JANA Partners To Vote Team Health Shares in Favor of Buyout

Barry Rosenstein's hedge fund firm JANA Partners has filed an amended 13D with the SEC regarding its position in Team Health Holdings (TMH).  Per the filing, JANA's ownership stake remains unchanged at 7.91% of the company with 5.89 million shares.

Their 13D was filed to note that on October 30th, they entered into a "voting and support agreement" relating to the merger where JANA has agreed to vote its shares in favor of Team Health's proposed acquisition by Blackstone Group for $6.1 billion.

Per Google Finance, Team Health Holdings is "a provider of outsourced healthcare professional staffing and administrative services to hospitals and other healthcare providers. The Company operates through four segments: Hospital Based Services, IPC Healthcare, Specialty Services and Other Services. The Hospital Based Services segment provides healthcare service programs to users of healthcare services on a fee for service, as well as a cost plus or contract basis. The IPC Healthcare segment consists of IPC and provides acute hospital medicine and post-acute provider service programs to users of healthcare services. The Specialty Services segment provides healthcare service programs to users of healthcare services in an outpatient setting or in a non-hospital-based environment. The Other Services segment is an aggregation of locums staffing, scribes, and billing, collection and consulting services that provides a range of other healthcare services."

Jonathan Gray on Real Estate: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Jonathan Gray, head of real estate at Blackstone who talked about real estate.


Jonathan Gray's Presentation at Invest For Kids Chicago 2016

•    16% net return to Blackstone

•    Our edge is scale and conviction

•    We seek an opportunity to buy it, fix it, sell it

•    Timing on Hilton and EOP deals in 2007 was poor, but still made 3x our investors’ money because we had the right structure and we didn’t panic; both were good assets and while levered they had reserves and no covenants; key was not being forced to sell; and had 2/3 of EOP assets not been sold 90 days after closing to delever, we wouldn’t be sitting here

•    Airbnb has reduced hotels’ pricing power, but most are leisure travels; business travels often still want hotels

•    Record occupancy across hotel industry

•    Good opportunity in logistics but a real challenge for retail, especially “generic consumer supply” retail

•    We’re looking to own in areas that are exciting and driven by technology/innovation: Bay Area, Seattle, New York

•    Risks today: sharp jump in rates due to wage inflation; political crisis leading to economic crisis in Europe; China deceleration gets worse

o    All are risks but none are base case

•    Sam Zell says I’m too optimistic but I think we’re likely to continue slow growth; housing recovery has legs; banks are in good shape; realistic but trying to find opportunity in slow growth world

•    Powerful urbanization trend in Chicago – people want to come here and live in the city, with companies like McDonald’s and Conagra following them


Be sure to check out the rest of the presentations from Invest For Kids 2016.

Intangibles of Building a Great Hedge Fund: Ken Griffin, Alex Klabin, Jason Karp (Milken Institute Panel)

At the Milken Institute conference recently, numerous prominent hedge fund managers gathered on a panel entitled: The Intangibles of Building a Great Hedge Fund: People as an Asset Class.

Ken Griffin of Citadel, Alex Klabin of Senator Investment Group, Jason Karp of Tourbillon Capital, and Gideon Berger of Blackstone all took part in the discussion on investing and the hedge fund industry.


Milken Institute Panel: Intangibles of Building a Great Hedge Fund

Here are some select quotes from the panel and the full video is below:

Alex Klabin on what makes a great investor:  "Great investors, in my view, are able to distill complicated ideas / complicated situations down to the one or two things that really matter. And then make an analogy in their head to distill what the core of the investment is."

Ken Griffin on science versus art in investing:  "In every one of our businesses, there's a science and there's an art.  The science is usually caps in the process and hard work that goes behind driving an investment decision.  We'll do thousands of meetings a year, it's as unglamorous as it can be.  But you use it to assimilate information about how a company's progressing, how a business is unfolding or developing.  And if you're really good, you have an idea of what guidance is going to look like, what the quarter's going to look like.  The art comes down to not how well you can do all that work, but how well you can differentiate your idea from what other people perceive reality to be.  And you're successful in this business when you have a differentiated point of view and the market agrees with you when the information that you have becomes known by all ... You need to have the ability to understand: how will other investors respond to this information when it becomes known.  That's the art in the business, and it's a tough art."

Jason Karp on people as an asset class:  "In our industry, people spend more time on stocks than they do on people.  In my 17 years, what I've discovered is that people, if you train them properly, if you invest in them properly, have more duration, yield, and optionality than any stock I've ever purchased."

Jason Karp on what he looks for in hiring:  "One of the things that we screen for is a variable called openness to change.  And it's the single most important variable that we screen for.  It's basically how well you're able to quickly change your mind when you're presented with conflicting information."

Gideon Berger on what he looks for when investing in managers: "Some people are trying to become lifestyle hedge fund managers, and some people are just trying to get rich, and some people love investing.  What are you actually trying to do?  The two things that we focus on the most: 1. the commitment to building the organization and 2. character that suggests we think they can withstand adversity."

Gideon Berger on what they do before investing:  "What we try very hard to do is be very explicit and write down our investment thesis going in.  Why are we making this investment?  Where do we think the edge or opportunity is coming from? If the thesis is playing out, but the investment isn't playing out, that's an opportunity to add to the position.  But if the thesis isn't playing out but you're making money, that's good luck.  Separating why you're making an investment versus results is very important."

Embedded below is the video of the panel from the Milken Institute:


 

Byron Wien's 20 Lessons Learned Throughout His Investing Career

Byron Wien is Vice Chairman at Blackstone and prior to that worked at hedge fund Pequot Capital and Morgan Stanley.  Earlier this year, he released an addendum to his usual commentary about lessons he's learned in 80 year investing career.  His words of wisdom are below:


Byron Wien's 20 Lessons Learned


1.  Concentrate on finding a big idea that will make an impact on the people you want to influence.  The Ten Surprises, which I started doing in 1986, has been a defining product.  People all over the world are aware of it and identify me with it.  What they seem to like about it is that I put myself at risk by going on record with these events which I believe are probable and hold myself accountable at year-end.  If you want to be successful and live a long, stimulating life, keep yourself at risk intellectually all the time.

2.  Network intensely.  Luck plays a big role in life and there is no better way to increase your luck than by knowing as many people as possible.  Nurture your network by sending articles, books and emails to people to show you’re thinking about them.  Write op-eds and thought pieces for major publications.  Organize discussion groups to bring your thoughtful friends together.

3.  When you meet someone new, treat that person as a friend.  Assume he or she is a winner and will become a positive force in your life.  Most people wait for others to prove their value.  Give them the benefit of the doubt from the start.  Occasionally you will be disappointed, but your network will broaden rapidly if you follow this path.

4.  Read all the time.  Don’t just do it because you’re curious about something, read actively.  Have a point of view before you start a book or article and see if what you think is confirmed or refuted by the author.  If you do that, you will read faster and comprehend more.

5.  Get enough sleep.  Seven hours will do until you’re sixty, eight from sixty to seventy, nine thereafter, which might include eight hours at night and a one-hour afternoon nap.

6.  Evolve.  Try to think of your life in phases so you can avoid a burn-out.  Do the numbers crunching in the early phase of your career.  Try developing concepts later on.  Stay at risk throughout the process.

7.  Travel extensively.  Try to get everywhere before you wear out.  Attempt to meet local interesting people where you travel and keep in contact with them throughout your life.  See them when you return to a place.

8.  When meeting someone new, try to find out what formative experience occurred in their lives before they were seventeen.  It is my belief that some important event in everyone’s youth has an influence on everything that occurs afterwards.

9.  On philanthropy my approach is to try to relieve pain rather than spread joy.  Music, theatre and art museums have many affluent supporters, give the best parties and can add to your social luster in a community.  They don’t need you.  Social service, hospitals and educational institutions can make the world a better place and help the disadvantaged make their way toward the American dream.

10.  Younger people are naturally insecure and tend to overplay their accomplishments.  Most people don’t become comfortable with who they are until they’re in their 40’s.  By that time they can underplay their achievements and become a nicer, more likeable person.  Try to get to that point as soon as you can.

11.  Take the time to give those who work for you a pat on the back when they do good work.  Most people are so focused on the next challenge that they fail to thank the people who support them.  It is important to do this.  It motivates and inspires people and encourages them to perform at a higher level.

12.  When someone extends a kindness to you write them a handwritten note, not an e-mail.  Handwritten notes make an impact and are not quickly forgotten.

13.  At the beginning of every year think of ways you can do your job better than you have ever done it before.  Write them down and look at what you have set out for yourself when the year is over.

14.  The hard way is always the right way. Never take shortcuts, except when driving home from the Hamptons.  Short-cuts can be construed as sloppiness, a career killer. 

15.  Don’t try to be better than your competitors, try to be different.  There is always going to be someone smarter than you, but there may not be someone who is more imaginative. 

16.  When seeking a career as you come out of school or making a job change, always take the job that looks like it will be the most enjoyable.  If it pays the most, you’re lucky.  If it doesn’t, take it anyway, I took a severe pay cut to take each of the two best jobs I’ve ever had, and they both turned out to be exceptionally rewarding financially. 

17.  There is a perfect job out there for everyone.  Most people never find it.  Keep looking.  The goal of life is to be a happy person and the right job is essential to that. 

18.  When your children are grown or if you have no children, always find someone younger to mentor.  It is very satisfying to help someone steer through life’s obstacles, and you’ll be surprised at how much you will learn in the process. 

19.  Every year try doing something you have never done before that is totally out of your comfort zone.  It could be running a marathon, attending a conference that interests you on an off-beat subject that will be populated by people very different from your usual circle of associates and friends or traveling to an obscure destination alone.  This will add to the essential process of self-discovery.

20.  Never retire.  If you work forever, you can live forever.  I know there is an abundance of biological evidence against this theory, but I’m going with it anyway.


For more perspective from great investors, head to:

- Warren Buffett & Charlie Munger's secrets to investing success

- Lessons from Stanley Druckenmiller

- Andreas Halvorsen on investment process

- Mohnish Pabrai on checklist investing

- Jeremy Grantham's 10 investment lessons

Delivering Alpha Real Estate Panel: Ackman, Sternlicht & Gray

Continuing coverage of CNBC & Institutional Investor's Delivering Alpha Conference, we're now shifting to the real estate panel featuring Pershing Square's Bill Ackman, Starwood Capital Group's Barry Sternlicht and Blackstone Group's Johnathan Gray.

If you missed it, we've also posted up notes from the other panels at the conference.

Bill Ackman (Pershing Square):  Ackman's been in the news recently regarding a new stake in Proctor & Gamble (PG) so naturally he addressed that first saying, "We think it's a great company ... it's a cheap stock, but it's cheap for a reason.  We own the stock, we like the company, we own about $1.8 billion in equity in options."

That's a lot when you frame it in the context of a $10 billion dollar fund.  Recently, Ackman was also saying his PG bet is the largest initial bet on a company he's ever made.  Many have postured that he'll look to shake-up management and examine splitting the business up.

Ackman also touched on his stake in J.C. Penney (JCP), whose shares have been in steady decline.  He argued that it's the only company that can make 15-20x return (seems awful high), attributing the sell-off to a PR problem versus fundamentals.

On the subject of real estate, he advocated buying single family homes, arguing that it's a good business and an "asset class where institutions are underrepresented."  For more from this investor, we just posted up Ackman's recommended reading list.


Barry Sternlicht (Starwood Capital):  He noted that there's enough debt financing and that spreads are tight.  He also pointed out that you don't really see foreign banks here.

Echoing Ackman, Sternlicht says they've been buying houses and thinks the market could even possibly be overbought.  On Europe, he thinks it's still the first inning there so if you get involved, you've got to buy and hold.  We've highlighted thoughts from Sternlicht before in investing lessons learned from Richard Rainwater.


Johnathan Gray (Blackstone):  They bought a lot of commercial real estate near the top of the market but said it's not painful because rents are improving (due to lack of new construction).  He believes there's some opportunity out there to buy things that others aren't interested in.  The caveat, is that financing is harder to obtain than in the past.

Blackstone obviously likes Ackman's notion of buying homes as that's what they've been doing.  Two thousand for $300 million, saying execution is key.  He especially seems to like European deals and thinks the continent is not going into an abyss.  In summary, he wants to buy hard assets at a discount to replacement cost.


Be sure to check out more insights from top investors from the conference:

- Best ideas panel

- Global opportunities panel

- Chase for yield panel

Byron Wien's Market Commentary: March 2011

Readers will be familiar with Byron Wien from his days at hedge fund Pequot Capital. Since then, he's moved on to The Blackstone Group and has penned his latest market commentary for March 2011 entitled, 'Off to a Good Start.'

It's a bit ironic that many market prognosticators have focused on how 2011 has started off well in their recent diatribes and then *boom* the month of March hits with a ramp in market volatility. Earlier, we pointed out hedge fund manager Crispin Odey's bullish outlook that he penned before things turned sour.

When everything in the market was 'fine and dandy', these respected gurus' commentary echoed the same tune. With increased fears, it will be intriguing to see if their next publications reflect a change in sentiment. While Wien has hinted at concern for the European region, it's obviously much harder to predict an earthquake/tsunami double-punch in Japan.


Byron Wien's March 2011 Market Commentary:

"Investors came into 2011 feeling constructive about the outlook. Forecasts of market performance expected the Standard & Poor's 500 to rise about 10% after a strong performance in 2010. The economy was projected to grow 3%, unemployment was thought to decline modestly and interest rates were likely to rise a bit but stay low, with inflation remaining tame. All of this was reflected in various measures of market sentiment which were at varying levels of optimism ranging from mild to extreme. Since by now we all have learned that the best time to buy stocks is when investors are despondent, savvy professionals were cautious in January, expecting a correction at least or perhaps a downturn lasting until the weather warmed.

If you believe as I do that the market was put on earth by God to make fools of the greatest number of people, it would not be surprising to you that stocks rallied throughout the early part of the year. The fundamental background was positive. Retail activity was firm, automobile sales were surprisingly strong, fourth quarter earnings were mostly beating expectations, the European credit crisis was dormant for the moment, state and local governments were making an effort to control expenses and initial unemployment claims were trending downward. There were some negatives: the Federal budget deficit was running at an unprecedented $1.5 trillion rate and the United States was likely to run up against its debt ceiling by March. Inflation was beginning to become a serious problem in the developing world, casting some doubt on the potential profitability of companies operating in those markets. Political upheavals in Tunisia, Egypt, Libya and Bahrain raised the issue of stability in that critical oil-producing region. The January unemployment report came in at 9.0%, but that was more because of people dropping out of the work force than new jobs being created. As we moved into February investor optimism remained undaunted and those who were cautious began to buy again, recognizing that it was futile to "fight the tape." Mutual fund buyers who had shunned equities in favor of bonds during 2010 bought more common stocks in January than in any month since 2003.

In February the economic background was mixed. Inflation, which had not been a problem because wage increases were rare and home prices were not increasing, suddenly became a concern as both consumer and producer prices rose more than expected. President Obama presented his budget and those looking for significant progress in reducing expenditures were disappointed. It appears that few in Washington are willing to make cuts in defense, or in Social Security, Medicare, Medicaid and other entitlements. Every budget hawk seems to focus on the discretionary component of the budget, especially foreign aid, earmarks, the Department of Education, etc. The entire discretionary component is 29% of the budget, so if all of these items were cut to zero, the budget deficit would still be over $1 trillion. It is clear that we are not going to make major progress in fiscal restraint without making adjustments in a wide range of previously sacrosanct programs. To do this Congress would have to reduce some benefits important to their constituents and run the risk of not being re-elected.

While most Americans recognize that we cannot run trillion dollar deficits indefinitely, few seem willing to make the sacrifices that would be necessary to bring expenditures more in line with receipts. For the past 60 years the United States government expenditures were about 20% of Gross Domestic Product (GDP) and tax and other receipts were about 18%, resulting in a 2% gap. Today expenditures are running about 25% of GDP and receipts are 16%, for a 9% gap. We have been fortunate that foreign lenders who have financed this gap have been willing to buy our Treasury bills, notes and bonds at historically low interest rates, but I do not believe we can count on this condition lasting forever. If we need a crisis to address this problem seriously, a sharp rise in interest rates might cause Congress and the electorate to recognize the need to make some serious program adjustments.

Looking at some troubled areas of the economy that may be improving, housing stands out. The January report on housing starts shows a significant rise, primarily because of multi-unit construction. As the economy improves, those with jobs feel more secure, family formations increase and housing demand steps up. As a result of low interest rates and the decline in house prices over the past few years, affordability has been on the rise, but it is only now beginning to become apparent in transactions. If the trend continues, this could be an important positive for the economy. Mortgage delinquencies are declining, but the overhang of homes for sale remains large. If home prices do improve at all, they are likely to do so gradually.

But there are other important signs of strength. The Institute for Supply Management purchasing manager indexes for both manufacturing and services are showing remarkable strength and exports are contributing to the growth of the U.S. economy as the developing world buys more of our goods. The consumer continues to spend. Although consumer confidence has been relatively flat, real consumer spending is back to pre- recession levels. Capital spending continues to exceed the levels of previous cycles as companies seek ways to improve productivity. The dark side of this is that much of the new equipment enables companies to reach their production and service goals with fewer workers, so unemployment remains high. I do expect the unemployment rate to decline this year into the mid-8% range, however.

Overseas, recoveries are taking place everywhere. Real growth in the Euro zone was almost 2% at the end of last year in spite of the financial problems in the southern tier countries. Real growth in Japan at the end of 2010 was almost 5%, helped partly by deflation there. This was substantially above the levels achieved earlier in the last decade. Industrial production is strong almost everywhere and retail sales have recovered sharply from the recession, but they have fallen back recently in Japan. Housing is weak across the globe. By now almost everyone recognizes that the engine of growth is shifting to the developing world, but some problems are emerging there as a result of rising commodity prices. Food is an important component of consumer prices (over 30% in China and Brazil and 47% in India) and pork and grains are surging. In India, for example, wholesale and retail prices have been increasing at an 8%–9% rate and the government has increased interest rates in an attempt to dampen economic activity and prices. As a result projected real growth is expected to decline from close to 9% to the 6%–7% range. A similar inflation problem exists in China, where the government is taking even more aggressive monetary steps to control prices. Perhaps Vietnam is too small to be important, but prices there are increasing more than 20% and the base lending rate is only 9%. The result of all of this monetary restraint is that the performance of the equity markets of the emerging countries has been lagging behind Europe and the United States. It may not be here just yet, but I think a buying opportunity is developing. China has already begun to do better.

One of the worries at the beginning of the year was that the financial crisis in Europe would reemerge. I was hopeful that a combination of austerity measures, higher taxes and growth would be combined with transitional aid from the International Monetary Fund, the European Union and Germany to provide a period during which the stress could be reduced. I was also encouraged by the lack of public protest against the measures various governments were taking to bring their budget deficits and overall debt into line. Recently there have been reasons to be concerned. Angela Merkel's political party lost an election in Hamburg, which was a setback for her. Merkel's leadership is essential to the workout period for the weaker economies and to fill that role she must maintain her political strength at home. Interest rates on the 10-year bonds of Portugal, Ireland and Spain have risen recently, reflecting increased uncertainty, and credit default spreads are rising. I remain optimistic about Europe for the intermediate term but this is a situation that requires monitoring. One area where some good news is appearing is the financial condition of state and local governments. After dropping to a problematic low at the end of the recession, personal income receipts at the state level have been increasing. Even New York City reports that tax revenues have been coming in $2 billion higher than projected three months ago. While there are still severe problems in a number of troubled states like New York, California, New Jersey and Illinois, I believe the situation is improving. I do not see similar progress at the Federal level.

There is considerable controversy over whether the apparent strength of the United States economy is a result of the QE2 monetary easing program. Many believe that much of the money the Fed injected into the economy went into the stock market. There are plenty of Bernanke critics around who will argue that the economy was starting to recover on its own and the second round of easing was unnecessary at best and dangerous at worst. After all, adherents of Milton Friedman believe that inflation "is always and everywhere a monetary phenomenon," but while the recent reports on the consumer price index are showing a rise, we are a long way from what we experienced in the 1970s. In my view you need wages and housing prices to be rising for inflation to become a problem. House prices are still declining and it is doubtful that wages will rise significantly with the unemployment rate at 9%; it was 6% in 1974 when inflation was becoming a severe issue.

The Federal Reserve began QE2 last fall because the prospect for passing another fiscal stimulus program seemed dim based on the temper of the populace, questions about the original Obama stimulus program and the Republican shift in Congress. Monetary easing was the only tool left in the box to deal with the problem of persistent high unemployment, and the current easing is likely to continue until we see the jobless rate drop comfortably into the 8% range. At that point the Fed may begin tightening, but should we be so fearful of that? Looking at past cycles, according to Strategas Research, the Standard & Poor's 500 gained an average of 15.6% in the twelve months before the first tightening and 4.8% in the six months before tightening began. Even after the first tightening the S&P gained 8% in the first six months and 3.7% in the first year. What matters most is economic momentum and earnings growth. If the United States economy is going to grow at 4% or better in 2011 and not slip back into recession in the following year, then the likelihood of the market continuing to deliver positive performance is high. Excessively bullish sentiment will surely produce periodic pullbacks, but in the 84 years since 1926 the S&P 500 has risen more than 10% 48 times, more than half the time, and with the present favorable outlook I think 2011 will fall in that group. "


For more market commentary, scroll through excerpts from Seth Klarman's latest letter as well as Warren Buffett's annual letter.

Blackstone Group's Byron Wien: Ten Surprises For 2010

Byron Wien, Senior Managing Director at The Blackstone Group pens an annual list of surprises each year and below are his predictions for 2010. Although the information was released earlier this year, many outlets just covered the bullet points of his predictions and not the entirety of his research presentation. As such, we wanted to post up the full piece for those interested. Wien of course was previously the Chief Investment Strategist at hedge fund Pequot Capital before they shut down. His list now joins the rest of our 2010 crystal ball coverage as we'd previously posted up Doug Kass' 2010 predictions as well as a prediction of the top 10 investment themes for 2010.

Here is the brief summary of Wien's 2010 predictions that you may have seen floating around the internet:

1. The US economy grows at a 5% real rate and unemployment drops below 9%.

2. The Federal Reserve hikes the fed funds rate to 2% by year-end.

3. Ten year treasury yields rise above 5.5%.

4. The US dollar rallies against the yen and the euro.

5. The S&P rallies to 1300 in the first half of the year, declines to 1000, then settles around 1115.

6. Japan becomes the best performing market.

7. President Obama endorses nuclear power development.

8. The Obama administration becomes energized via US economic improvement.

9. Financial service legislation will be passed (but in a softer form than originally feared).

10. Civil unrest in Iran peaks.


An interesting set of predictions from Wien, and you can already see how some of them are playing out like he predicted as the S&P marches higher and treasury yields have started to jump as well. We'll watch with interest to see if some of his second half of the year predictions come true. As always, take these with a grain of salt. Below is the presentation in its entirety from Wien and The Blackstone Group. It's chalk full of research that illustrates the macro factors he examined to draw his conclusions. Here is the embedded document:



You can directly download a .pdf here.

For more crystal ball gazing, check out the top 10 investment themes for 2010 as well as Doug Kass' 2010 predictions. And for those of you interested in some of Wien's previous work, we've posted some of his past market commentary while at hedge fund Pequot as well.