Senator Investment Group Increases Realogy Position

Alex Klabin and Doug Silverman's hedge fund Senator Investment Group has filed a 13G with the SEC regarding shares of Realogy (RLGY).  Senator now owns 5.12% of the company with 7.5 million shares.

This is a sizable increase from the 4 million shares they owned at the end of the second quarter.  The filing was made due to activity on August 27th.

As of the end of Q2, some of the largest holders of RLGY shares included other prominent hedge funds such as Lone Pine Capital, Paulson & Co, Glenview Capital, Pennant Capital, and Valinor Management, among others.

For more from this fund, be sure to check out Alex Klabin on the intangibles of building a great hedge fund.

Per Google Finance, Realogy is "a franchisor of residential real estate brokerages and a provider of outsourced employee relocation, and title and settlement services in the United States. The Company has four operating segments: Real Estate Franchise Services (RFG), Company Owned Real Estate Brokerage Services (NRT), Relocation Services (Cartus), and Title and Settlement Services (TRG). The RFG segment is a franchisor of residential real estate brokerage services. The NRT segment owns and operates a residential real estate brokerage business in the United States. The Cartus segment provides outsourced employee relocation services. The TRG segment provides full-service title and settlement services to its clients. The Company's portfolio of brokerage brands includes Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA, Sotheby's International Realty, Better Homes and Gardens Real Estate, The Corcoran Group, ZipRealty and Citi Habitats."

John Paulson on Gold, Housing/Real Estate & Risk Arbitrage: Delivering Alpha Conference

John Paulson, founder of hedge fund firm Paulson & Co, sat down with CNBC's Carl Quintanilla at the Delivering Alpha Conference today and touched on numerous topics, mainly focusing on gold and the housing recovery/real estate.  He noted that his returns this year at his main funds range from 5% and 32%.


Paulson on Gold

He's been getting a lot of negative publicity for his Gold Fund.  However, he points out that this fund is only around 2% of his assets under management.  He was looking for a currency alternative to the US dollar in the event we get inflation, and he notes that gold has been an excellent candidate for this in the past.

Paulson said, "Although the Fed has printed a lot of money to date, there is little inflation.  Some (investors) who bought gold have lost patience.  The rationale for owning gold has not gone away.  The consequences for printing money over time will be inflation... it's just difficult to predict when."

He thinks gold is in a 'pause period' right now and sees demand for gold increasing again and points out that it's always been volatile.  He thinks it's an important part of anyone's portfolio.


Paulson on Housing / Real Estate / Land

They took a long-term view on housing, as it's a cyclical area (7 years up, 7 years down).  They saw a peak around 2006 (and shorted subprime) and they think it's bottomed so they've gone long.  He sees it as the beginning of the recovery and said it could last another 4-7 years, inviting others to jump in, saying "it's not too late."

Paulson went on to say, "Buying a home is the best investment an individual can make.  Affordability is at an all time high.  You can lock in rates of a fixed rate mortgage and get the benefits."

He then continued, noting, "I'm not sure (home prices) will increase 10% every 5 years, but probably around 5-7%."

Paulson has exposure in real estate via land as he says land is actually affected the worst in real estate cycles.  He noticed this pattern in the crisis of 1990, so he set up special real estate funds to exclusively buy entitled lots across the country.

Prices fell almost 80% from their peak value in 2006.  They like to buy in distressed situations (from banks, builders, etc) in growth areas of the country.  They've focused on Arizona, California, Colorado, Nevada, and Florida.

They've also played securities:  Before/during the crisis, they shorted BBB tranches, then started buying AAA tranches that fell in price by 40%.

He also highlights his stake in Realogy (RLGY), the largest residential broker in the country (we flagged Paulson's stake in RLGY late last year and also pointed out how Lone Pine Capital bet on RLGY recently as well).

On his bet on the housing recovery, John Paulson said he's as sure of this bet as he was about his subprime short.


Paulson on His Legacy Risk Arbitrage Strategy

Paulson's legacy fund strategy is merger arbitrage.  He talked about how companies he likes to buy are often ones from the announced deals that could get a competitive bid.  He's also looking to see which industries will see consolidation and take a stake in companies that could be takeover targets.

He also talked about his stakes in Sprint and Leap Wireless that have panned out well.

Paulson also noted how there's a lot of talk/chatter in the cable business.  He pointed to John Malone's stake in Charter Communications (CHTR), which he thinks will acquire more cable assets.  While there's been talk of Time Warner Cable (TWC), he says that's a large entity.  He also named Cablevision (CVC) as a potential target, but notes that's up to the Dolan family.

In risk arbitrage, he says "There's always a regulatory risk, and that's an important part of the analysis."

Paulson said he never considered retiring after his successful big subprime bet: "The goal in money management is not to do one great year, it's to compound returns over many years."  He says he'd like to manage money another 20 years, as he admires Warren Buffett and George Soros.

Video from Paulson's interview is embedded below:




For more from the Delivering Alpha Conference, head to:

- Nelson Peltz on PepsiCo & Mondelez

- Best ideas panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Larry Robbins & Jacob Gottlieb on healthcare plays

- Carl Icahn on activism 

Lone Pine Capital Raises Realogy Holdings (RLGY) Position

Steve Mandel's hedge fund firm Lone Pine Capital filed a 13G with the SEC regarding shares of Realogy Holdings (RLGY).  Per the filing, Lone Pine has revealed a 5.1% ownership stake in Realogy with 7,457,505 shares.

This marks a 207% increase in Lone Pine's position size since the end of the first quarter.  The 13G filing was required due to portfolio activity on May 14th. 


Other Hedge Funds Involved in Realogy

Our premium newsletter last week highlighted how Blue Ridge Capital and Paulson & Co are also involved in this stock.

Hedgies seem to like Realogy as a play on the recovering US housing market and find the company's high margin (and low capital intensity) business model attractive as RLGY benefits from increased sale volumes and rising prices.

Per Google Finance, Realogy Holdings "through its subsidiaries, provides real estate and relocation services. The Company operates in four segments: Real Estate Franchise Services, Company Owned Real Estate Brokerage Services, Relocation Services and Title and Settlement Services. Through its Real Estate Franchise Services segment (RFG), is a franchisor of some of the most recognized brands in the real estate industry. Through its subsidiary, NRT LLC (NRT), it owns and operates a full-service real estate brokerage business in more than 35 of the metropolitan areas of the United States. Through its subsidiary, Cartus Corporation (Cartus), it is a provider of outsourced employee relocation services and the provider in the United States."

This hedge fund has been active lately as we detailed some of Lone Pine's other portfolio activity.

Paulson & Co Reveals Stake in Realogy (RLGY)

John Paulson's hedge fund firm Paulson & Co has filed a Form 3 with the SEC revealing a stake in Realogy Holdings Corp (RLGY).

Per the filing, Paulson has revealed its ownership in 11% Series A, B, and C Convertible Senior Subordinated Notes due 2018.  However, in the footnotes, Paulson has agreed to convert all of its notes into shares of common stock on the date of closing of the Realogy's initial public offering, where it has priced at the top of its range.

In total after conversion/exercise, it appears as though Paulson will own over 11.8 million shares.

Realogy is the owner of the Coldwell Banker and Century 21 real-estate brokerage brands. Apollo Global Management originally took the company private in 2007 and will now be public again.