful for companies to hear from various types of shareholders: hedge funds, institutional investors, etc. 

Talked about the rules around disclosing activist positions (i.e. 13D filings etc).  Thinks there's a decent balance now.  Seemed to think potentially moving disclosure requirements down to a 1% threshold would be difficult as shares can move against you.

Thinks it's useful for Directors of companies to go on a 'listening tour' to hear what people think about the company first.  It's in the company's interest to attract smart investors to give input. 



Zach Oleksiuk (BlackRock)

"We are skeptical of directors who are focused on a single issue or a single thesis."  Notes there's a lot of different types of activists in terms of style and quality.  Thinks there will be more investor focus on environmental and social issues going forward, especially if the issues impact the business.



Richard Brand (Cadwalader) 

Settlement outcomes should be driven by two things: what's right for the company (shareholder value) and the relative leverage of the parties.  The opinions of large institutional shareholders matters a lot.  Thinks there will be a convergence of private equity style and activist style investing in the future.  Also argued hedge funds could start to buy companies (cites Elliott Management, Carl Icahn).  And then private equity investors could start behaving more like activists. 

Notes From Sohn San Francisco 2016: Morfit, McGuire, Palihapitiya & More

Below are notes from the 2016 Sohn San Francisco investment conference where investment managers presented their latest ideas to benefit charities.  We also posted up notes from the Next Wave Sohn San Francisco conference as well that featured emerging managers.

Notes From Sohn San Francisco 2016 Conference


Mason Morfit, ValueAct Capital

• Idea: Long Morgan Stanley (MS)
• Try to find businesses with enduring franchise value
• 3 defined business units
• 7 defined revenue types
• Did a lot of work to understand the unit economics
• 75% of the revenue and 85% of the profit come from asset light fee based businesses (not capital intensive businesses)
• Long term trend is very positive
• MS has maintained and in some cases grown its share in wealth management and investment banking advisory 
• Risk factors: earnings decline, principal loss, liquidity/access to capital

Mick McGuire, Marcato Capital Management

• Idea: Long Buffalo Wild Wings (BWLD)
• Owns 5% of the company
• Differentiated concept focused on wings, beers, sports
• ~1,200 units with potential to grow to 1,700 units
• Long history of industry leading same store sales (SSS) growth
• Central component of investment thesis:
• Differentiated concept with long runway for growth
• SSS declines and capital allocation missteps have hurt shares
• Opportunity to create shareholder value by: transitioning to a 90%+ franchised model by 2020, improve 4 wall margins (several hundred bps opportunity), and optimize capital structure
• Multiple has compressed as traffic has slowed and costs continue to rise
• When growth slowed, BWLD acquired franchised stores for high multiples
• Average replacement cost is ~$2.3mm per unit but in 2015, spent $3.5mm per unit - overpaid; bad use of capital
• Incentives are weighted singularly towards growth, not ROI
• While unit volumes have increased significantly since IPO, ROI has decreased because the cost to build a unit has increased
• Franchised businesses command higher multiples; higher franchise mix correlated with higher multiples
• BWLD is 50/50 today but recommending that they go to 90% franchised model by refranchising units at multiple of 6.0x EBITDA
• Valuation: if they can move to a higher franchised model range of value from $218 to $311 (versus ~$141 today)

Chamath Palihapitiya, Social Capital

•  Primarily invests in fast growing private tech companies
• Multi-trillion dollar opportunity hiding in plain sight
• Retail will be a $1T business by 2025
• Every company succeeds based on three factors: build a great product with great market fit, develops adjacent products in deep verticals, invests in features to drive ARPU
• Amazon (AMZN) thesis based on AWS and outsourcing infrastructure spending and moving it to the cloud; reshaping economics by taking out costs
• Similar concept for software that will move to the cloud

• Idea: Long Workday (WDAY) 
• $100bn opportunity in 10 years; 20% IRR
• Workday is the system of record for HR and is viewed as the best in class product among CIOs
• Leading market share supporting the largest global employee bases including Samsung, McDonalds, IBM
• HCM product manages 19mm employees on behalf of its employers
• Adjacent products in deep verticals: Workday Financials - system of record to manage financials; now manages financials for global companies
• Invest in features to drive ARPU (payroll and many other features)
• Rapid pace of innovation
• Workday competes against Oracle (ORCL) and SAP (SAP)
• Lowest spend on M7A over the last 5 years
• "M&A is what you do when what you do doesn't work anymore."
• Done< $0.3bn over last 5 years, SAP and Oracle have had a lot of M&A
• Netflix ability to close the books and file with the SEC went down significantly with Workday versus Oracle
• Workday is an enterprise product company
• Best management team in software
• Fully aligned, long term oriented
• 97% customer satisfaction; very high consistent with consumer tech like Facebook, Google, Apple but this is enterprise tech
• Following the Salesforce playbook but doing it better
• $100bn company in 10 years

Carson Block, Muddy Waters Capital

• Idea: Short Tutor Perini (TPC)
• Construction company
• Nearly all analysts have the stock as a buy
• FCF is the Achilles heel - the company bleeds cash in working capital driven by growing accounts receivable
• Loan agreement has been amended 6 times in 5 years and there is a chance that banks could pull RC facility; Business has $94mm of cash on BS but 79% of cash sits in JV so it could run into a major liquidity problem
• 4 CFOs over 9 years
• Summary: business can't consistently generate cash, projected earnings growth highly questionable, lack of management credibility, and liquidity could become challenged

Mihir Wohra, PIMCO

• Idea #1: Rates trade - Hawkish Fed
• Market is currently underpricing the possibility of a Fed hike or that there will just be one hike
• Buy a pair: buy a put on the 1 year rate

• Idea #2: Dovish Fed - Buy REITs
• REIT prices tend to be correlated to equities over the short-term but underlying economic factors prevail over the long term
• Will do well if Fed doesn't raise rates or cuts

• Idea #3: Commodities trade: Long call options on 2018 Natural Gas - No Fed correlation
• In the midst of global price convergence that will pull US natural gas prices higher while lowering global prices; US is opening new LNG export terminals and US nat gas is the cheapest in the world so there are buyers
• Buying 2018 at a discount to 2017 is attractive given US LNG exports are only increasing over the next few years

• Idea #4: Bonus trade: sell puts / buy calls on October VIX Futures
• Volatility should rise towards long term averages if election stays close
• Volatility could rise more if Trump probability of winning increases

• Idea #5: Bonus trade: Currencies - works if Trump win probability decreases
• Mexican peso has significantly underperformed other EM and commodity currencies in 2016 due to possibility of Trump victory and tougher US policies toward Mexico

Jeff Osher, Harvest Capital Strategies

• Idea: Long Echostar (SATS)
• Global provider of satellite services, video, delivery solutions and broadband satellite technologies
• Echostar Technologies: set top box business with $1.3bn revenue; $100mm EBITDA, 7.6% EBITDA margins
• Satellite services: $445mm revenue; 84% EBITDA margins; very good business with long dated contracts
• HughesNet: $1/4bn revenue; provide consumer broadband for households that can't get wired broadband
• Duopoly: Hughes and Viasat
• Hughes has 1mm subscribers with 30% EBITDA margin
• Business is capacity constrained
• 2016 launches will drive 50% revenue growth for Hughes within 3 years.  Given higher incremental margins, EBITDA should nearly double
• Sum of the parts valuation results in target price of $71.76 (versus today at ~$44)
• Other actions could result in homerun scenarios: Echostar Technologies divestiture, Echo Mobile, Dish Mexico, Sling TV, Brazil orbital slot, Pay TV, positioning for opportunistic M&A

Joseph Lawler MD, JFL Capital Management

• Idea: Short IP Group (IPO.LSE)
• Publicly traded fund that invests in healthcare companies
• Most publicly traded investment firms trade at a discount to NAV but IPO trades at a premium
• Adverse selection process - they seem to invest in companies that other VCs have passed on
• Investments are overvalued especially investment in Oxford Nanopore.  It's a DNA sequencing company; the cost of DNA sequencing has gone down significantly and has become commoditized

Arjun Divecha, Grantham May Van Otterloo & Co

• Idea: Investing in Indian financials (non state-owned banks)
• Never think of an emerging market as a place to permanently put capital
• India from a long term point of view looks pretty good as a place to invest - well positioned for economic growth over next 5 years
• Private sector financials are taking market share away from state owned banks
• Dependency ratio looks pretty good in the future versus other countries like US, Japan, and China.  Dependency ratio = ratio of non-working to working people
• India looks good because of improving fiscal discipline, improving inflation, current account benefiting from oil windfall (big importer of oil), capacity utilization is very low
• India is massively under-urbanized
• Household debt to GDP is 9% versus US where it is ~100%
• Huge scope for increase in consumer loans
• Pitch was about investing in non state-owned banks, like publicly traded ones such as HDFC Bank, Axis Bank, IndusInd Bank and Yes Bank; State owned banks can't make loans anymore due to loan issues
• The private banks are very well run; 3-6-3 banks
• Not easy for foreign investors - must have access to local market
• HDFC Bank (HDB) and ICICI Bank (IBN) are listed on the NYSE 
• 4-5% net interest margins
• Valuations are high but earnings growth has historically justified high valuation
• HDFC trading at 4.5x price to book
• 26.7% earnings growth over 20 years
• Thesis summary: well positioned for economic growth, low penetration of financial sector, well run financials are taking market share from well run banks

Peter Palmedo, Sun Valley Gold

• Idea: Gold: data and dogma
• Discovered Summers-Barsky Gold Thesis: price of gold is driven by the real return in capital markets
• From 2002 to 2015 gold real return was 7.9% versus a blended real return of 4.5%
• China gold demand in excess of domestic supply
• Most PMs hold unsubstantiated beliefs about gold but the algorithmic, data driven models will get it
• Own gold in the simplest form
• Cheap, safe and stable; think about gold in the context of portfolio insurance and risk diversification 
• Buy gold if you think we are in a low real return world

Be sure to also check out the presentations from the Next Wave Sohn San Francisco conference as well, which featured emerging fund managers.

Dan Loeb Buys Herbalife, Morgan Stanley & Tesoro: Third Point Q4 Letter

Let the battle begin.  Dan Loeb's hedge fund Third Point has started a long position in Herbalife (HLF), he revealed in his Q4 letter to investors.  He also filed a 13G with the SEC disclosing that Third Point owns 8.24% of the company as of January 3rd.

Loeb Long Herbalife

Readers will recall that we recently posted up Bill Ackman's short presentation on HLF where he called it a pyramid scheme.  Brian Sullivan tweeted that Andrew Ross Sorkin spoke with Third Point, who believe there's no evidence HLF is a pyramid scheme in their research.

Third Point believes in the compounder thesis that the stock was trading at an attractive discount (after Ackman's short presentation).  Third Point writes,

"Applying a modest 10-12x earnings multiple suggests Herbalife's shares are worth $55-68, offering 40-70% upside from here and making the company a compelling long investment ... Given that the company has historically traded more in the 12-14x range (and traded at 16-20x earnings through much of 2011 and early 2012), the opportunity for the company to tell its side of the story tomorrow at its Analyst Day in New York, and the significant short interest, we believe shares could even trade well about our current price target."

So, you now have two hedge fund heavyweights: 1 long, 1 short.  Who wins?  Only time will tell.  Now all we need is David Einhorn to toss his hat in the ring as well.  After all, in May of this year Einhorn popped up on a HLF earnings call and started asking questions.  However, he has not disclosed a position long or short.

 
Third Point Starts Morgan Stanley & Tesoro Positions

While the HLF position will get all the focus, we also wanted to highlight that Third Point disclosed a new position in Morgan Stanley in their Q4 letter as well. They feel the company is a turnaround story and point to the stock trading at a 20% discount to tangible book, down from the 35% discount when they acquired shares at an average price of $16.77 per share.

The hedge fund also bought shares of refiner Tesoro (TSO).  They write, "we see Tesoro generating about $9 per share in annual excess FCF on a normalized basis and our expectation is that shares can double from the current price of $40.  We believe the Q3 story was only the beginning, and are happy to own Tesoro for its next few chapters."

Embedded below is Dan Loeb & Third Point's Q4 2012 letter to investors:



 

For more on this hedge fund manager, we just yesterday posted up how Third Point ramped up net long equity exposure.

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.

Bruce Berkowitz & Bill Ackman: Summary of Their Harbor Investment Conference Talk

We're continuing our focus on the recent Harbor Investment Conference that took place late last week and wanted to point out a discussion between Fairholme Capital's Bruce Berkowitz and Pershing Square Capital Management's Bill Ackman. The two interviewed each other on their respective investments.

Below courtesy of our friends at Benzinga.com is a guest post summarizing the managers' talk at the Harbor Investment Conference:

"Berkowitz of Fairholme Capital, was interviewed by Bill Ackman, the conference's Co-Chair, and he discussed why he's been long Berkshire Hathaway (NYSE: BRK-A) and Leucadia National Corp. (NYSE: LUK) for a long time. He bought both of them around 1985, for similar reasons. He liked the company's management, and he specifically liked Berkshire because he said that Warren Buffett was a "smart guy" who ran other people's money. He paid about $2,700 per share for each A share he owns.

Ackman of Pershing Square Capital, asked what Berkowitz's biggest investment error was of his career. Berkowitz responded by saying that his biggest mistake was trusting management, and not verifying them. He said that in order to verify management, you have to try to prove them wrong, and kill their thesis.

He also discussed some of his better investments, like Imperial Metals, which Berkowitz said he has no idea why it's doing well, it just is. He discussed his position in Wells Fargo (NYSE: WFC) in the late 1980's and early 1990's, and said that he really likes the banks now. He believes we are rebuilding now, and a lot of banks are trading below book value, with low valuations, and said that the worse the bank was perceived, the better it will probably wind up being. He owns positions in Goldman Sachs (NYSE: GS), Regions Financial (NYSE: RF), AIG (NYSE: AIG), CIT Group (NYSE: CIT), Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS) in the financial sector. Berkowitz said there is a black box risk to owning banks, but after three years, you can get an idea of who's going to do well. Berkowitz said he would own more of Goldman Sachs if he could, but as a mutual fund, he's forbidden by law.

Regarding AIG, he said that AIG is more respected in Asia than it is here, and he sees tremendous value in the company's remaining assets, which it has so many of. Berkowitz said that former AIG CEO Hank Greenberg was a serial acquirer of assets, and there is tremendous value still there. He said that the current AIG is trading below book value, and it's trading at a single digit P/E. A major reason why he likes AIG is the company won't have to pay taxes for quite some time, as the company lost over $100 billion in market cap."

To read about the rest of Ackman and Berkowitz's talk, we highly recommend heading to the full summary at Benzinga here.

Bruce Berkowitz Buys Morgan Stanley (MS): Fairholme Portfolio Update

Bruce Berkowitz's Fairholme Capital has quite the appetite for financial companies and this partially (mainly?) stems from his confidence in a United States recovery. While he acknowledges that a double-dip recession is possible, his bets say otherwise. His Fairholme Fund (FAIRX) recently revealed its latest portfolio and here is the portfolio breakdown as of May 31st, 2010:

1. Sears Holdings (SHLD): 7.7% of the portfolio
2. AIG (AIG): 6.8%
3. Citigroup (C): 5.4%
4. Goldman Sachs (GS): 5.4%
5. Berkshire Hathaway (BRK.A): 4.7%
6. Bank of America (BAC): 4.4%
7. St. Joe (JOE): 4.3%
8. Humana (HUM): 4.0%
9. AmeriCredit (ACF): 3.6%
10. Regions Financial (RF): 3.5%
11. Spirit AeroSystems (SPR): 2.7%
12. Hertz Global (HTZ): 2.6%
13. MBIA (MBIA): 1.0%
14. Morgan Stanley (MS): < 1.0%

Keep in mind that the latest portfolio update above only reflects equity positions. As we've highlighted before, he has a large debt position in General Growth Properties as well as other corporate and convertible bond stakes. And of recent news regarding the positions above, he surely has to be happy that AmeriCredit is set to be purchased by General Motors.

We've previously detailed Berkowitz's new MBIA stake as well as the fact that he has been adding to his AIG position. What's interesting here is that Berkowitz is now one of the largest shareholders in MBIA and yet it is only a 1% position for his mutual fund. Specifically regarding his MBIA stake, Berkowitz believes that the firm will survive as it honors its guarantees and has a confident CEO in the form of Joseph Brown. Berkowitz also is fond of the move that separated the municipal bond insurance arm into a new unit. Circling back to his economic recovery theme, he thinks that policies MBIA writes now and in the near future will be lucrative.

Regarding his position in AIG, Berkowitz feels that at the end of 2011 the company will be free and clear of the government's stake and you can read his full AIG thesis here. Also, we pointed out his new position in Goldman Sachs back when he revealed it at the Value Investing Congress. Back then, it was unclear as to how large of a stake he had purchased but now we can see it's quite a sizable one at 5.4% of his fund's capital. Lastly, it's worth noting that the Fairholme Fund still has just under a 15% cash position. If opportunities arise, we'll assume that Berkowitz won't be shy. As you can see, it's quite clear: Fairholme fancies financials.

Roberto Mignone's Bridger Management Adds Financials, Exits 'Hedge Fund Favorite' Names: 13F Filing

(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 Roberto Mignone's hedge fund Bridger Management. Bridger focuses on long/short equity and event driven strategies (which you'll see evidence of in their portfolio below). Last we heard, Bridger has just under $3 billion in assets under management and is closed to new investors because Mignone likes to focus on investing rather than running a large organization. Not to mention, he argues that once you garner too large of an AUM pool, you can't have a short portfolio of complementary size. After all, Mignone is known for his sleuthing abilities on the short side. Previously, we had detailed some of his investment thoughts for 2010 from a hedge fund panel.

Before founding Bridger, Mignone co-founded Blue Ridge Capital with John Griffin in 1996, another hedge fund we track here on the site. And before that, both Mignone and Griffin worked at Julian Robertson's legendary Tiger Management. As such, they are both 'Tiger Cub' hedge funds. Mignone received his degree from Harvard and his MBA from Harvard Business School. In terms of recent portfolio activity disclosed after the date of the filing's we're covering, Bridger revealed two new positions.

The positions listed below were Bridger'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
Centene (CNC) ~ we detailed the specifics of this stake when they first disclosed it
Genpact (G)
Waters (WAT)
Iesi-Bfc (BIN)
JPMorgan Chase (JPM)
Goldman Sachs (GS)
Marriott (MAR)
Red Hat (RHT)
XTO Energy (XTO)
Comerica (CMA)
AMR (AMR)
Fuel Systems (FSYS)
Istar Financial (SFI)
Medifast (MED) ~ we detailed the specifics of this new position earlier
Marshall & Ilsley (MI)
Key Corp (KEY)
Suntrust Bank (STI)
Xenoport (XNPT)
Cathay Gen Bancorp (CATY)
Wonder Auto Tech (WATG)
Popular (BPOP)
Bristol Myers Squibb (BMY)
Carefusion (CFN)
Macquarie (MIC)
Iberiabank (IBKC)
Nektar Therapeut (NKTR)
Acorda (ACOR)
Immunogen (IMGN)
Glacier Bancorp (GBCI)
Amedisys (AMED) Puts


Increased Positions
Morgan Stanley (MS): Increased position size by 150%
Electronic Arts (ERTS): Increased by 73.8%
Regions Financial (RF): Increased position by 72.7%
Casella Waste Systems (CWST): Increased position by 48.6%
Davita (DVA): Increased position by 33%
State Street (STT): Increased position by 32.9%
Exxon Mobil (XOM): Increased position by 30.8%
Boston Scientific (BSX): Increased position by 26.6%
Synovus Financial (SNV): Increased position by 20.5%
Waste Connections (WCN): Increased position by 19.3%


Reduced Positions
Aetna (AET): Reduced by 70%
Life Tech (LIFE): Reduced by 67.8%
Millipore (MIL): Reduced by 42%
Eclipsys (ECLP): Reduced by 39.6%
OSI Pharmaceuticals (ONXX): Reduced by 33.6%
Jazz Pharmaceuticals (JAZZ): Reduced by 28.1%
Biogen Idec (BIIB): Reduced by 17.6%


Positions They Sold Out of Completely
Royal Carribean (RCL)
Apple (AAPL)
First American (FAF)
Microsoft (MSFT)
Green Mountain Coffee Roasters (GMCR)
Amerigroup (AGP)
Allergan (AGN)
Republic Service (RSG)
Warner Chilcott (WCRX)
Expedia (EXPE)
United Therapeutics (UTHR)
Talecris Biotherapeutics (TLCR)
Ritchie Bros (RBA)
Mannkind (MNKD)
Mako Surgical (MAKO)
Petmed (PETS)
Ehealth (EHTH)
Given Imaging (GIVN)
Sanderson Farms (SAFM)
CIT Group (CIT)
Amylin Pharmaceuticals (AMLN) Puts


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

1. Waste Connections (WCN): 3.4%
2. Pall (PLL): 3.3%
3. Covidien (COV): 3.1%
4. Cardinal Health (CAH): 3%
5. Medtronic (MDT): 3%
6. Dr Pepper Snapple (DPS): 3%
7. Centene (CNC): 2.9%
8. Morgan Stanley (MS): 2.9%
9. Amgen (AMGN): 2.8%
10. Unitedhealthcare (UNH): 2.4%
11. Millipore (MIL): 2.4%
12. Las Vegas Sands (LVS): 2.3%
13. Berkshire Hathaway (BRK.A): 2.3%
14. Hyatt Hotels (H): 2.3%
15. Genpact (G): 2.2%

In the first quarter, we saw Bridger completely sell out of a few names that are typically hedge fund favorites which was interesting. They exited Apple, Microsoft, CIT Group, and Green Mountain Coffee Roasters. Many of these names are on Goldman Sachs VIP list of the stocks most important to hedge funds. Other positions Bridger also sold sizable partial positions in include Aetna, Life Tech, and Eclipsys.

In terms of additions, we already knew about their new Centene position, but now you see how large it is in the context of their overall portfolio. Not to mention, their new ownership of Genpact (G) is notable too as it's their fifteenth largest US equity long. They also added to exiting position Waste Connections, which is now their largest holding. We also make note of their addition in shares of Electronic Arts. Just yesterday we examined Chase Coleman's hedge fund Tiger Global and saw they were clearly bullish on ERTS.

And while Bridger's large focus is on the health space, you obviously see many financial plays scattered in their portfolio. They were adding to regional banks like Regions and Synovus in the first quarter and added shares of big banking plays as well, like JPMorgan Chase and Morgan Stanley.

Assets reported on Bridger's 13F filing were $2.5 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, Dan Loeb's Third Point, John Paulson's hedge fund Paulson & Co, and Chase Coleman's Tiger Global. Be sure to check back daily for new hedge fund updates.