Pershing Square Starts Hilton Stake Again

Bill Ackman's investment firm Pershing Square Capital Management today revealed that they've started a new position in Hilton (HLT).  Pershing now owns a 3.7% stake, or around 10.9 million HLT shares.

This isn't the first time Pershing has owned HLT shares in recent memory.  They sold their previous stake in Q2 of 2017 after the company split itself up into a real estate company, an asset light management company, and a timeshare business.

This time around, they've bought HLT, which is just the asset light hotel management business.  This year, HLT shares have dropped from a high of $87.62 to a low of $63.76 before slightly rebounding to current levels of around $67.

For more on this fund, we've also highlighted their Pershing Square's new position in Starbucks (SBUX) and thesis presentation.

Bill Ackman Long Starbucks: Pershing Square Presentation

At the Grant's Interest Rate Observer Conference, Bill Ackman of Pershing Square unveiled a new long position: Starbucks (SBUX).  The presentation is entitled 'Doppio' and Pershing now owns over 15 million shares with a cost basis of $51 and they've used forward contracts.  It's around a $900 million stake.

Pershing notes SBUX is trading at 22x, a discount to the average of 26x and they feel premium coffee is a secularly growth category.  If same store sales and valuation can return to average levels, SBUX shares can double in three years.

Pershing's thesis is that this is a rare opportunity to own one of the world's best franchises at a discount.  They're encouraged by actions of the new leadership team, as they've streamlined the portfolio (sold Tazo, closed Teavana stores, sold the consumer packaged goods business to Nestle).  They're also initiating cost savings and a significant share buyback plan (~$19bn three year target).

Pershing Square: Long Starbucks Presentation

Embedded below is the .pdf of the presentation:



You can download a copy here.

For other recent hedge fund commentary, we also posted up David Einhorn & Greenlight Capital's Q3 letter.

Pershing Square Annual Report 2017: Sold Nike, Covered Herbalife Short

Bill Ackman's Pershing Square is out with its annual report for 2017.  For the year, they lost 4% net.

The report gives updates on their positions in Automatic Data Processing (ADP), Restaurant Brands (QSR), Mondelez (MDLZ), Howard Hughes (HHC), Chipotle (CMG), Fannie Mae & Freddie Mac, and Platform Specialty Products (PAH).

Pershing Square Sold Nike (NKE) Position Already

Pershing Square reveals they already sold their new Nike (NKE) position and explain the rationale below:

"During the course of our four-month ownership of Nike (we sold the position recently), the stock price appreciated by34%, reducing the returns to be earned from our investment to a level at which we believed our capital could be allocated to more attractive opportunities.  It is rare that we are a short-term investor.That said,we are always willing to redeploy capital if an investment appreciates to a level that no longer offers sufficient returns relative to other potential opportunities."


Rationale For Covering Herbalife (HLF) Short

They also outline why they covered their Herbalife (HLF) short position:

"While we have been correct in our belief that Herbalife’s business fundamentals would deteriorate as earnings per share, revenue growth, and other measures of business performance weakened substantially since we initiated the investment, we underestimated Herbalife’s ability to access debt capital and use financial engineering which–coupled with Mr.Icahn’s share purchases to materially reduce the company’s free float–has driven share price appreciation."


Embedded below is Pershing Square's 2017 annual report:



You can download a .pdf copy here.

Pershing Square Trims Automatic Data Processing (ADP) Position

Bill Ackman's activist investment firm Pershing Square Capital has filed an amended 13D with the SEC regarding its position in Automatic Data Processing (ADP).  Per the filing, Pershing now owns 7.2% of the company with 31.79 million shares.

It notes that, Pershing "sold a net amount of 5,004,633 shares of Common Stock and American-style call options for portfolio management purposes.”  You can view the full list of transactions here.

For more on this fund, we highlighted some other recent portfolio activity from Pershing Square here.

Per Google Finance, ADP is "a provider of human capital management (HCM) solutions to employers, offering solutions to businesses of various sizes. The Company also provides business process outsourcing solutions. Its segments include Employer Services and Professional Employer Organization (PEO) Services. The Employer Services segment offers a range of human resources (HR) business process outsourcing and technology-enabled HCM solutions. These offerings include payroll services, benefits administration, talent management, HR management, time and attendance management, insurance services, retirement services, and tax and compliance services. ADP TotalSource, ADP's PEO business, offers small and mid-sized businesses a HR outsourcing solution through a co-employment model. As a PEO, ADP TotalSource provides HR management services while the client continues to direct the day-to-day job-related duties of the employees."

Pershing Square Building United Technologies Stake; Covers Herbalife Short

Per CNBC, Bill Ackman's Pershing Square has reportedly been building a stake in United Technologies (UTX).  Ackman told Scott Wapner that he thought the company was "great."  The company has been awaiting the closure of its acquisition of Rockwell Collins (COL).  Additionally, UTX management has said they've been evaluating splitting up into a few different entities.

Secondly, Ackman has exited his bet against Herbalife (HLF).  He had previously been outright short shares, but then this past November restructured the short via put options.  Now, he's out of his short bet entirely.  

This comes after he said back in 2013 that he'd go to the "ends of the earth" to shut the company down, dubbing it a pyramid scheme.  Shares of HLF are already up 36% year-to-date after being up a similar amount already last year.

Pershing Square has been active lately, as it also recently revealed a new Nike (NKE) position.

For more from this investor, you can view a recent Pershing Square presentation here.

Pershing Square Portfolio Update Presentation: Nike, S&P Global & More

Bill Ackman's activist firm Pershing Square recently made a presentation to investors about the current state of their portfolio and how they're re-tooling the organization after a few years of poor performance.  In 2017, Pershing was down 4%.

The presentation provides brief updates on all their holdings, including their new Nike (NKE) stake.


Pershing Square on New Nike Stake (NKE)

They bought Nike because it's "a high quality business that should compound long-term earnings at a high rate due to strong revenue growth and margin expansion."

They see it as an iconic brand with a dominant market position.  The company has assets via patents, a huge marketing budget, brand loyalty, manufacturing skill, and leverage with suppliers and customers.

Pershing thinks the company can continue to grow revenue in the high single digits.  They note positive secular trends of health/wellness and emerging market growth as key contributors, as well as pricing power.

The firm sees Nike expanding margins via new manufacturing processes and growth in distribution channels with "more favorable economics."


Ackman Bought & Sold S&P Global (SPGI)

The presentation also reveals that Pershing Square was buying shares of S&P Global (SPGI) during 2017 but sold the stake because they couldn't build a full position size as markets rose.

Their thesis was that "S&P is an annuity-like business with pricing power, strong secular growth and a margin opportunity."  It's a credit ratings and financial data services firm with the former comprising 55% of EBIT and the latter 45%.


Lastly, Pershing Square also bought an undisclosed position but sold that as well.  It's interesting that they aren't revealing the name.  Does this mean perhaps they might want to revisit it if the share price hits a level they're comfortable with? Who knows.

The presentation also includes updates on their stakes in: ADP, Chipotle, Howard Hughes, Mondelez,  Restaurant Brands, Fannie Mae/Freddie Mac, Platform Specialty Products, and their short of Herbalife (HLF).

Embedded below is Pershing Square's portfolio update presentation:



For more from this fund you can also read Pershing Square's Q3 letter.

Pershing Square Takes Nike Stake

Bill Ackman's activist firm Pershing Square has taken a passive stake in Nike (NKE), according to a Reuters report.  Ackman apparently announced the position at an investor event but doesn't plan to go activist as the company is already heading down the right path.  The fund manager reportedly accumulated the stake since October.

We joked on Twitter that perhaps he read Shoe Dog recently?  Shoe Dog, of course, is the book about Nike's founder Phil Knight and has been recommended by the likes of Warren Buffett and numerous other investors.

For more on this fund we've also previously posted Pershing Square's Q3 letter.

Per Yahoo Finance, Nike is "designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. It offers NIKE brand products in nine categories: running, NIKE basketball, the Jordan brand, football, men's training, women's training, action sports, sportswear, and golf. The company also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking, and outdoor activities. In addition, it sells sports apparel; and markets apparel with licensed college and professional team and league logos. Further, the company sells a line of performance equipment, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, and other equipment under the NIKE brand for sports activities; various plastic products to other manufacturers; athletic and casual footwear, apparel, and accessories under the Jumpman trademark; action sports and youth lifestyle apparel and accessories under the Hurley trademark; and casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks. Additionally, it licenses agreements that permit unaffiliated parties to manufacture and sell apparel, digital devices, and applications and other equipment for sports activities under NIKE-owned trademarks. The company sells its products to footwear stores, sporting goods stores, athletic specialty stores, department stores, skate, tennis and golf shops, and other retail accounts through NIKE-owned retail stores and Internet Websites, mobile applications, independent distributors, and licensees. The company was formerly known as Blue Ribbon Sports, Inc. and changed its name to NIKE, Inc. in 1971. NIKE, Inc. was founded in 1964 and is headquartered in Beaverton, Oregon."

Pershing Square Q3 Letter: Restructures Herbalife Short

Bill Ackman is out with Pershing Square's third quarter letter to investors.  Pershing Square returned -3.7% net in the third quarter and was down 4.2% for the year at that time.

Pershing has restructured its short position in Herbalife (HLF).  Rather than shorting common stock, they've covered that and are now short via put options.

Ackman is also quite bullish on Mondelez (MDLZ): "We believe MDLZ is currently substantially undervalued given its high business quality, long-term secular growth potential - especially in emerging markets - and substantial opportunity to improve profit margins.  Today, Mondelez trades at 17 times our estimate for 2018 earnings per share, a discount to the S&P 500 market multiple, for a business whose attributes are substantially better than the average company in the S&P 500."

The letter also provides updates on their holdings: Restaurant Brands (QSR), ADP (ADP), Howard Hughes (HHC), Chipotle (CMG), Fannie Mae / Freddie Mac, Platform Specialty Products (PAH).

Embedded below is Pershing Square's Q3 letter:



For more recent hedge fund commentary, we've also posted up Third Point's Q3 letter as well as Greenlight Capital's Q3 letter.

Notes From Great Investors Best Ideas Conference (GIBI) Dallas 2017: Ackman, Einhorn & More

The 11th annual Great Investors Best Ideas (GIBI) Dallas Investment Symposium just took place where managers shared investment ideas to benefit The Michael J. Fox Foundation for Parkinson's Research and Vickery Meadow Youth Development Foundation.  Below are some brief notes on the event:


Notes From GIBI Dallas Conference 2017

David Einhorn, Greenlight Capital

Still owns a huge position in General Motors (GM) but has been trimming it since it's grown too large (risk management, position sizing, etc).  Still his largest position by a longshot though.  Still thinks it's very cheap and points to an opportunity for a new shareholder base to get into shares.  Likes they've gotten rid of its riskiest international business and is investing in autonomous cars and electric vehicles: the future.

He also likes Tempur Sealy (TPX).  Thinks estimates are way too low (notes that management's incentives are way higher).  The company had a dispute with Mattress Firm and stopped selling its mattresses there.  Despite that, customers still actively sought out the TempurPedic brand, so the co is replacing its lost Mattress Firm sales elsewhere at higher margins.  Thinks there's also a reasonable chance MF comes back to them since MF has lost sales.

Einhorn said that his 'bubble basket' of shorts in highflying tech stocks like Amazon and Tesla are valued like profits don't matter ... ever.  He says eventually people will wake up and profits will matter and their stocks will crater.  He also pointed to somewhat of a cult following status that is attached to Tesla's stock with all the hype that Elon Musk continuously builds with various projects.  There's around 30 stocks in Einhorn's bubble basket.   He noted he owns a Tesla, but also points out that the company probably lost $20-30k selling it.  Says company hasn't figured out how to make cars profitable on a unit basis.  You can also read Greenlight Capital's Q2 letter here.


Bill Ackman, Pershing Square Capital

Pitched his newest long: Automatic Data Processing (ADP).  Has an activist position.  Thinks it's a quality business: simple, not capital intensive, secular tailwinds (sees lots of growth ahead).  Automating employees.  Ackman thinks the stock's a double.  We've posted Ackman's presentation on ADP previously.

Also mentioned the GSEs he's involved with: Fannie Mae & Freddie Mac.  Still owns and thinks there's huge upside there.  He originally pitched these plays three years ago at the same conference.  Thinks they will eventually trade multiples higher of where they are now.

He's still short Herbalife (HLF) and has lost millions on the bet as the stocks' up around 40% from his average short price.  Said that of the risk factors considered for the position, Carl Icahn coming in and buying 20+% of the company wasn't one he considered.

Noted he still owns Howard Hughes (HHC) and while he doesn't see any immediate catalysts, thinks it's a long-term play as a high quality business.

Says average investor can be plenty concentrated with 10-15 holdings.  Biggest mistake of his career?  Not selling when new information emerged that didn't jive with his investment thesis.  You can read Pershing Square's Q2 letter here.



Tom Russo. Gardner Russo Gardner

Spoke about global brands and various companies still controlled by the founding families.  His best idea was the company hit with a scandal and PR crisis: Wells Fargo (WFC).  Previously he had noted how his WFC stake has remain unchanged (around 6% of his assets) and that he thought the company simply became too fixated singly on one variable (cross-selling) which lead to a bunch of accounts being opened in customers names.  The company now suffers from poor optics but on a risk level, direct financial harm has been modest and he has faith in the legal process.



Andrew Wellington, Lyrical Asset Management

A couple of picks:  Flex Ltd (FLEX), co is seeing double digit growth in its bottom line and 50% of FCF going to shareholders.  Trading around 12x earnings.

Affiliated Managers Group (AMG): asset management play, owns equity stakes in boutique management firms.  Says they own really good managers.  Trading around 12x NTM earnings.



Van Hoisington, Wasatch-Hoisington US Treasury Fund

He concluded that we're heading to a recession as the Fed has restrictive policies already in effect and money and credit are slowing noticeably.  Structural impediments to growth are over-indebtedness globally as well as adverse demographics.  Thinks rates will stay lower. 



Jeanie Wyatt, South Texas Money Management

A few ideas: Citigroup (C) as a value play.  Thinks it could re-rate from almost 1x book value to closer to 1.4x.  Since the crisis the company has a better situation and less subprime.

KAR Auction Services (KAR):  notes 20% EPS growth, end markets that are accelerating as well.  Trading just over 22x next year's earnings but with a big opportunity ahead as various leases will be coming to term.

Electronic Arts (EA): video game stock that's benefited from going over the top (OTT) as it leads to higher margins than the typical video game distribution model of physical games, etc.  Accelerating sales growth.  Also sees new potential upside in e-sports. 

Vodafone (VOD): Stock has traded sideways but the company has improved in end markets.  Thinks it offers good downside protection as sales growth has accelerated.


For more stock picks from recent investment conferences, we posted up notes from the Sohn San Francisco Conference yesterday.

Pershing Square To Sell Entire Nomad Foods Stake

Nomad Foods (NOMD) today issued a press release stating that they were commencing an offering of 33.33 million shares from Bill Ackman's Pershing Square.

This means that Pershing is selling its entire stake in the company and will no longer be a shareholder.

For more from this hedge fund, we've also posted up Pershing Square's Q2 letter.

Per the press release, Nomad Foods is "a leading frozen foods company building a global portfolio of best-in-class food companies and brands within the frozen category and across the broader food sector. Nomad Foods produces, markets and distributes brands in 17 countries and has the leading market share in Western Europe. The Company’s portfolio of leading frozen food brands includes Birds Eye, Iglo, and Findus."

Pershing Square Q2 Letter: Sold Undisclosed Hilton Stake

Bill Ackman's Pershing Square has put out its mid-year report which includes commentary on their investments.  They also disclose that they previously owned a stake in Hilton (HLT) but recently sold it after the spin-offs took place.

In the letter, they also write about their latest investment, Automatic Data Processing (ADP):

"ADP is a classic Pershing Square investment. It is a simple, predictable, free-cash-flow generative business that has under performed its potential. As a conservatively financed, capital-light business with long-term customer relationships in a sector with substantial positive growth, we believe it has modest downside. If it is able to achieve its potential, we believe it offers substantial upside. We acquired ADP for the funds along with a co-investment vehicle (PSVI) which we recently raised to increase our ownership of the company.  We believe that ADP is one of the highest quality businesses we have owned, and one which offers an enormous opportunity for operational improvement.

They also provide an update on their stake in Chipotle (CMG), noting that the company has battled another setback with a norovirus incident in Virginia.  That said, Pershing feels that the company is still on the right track.  They write,

"We made our investment in Chipotle anticipating that the sales recovery would be neither smooth nor predictable,but with a belief that the key drivers of Chipotle’s powerful economic moat and long-term success would remain intact. With the steps that the company has taken to improve its business, we continue to believe there is an enormous long-term growth opportunity for Chipotle given: (1) the significant potential to drive sales per restaurant higher through mobile and digital ordering, menu innovation, catering, and improved operations, (2) the opportunity to expand its vastly under penetrated restaurant base in the U.S., and (3) the considerable potential to build the brand internationally."

Their letter also touches on Mondelez (MDLZ), Howard Hughes (HHC), Air Products (APD), Restaurant Brands (QSR), Platform Specialty Products (PAH), Nomad Foods (NOMD), and Fannie Mae/Freddie Mac, as well its short position: Herbalife (HLF).


Embedded below is Pershing Square's Q2 letter:



You can download a .pdf copy here.

Pershing Square's ADP Presentation

Bill Ackman's activist investment firm Pershing Square has a new position: Automatic Data Processing (ADP).  The firm recently released a slideshow presentation on their investment.

Their transformation plan for ADP includes the following:

- Fix corporate structure, corporate bloat and inefficiency
- Accelerate investments in product and back-end improvements
- Accelerate product migrations
- Reduce excess support personnel, focus on value-add services
- Increase sales force productivity

As a result, they see the company increasing growth and margins.  Pershing has also been trying to gain board representation but so far has been unsuccessful.  

Embedded below is Pershing Square's ADP Presentation: "The Time Is Now"



You can download a .pdf copy here.

For more information, they've also started a website on their stake: www.adpascending.com

Pershing Square Builds Automatic Data Processing Stake

Recently, Bloomberg reported that Bill Ackman's activist firm Pershing Square Capital Management had built a stake in Automatic Data Processing (ADP).  Then today, Ackman told CNBC that he's "still buying the stock as of this morning" and that he is "not seeking control of the company."

Per Ackman's recent interview, he feels the company can expand profit margins by more than 50%.  Pershing now reportedly owns 8% of the company mainly via derivatives.

Apparently, Ackman was seeking to push back the board nomination window.  ADP responded: "The Board has unanimously determined that it is not in the best interests of ADP or its other shareholders to accede to Pershing Square's last-minute request for an extension."

ADP also appeared to take a dig at Pershing in its statement as well: "Since Carlos Rodriguez became CEO nearly six years ago, ADP's total shareholder return of 202% is well in excess of the S&P 500 TSR of 128% - and is many multiples of Pershing's TSR of 29%."

For more on this fund, we've also highlighted other recent portfolio activity from Pershing Square here.

Per Google Finance, Automatic Data Processing is "a provider of human capital management (HCM) solutions to employers, offering solutions to businesses of various sizes. The Company also provides business process outsourcing solutions. Its segments include Employer Services and Professional Employer Organization (PEO) Services. The Employer Services segment offers a range of human resources (HR) business process outsourcing and technology-enabled HCM solutions. These offerings include payroll services, benefits administration, talent management, HR management, time and attendance management, insurance services, retirement services, and tax and compliance services. ADP TotalSource, ADP's PEO business, offers small and mid-sized businesses a HR outsourcing solution through a co-employment model. As a PEO, ADP TotalSource provides HR management services while the client continues to direct the day-to-day job-related duties of the employees."

Pershing Square Trims Restaurant Brands Stake: Report

CNBC is reporting that Bill Ackman's activist firm Pershing Square Capital Management has sold $610 million worth of Restaurant Brands (QSR) in a block trade, selling 10 million shares at $61 per share.

After this trade, Pershing would still own 29 million shares of QSR using the latest figures from their first quarter 13F filing.  While QSR was previously Ackman's top holding, this sale means there's potential for it to slip down a spot to his second largest holding, behind Air Products (APD).

For more on this hedge fund, check out Pershing Square's Q1 letter here.

Per Google Finance, Restaurant Brands is "a quick service restaurant (QSR) company. The Company had over 20,000 restaurants in more than 100 countries and the United States territories, as of December 31, 2016. It operates through two segments: Tim Hortons (TH) and Burger King (BK). Tim Hortons restaurants are quick service restaurants with a menu that includes blend coffee, tea, espresso-based hot and cold specialty drinks, baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps and soups, among others. Burger King restaurants are quick service restaurants that feature flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks and other food items. The Company operates coffee roasting facilities in Hamilton, Ontario and Rochester, New York. The Company sells its raw materials and supplies, including coffee, sugar, paper goods and other restaurant supplies to Tim Hortons restaurants."

Pershing Square's Q1 Letter

Bill Ackman is out with Pershing Square's first quarter 2017 letter.  Pershing returned -2.6% net in the first quarter of the year.

We've already highlighted how Ackman pitched Howard Hughes at the recent Sohn conference. 

His Q1 letter provides updates on other stocks such as Mondelez (MDLZ), Air Products (APD), Restaurant Brands (QSR), Chipotle (CMG), Fannie Mae/Freddie Mac, as well as Platform Specialty Products (PAH), Nomad Foods (NOMD), and their short of Herbalife (HLF).



Embedded below is Pershing Square's Q1 letter:



You can download a .pdf copy here.

Sohn Conference New York Notes 2017: Ackman, Einhorn, Meister & More

Below we're posting up notes from the Sohn Conference New York 2017.  It featured top hedge fund managers sharing their latest investment ideas all to benefit pediatric cancer research.  We've also posted up the emerging manager presentations from Next Wave Sohn.


Notes From Sohn Conference New York 2017

Bill Ackman (Pershing Square): Long Howard Hughes (HHC)

He argued strong management and solid real estate locations as the main reasons to own the company.  Note that Ackman is the Chairman of the co.  We've posted up Ackman's slideshow presentation from Sohn here.



David Einhorn (Greenlight Capital): Short Core Labs (CLB)

Cyclical stock, expects earnings to disappoint.  Oil prices won't have a 'v' shaped recovery.  Company's annual report shows 65% decrease in oil prices over two years and then a 100% increase in price, a literal 'v' chart.  Says stock is pricey and that they're exposed to the least desirable parts of the market.  Exposure to international oilfield capex budgets which won't recover.  Fair value could be around $62, or over 40% lower.  Recall that Einhorn has also been short Pioneer Natural Resources (PDX) in pitch at previous conferences.



Larry Robbins (Glenview Capital): Long DXC Technology (DXC), FMC (FMC), Quintiles IMS (Q)

DXC has already doubled over the past two years but he thinks it can double again given the huge increase in earnings power.  FMC purchased businesses that Dow and DuPont dumped as part of their merger.  Thinks FMC benefits as the others had to divest this in order to get their big deal done.



Keith Meister (Corvex Management): Long CenturyLink (CTL)

Thinks the company's merger with Level 3 is a game changer.  Filing a 13D with the SEC today disclosing a 5.5% stake.  Says consolidation in telecom will continue due to more data.  If economy is doing well = more data growth which is good for CTL.  If economy doing bad = a 9% dividend yield versus a 10-year Treasury potentially falling back to 2%.  Would never have invested if it weren't for the merger.  Stock priced as if things are in decline permanently.  Sees 40% upside with dividends in base case, but potential return as high as 50-70% if there's corporate tax reform.



Clifton Robbins (Blue Harbour Group): Long Investors Bancorp (ISBC)

Has seen deposit and asset growth continue, should benefit from less regulations and tax reform as well.  They own around 9.9% of the company and one of their partners just joined the board.  Stock could be worth between $17 and $19.  Fortress balance sheet.  Have grown loans 22% CAGR.  Co has $1 billion in excess cash to allocate.  Could potentially be an acquisition target since it's a strong regional bank.  Has previously pitched this name at another conference a few years ago.  Also noted his firm is focusing more now on the importance of environmental, social and governance (ESG) in investing.



Chamath Palihapitiya (Social Capital): Long Tesla 2022 Convertible Bonds

He called Elon Musk this generation's "Thomas Edison."  Thinks playing the bonds means no money lost as long as the company is worth at least $15 billion.  Argues company will have 5% of car market in the next decade.  They don't spend on advertising or a dealer network, don't have unions, etc.  Very capital intensive.  Called TSLA "unmodelable."



Josh Resnick (Jericho Capital):  Short Frontier Communications (FTR)

Massive debtload and deteriorating EBITDA which is a bad combination.  Has been short for five years, from $4 down to $1.50, longest short of his career.  Thinks company goes bankrupt.  32% of revenue comes from voice (phones) and thinks it declines sharply.  Losing market share to cable as well.



Jeff Gundlach (DoubleLine Capital): Emerging market outperformance (EEM) vs S&P 500

Not very bearish on the US dollar, but also not a bull.  American stock market seems to be overvalued. Questioned the herd mentality around index funds.  Go long EEM short SPY and leverage it up 1x.  Also said he's now on Twitter: @TruthGundlach to fight back fallacious media reports.



Debra Fine (Fine Capital): Long DHX Media (DHX/B on TSE)

Creator, buyer and distributor of children's TV content in Canada.  Thinks fair value is C$20-C$30.  The change in how video is consumed has increased need for children's content.  Says new content buyers like Netflix, Amazon and YouTube are driving up prices.  Notes that children's content drives merchandise and licensing dollars.  Children's content ages well and is usually cheaper to produce.



Davide Serra (Algebris Investments): Short U.K. gilts (bonds), Long UniCredit (UCG:BIT)

Brexit doesn't really help the UK economy, thinks it costs U.K. around 7% of GDP (~$200 billion).  Thinks European stocks are at an inflection point.  Big gap versus S&P 500 over past eight years and that's about to change.  Also talked long UniCredit, thinks Europe is overdue for consolidation efforts.  Italian banks been penalized for high share of nonperforming loans which creates opportunity as the company is fixing this and then added tailwinds of interest rates normalizing.  We previously highlighted Dan Loeb & Third Point's thesis on UniCredit.



Brad Gerstner (Altimeter Capital): Long United Airlines (UAL)

Thinks skepticism of the airline industry that's been pervasive for years is too negative.  Led to lower multiples despite margins that were uptrending.  Sentiment shouldn't be that low.  Millennials are traveling more than their parents did so airlines can be a secular grower.  Altimeter settled proxy contest with UAL last year.  Sees 18% increase in EPS to around $16.75.  More conservative base case is $13 a share by 2020.  Consolidation of the industry cannot be overstated and has basically resulted in an oligopoly.  Planes are full and price wars are long gone so there's pricing power now.  We've also highlighted how Warren Buffett likes airlines now too. Shares could double.



Kevin Warsh (Former Fed Governor):

Thinks a lot about tail risks and tail outcomes.  Feels most assets aren't ready for downside surprise.  Says to watch capex going forward.  If companies are spending, the economy still has further legs.  If there's a cut, not so sure the economy can keep it in high gear to go forward.  Biggest question for him is if lower inflation continues with slow growth.  Thinks institutional credibility rather than the printing press will be biggest asset going forward.



Tal Ben-Shahar (Potentialife): General advice: Do less

If you want to be happier, do less as quantity affects quality.  Reduce multi-tasking and find time for play, for friends, for family.



Sohn Contest Winner Dylan Adelman: Long eBay


Be sure to also check out notes from Next Wave Sohn which featured emerging managers pitching their investment ideas.

Bill Ackman's Sohn Presentation on Howard Hughes: SimCities

We've posted up notes from the Sohn New York Investment Conference and at the event Pershing Square's Bill Ackman pitched a long of Howard Hughes (HHC).

He's actually the Chairman of the company and has been a longtime shareholder.  His pitch is included here in its entirety.

Embedded below is Bill Ackman's Sohn Conference presentation on Howard Hughes entitled 'SimCities':



You can download a .pdf copy here.

Be sure to also check out notes from the Sohn Conference New York as well as Next Wave Sohn.

Betting on Zero Trailer: Documentary on Bill Ackman's Fight Against Herbalife

Bill Ackman and Pershing Square's short bet against Herbalife (HLF) has been dragging on for quite some time now.  Simply put, he argues the company is a pyramid scheme.

Now, a documentary has been released called Betting on Zero.  It details Bill Ackman's 'holy war' against the company and also touches on Carl Icahn's long position. 

The documentary is available on iTunes now, but here's a teaser of what you can expect.

Embedded below is the video trailer for Betting on Zero:



For more on this fund, we've detailed Pershing Square's 2016 annual report.

Pershing Square's 2016 Annual Report: VRX, APD, FNMA, HLF, HHC, MDLZ, NOMD, PAH, QSR

Bill Ackman's hedge fund firm Pershing Square Capital Management is out with its 2016 annual report.

Pershing Square lost 13.5% net in 2016.  The bulk of this loss was attributed to its previous position in Valeant Pharmaceuticals (VRX).

Ackman writes about why they ended up selling VRX:

"If the stock price had increased even very substantially from here, the impact on our overall performance would have been modest, and would not compensate  us for the human resources and substantial mindshare that this investment had and would have continued to consume  if we had remained a shareholder.  Furthermore, while Valeant has made significant progress and we expect  management to continue to do so, there is still a lot of work to be done.  

Clearly, our investment in Valeant was a huge mistake.  Th e highly acquisitive nature of Valeant’s business required  flawless capital allocation and operational execution, and th erefore, a larger than no rmal degree of reliance on  management.  In retrospect, we misjudged the prior management team and this contributed to our loss.  We deeply  regret this mistake, which has cost  all of us a tremendous amount, and whic h has damaged the record of success of  our firm." 

Despite the poor 2016, Pershing points out that they've generated a compound annual return of 14.8% compared to S&P returns of 7.7% over the same time period.

The report also details portfolio updates on numerous positions, including: Air Products & Chemicals (APD), Fannie Mae (FNMA) / Freddie Mac (FMCC), their short of Herbalife (HLF), Howard Hughes (HHC), Mondelez (MDLZ), Nomad Foods (NOMD), Platform Specialty Products (PAH), and Restaurant Brands (QSR).

They also touch on some of the positions they've exited.

Embedded below is Pershing Square's 2016 annual report:



You can download a .pdf copy here.

Pershing Square Exits Valeant Pharmaceuticals

Bill Ackman's activist firm Pershing Square Capital Management has announced it sold 27 million shares and options in Valeant Pharmaceuticals (VRX). 

Per the release, "We elected to sell our investment and realize a large tax loss which will enable us to dedicate more time to our other portfolio companies and new investment opportunities."

Around the time of sale, Pershing's VRX position size was smaller by their standards, between 1.5% to 3% of their funds.  Like many hedge funds involved, they suffered sharp losses.

With this news, the only other major funds involved with Valeant as of the end of 2016 include ValueAct Capital (who have now roundtripped their investment) and Paulson & Co.

Per Google Finance, Valeant Pharmaceuticals is "a pharmaceutical and medical device company. The Company is engaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). It operates through two segments: Developed markets and Emerging markets. In the Developed Markets segment, it focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes. In the Emerging Markets segment, it focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza. Its OTC products include PreserVision, Biotrue and Boston. Its other generic products include Latanoprost and Metronidazole. Its ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign."