Carl Icahn Starts Xerox Position, Files 13D

Per a 13D filed with the SEC, activist investor Carl Icahn has disclosed a new stake in Xerox (XRX).  Per the filing, Icahn now owns 7.13% of the company with over 72.21 million shares.

The filing contains the standard activist boilerplate that he intends to have discussions with management.

Icahn purchased shares throughout October and November via a forward contract with expiry of July 20th, 2017 at prices between $9.63 and $10.66. 

Those prices contain a footnote that explains: "Represents a forward price of $8.00 per Share, plus the amount per Share the Reporting Person paid the counterparty to the forward contract or minus the amount per Share the Reporting Person received from the counterparty to the forward contract, as applicable, in each case upon entering into such forward contract.  The forward price is subject to adjustment to account for any dividends or other distributions declared by the Issuer. In addition, the Reporting Person will pay a financing charge to the counterparty to such forward contract."

For more on this investor, head to Carl Icahn's recent interview.

Per Google Finance, Xerox is "engaged in offering business process and document management solutions. The Company operates through the following segments: Services, Document Technology and Other. The Company's customers include small and midsize businesses (SMBs), graphic communications companies, Governmental entities, educational institutions and Fortune 1000 corporate accounts. The Company's Services segment provides two types of service offerings: Business Process Outsourcing (BPO) and Document Outsourcing (DO)."

Michael Price on JC Penney, Shantanu Agrawal on Xerox: Ira Sohn Presentations

We're posting up notes from the Ira Sohn Conference.  Michael Price spoke briefly on J.C. Penney (JCP) saying that he just bought shares on the dip today.  Look at the ownership, the board, the assets below it.  "Look at the top lines, the revenues" (that was the problem).  He also said it's too early to get into banks, and to wait it out.

Price then introduced the Ira Sohn Contest Winner: Shantanu Agrawal who pitched long Xerox (XRX).  The judges panel consisted of David Einhorn (who is long XRX), Bill Ackman, Joel Greenblatt, Seth Klarman, and Michael Price.


Long Xerox (XRX): Stock $7.40 now. Uses sum of the parts (SOTP). Core business generates FCF, not high growth, but EBITDA to FCF conversion. Create equity at 14% FCF yield, could re-leverage the business, 21% FCF to equity.

Catalyst is return of cash flow in dividends and buybacks. $9.50 base, upside $11-12. Downside to $6.50. See $10B debt, but $6B associated with equip financing business. So he says net debt, after cash, only $2.7B, or $0,9B. Document related revenues were actually up 1% in 2011, so idea is not collapsing as fast as people think.

Bull case is cheap, FCF high, debt not as high as it looks, core business in slow decline not collapse, and decent risk/reward with $6.50 down, $9.50 fair value, $12 upside.


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.

David Einhorn's Greenlight Capital Q4 2011 Letter: Covered First Solar, Bought Dell

After a brief hiatus, MarketFolly.com is back in action covering top hedge funds. Right to the action: if you missed it, we wanted to post up David Einhorn's Greenlight Capital Q4 2011 letter to investors.

Key Takeaways:

- Covered their short in First Solar (FSLR)
- Covered short in Diamond Foods (DMND)

- New position: bought Dell (DELL) @ average price of $15.53
- Re-established position: bought Xerox (XRX) @ average price of $7.61

- Sold Travelers (TRV): Greenlight cut their forward earnings forecast
- Sold Pfizer (PFE)
- Sold Becton Dickinson (BDX) due to disappointing guidance
- Sold CVS (CVS) to fund more compelling opportunities

Embedded below is David Einhorn's letter where you can read Greenlight's rationale for their new buys of Dell (DELL) and Xerox (XRX):




For more from this hedge fund, you can also check out Greenlight Capital's Q3 letter as well as David Einhorn's short case on Green Mountain Coffee Roasters (GMCR).

David Einhorn Buys Seagate Technology (STX), Sells Various Stocks

ZeroHedge posted up David Einhorn & Greenlight Capital's Q2 investor letter which reveals that the hedge fund was down 2.5% for the quarter and is now down 5% for the year.

Greenlight noted that the US economy has continued to soften as energy and food prices eroded consumer purchasing power. At the same time, Greenlight points to strong corporate earnings as a positive.

Bought Seagate Technology (STX)

During the quarter, Einhorn's hedge fund saw notable portfolio turnover. Greenlight built a "medium sized long position" in Seagate Technology (STX) with an average purchase price of $16.06 a share (STX currently trades around $16.90). The current issue of our Hedge Fund Wisdom newsletter features an analysis of STX for those interested.

Sold Positions

Greenlight also sold completely out of its position in Cardinal Health (CAH). At the same time, they continue to hold a large position in CAH's spin-off, CareFusion (CFN). You can also see the investment thesis on CFN in a free sample of our newsletter.

Einhorn's fund also sold out of CIT Group (CIT), Yahoo! (YHOO), Vicat SA (France: VCT), MI Developments (MIM), MDC Holdings (MDC), and Xerox (XRX). They also covered their short position in LED-maker Cree (CREE).

While Einhorn sold out of CIT Group, we noted last week that Dan Loeb's Third Point continues to hold CIT as one of their largest positions.

Given that Greenlight sold so many positions, it will be interested to see if they've put that capital to work elsewhere or have merely raised cash levels as a form of protection. We've highlighted one buy as Greenlight purchased Playtech (LON:PTEC) shares. Embedded below is Greenlight's Q2 letter:



If the embedded doc doesn't work, you can view/download it here.

For more from Einhorn, be sure to check out his presentation from the Ira Sohn Conference.

Whitney Tilson, Carlo Cannell, Alexander Roepers: Notes from Value Investing Congress

Continuing our coverage of day two of the Value Investing Congress, we have summaries of the presentations from Whitney Tilson & Glenn Tongue (T2 Partners), Carlo Cannell (Cannell Capital), as well as Alexander Roepers (Atlantic Investment Management).

If you missed it, we've posted a plethora of resources from the event, including:

- Presentations from John Burbank & Lee Ainslie
- Bill Ackman's Q&A session from the Congress
- Presentations from David Einhorn, Kyle Bass, & Mohnish Pabrai
- Summaries of speeches from fund managers Zeke Ashton, Guy Spier, & Michael Lowitt

Next, onto the last round of speakers at the Value Investing Congress:

Carlo Cannell ~ Cannell Capital

The fund manager's presentation was named after 'Megaloceros Giganteus,' or an Irish elk that became extinct. Cannell says that over a long enough timeline, all companies will die and his talk zeroed in on a company he believes to be on the verge of extinction. He is short Pitney Bowes (PBI), a company that he says has an obsolete business model. There has been a decline in mail demand and this is hurting the mail processing equipment company.

Cannell warns that it might not be an 'actionable' short at the moment. At the same time, he cautions that stubborn short sellers can be come extinct just as easily. Remember the old market adage? The market can stay irrational longer than you can stay solvent. This isn't the first fund manager we've seen with a negative stance on Pitney Bowes. In the past, we've seen that Matt Iorio's White Elm Capital has owned puts on PBI for numerous quarters.

Two companies that are on Cannell's watchlist as potential shorts are Buffalo Wild Wings (BWLD) and Texas Roadhouse (TXRH). You can view notes from a previous talk by Cannell here.


Whitney Tilson & Glenn Tongue ~ T2 Partners

Tilson and Tongue began their presentation focusing on the economy and their fund has been positioned conservatively given their tepid economic outlook. The T2 managers highlight that the market is likely to remain range-bound, trading sideways via oscillations in either direction that cancel each other out. Housing remains the biggest issue to the economy as prices still have further to fall and inventories need to be absorbed. As such, T2 Partners is short the homebuilders via the exchange traded fund XHB.

The hedge fund is still long BP (BP) as they purchased it back in the company's darkest hour as shares tanked due to the unfortunate oil spill. He jokingly said that he's thankful for Jim Cramer, who he has utilized as a contrarian indicator. Tilson thinks the stock is easily worth $50 (it currently trades around $41 per share, so 20% upside potential). Fears from the oil spill have been greatly overblown and T2 feels the company is still cheap and will reinstate the dividend at some point.

Regarding other portfolio positions, recall that Tilson has been short InterOil (IOC). We've also detailed T2 Partners' latest letter to investors for those interested.


Alexander Roepers ~ Atlantic Investment Management

Roepers typically runs a concentrated portfolio and focuses on mid-cap stocks. He likes predictably profitable companies with solid balance sheets and solid cashflows. Roepers will focus on companies with market caps of $1 billion to $20 billion with a holding period of typically 1-3 years.

He pitched Owens Illinois (OI), pointing to its very strong moat and increasing share in emerging markets and thinks it goes to $45 per share (currently trading around $27). Roepers labeled the company a growth business and points to their packaging business in particular. Hedge fund Viking Global had previously held a position in OI, but they sold completely out in the first quarter of this year.

He also mentioned positions in Xerox (XRX) which he views as an acquisition target and targets $18 per share as a fair valuation of the company. The manager also mentioned ITT (ITT). Lastly, Roepers also rattled off positions in Rheinmetall (RHMGY) in Germany, as well as Muraka and Creata Water.


That wraps up our series of notes from the event. You can scroll through our entire coverage of the Value Investing Congress by clicking here. Stay tuned because in the coming days we'll take in-depth looks at some of the investment ideas from select hedge fund managers. Don't miss out! Receive our free updates via email or free updates via RSS reader.