TCI Fund Goes Activist on Altaba, Calls For Liquidation

Sir Christopher Hohn's investment firm TCI Fund Management has filed a 13D with the SEC regarding its position in Altaba (AABA).  They now own 9.7% of the company with 79.77 million shares.

They've been slowly selling shares throughout the first three months of the year, presumably to stay below the 10% ownership cap as AABA has been buying back stock.


TCI Goes Activist on Altaba

The big development here, is that they've converted their 13G into a 13D and gone activist.  They're calling for a liquidation of the company, which owns big stakes in Alibaba (BABA) and Yahoo Japan.

Hohn sent a letter to Altaba, detailed below:

"As you know TCI is the largest shareholder of Altaba owning close to 10% of the company. We have very much appreciated your efforts to create shareholder value. We fully agree with your explicit goal of narrowing the wide discount to net asset value at which Altaba continues to trade.However, we believe that the current strategy of Altaba is unlikely to materially reduce this discount. A clear plan of liquidation is now necessary. This should involve a complete distribution or sale of all of Altaba’s Alibaba and Yahoo Japan shares.We attach a presentation for the Board and shareholders of Altaba laying out in summary our proposed plan of liquidation. We strongly believe that the vast majority of Altaba’s shareholders would be supportive of this plan.We have today converted our SEC filing to a 13D so that we may engage actively with you, the Board of Altaba and all shareholders to create the best outcome for all parties. We look forward to engaging with you constructively as you consider our proposal."

TCI's Presentation on Altaba

Hohn's firm also published a presentation on AABA and we've embedded it below.

TCI Fund Trims Altaba Stake (AABA)

Sir Christopher Hohn's TCI Fund Management (The Childrens Investment Fund) has filed an amended 13G and a Form 4 with the SEC regarding its stake in Altaba (AABA).  Per the filing, TCI now owns 9.99% of AABA with 84,709,952 shares.

The Form 4 indicates they sold 750,000 shares at a weighted average price of $74.2795 on January 18th, and another 464,000 shares at weighted price of $74.0791 on January 19th.  Perhaps this transaction was possibly made to keep them below the 10% ownership threshold, though that's purely speculation on our part.

Altaba is the former Yahoo stub that was left after the company was sold to Verizon (VZ).  Altaba is basically a collection of ownership stakes in the likes of Alibaba (BABA), Yahoo Japan, etc.  The thesis has been that the company was trading at a discount to its NAV and that management would look to close the gap or monetize the stakes in a tax efficient manner.

As of the end of the third quarter of 2017, AABA was TCI's largest US holding worth almost $6 billion.  Given the run-up in AABA shares since then, this stake is likely worth even more.  However, there's no way to know if TCI has hedged out this play in anyway, as some other funds involved in the trade have shorted BABA shares to offset the exposure.

Per Yahoo Finance, Altaba "operates as a non-diversified, closed-end management investment company in the United States. Its assets consist primarily of equity investments, short-term debt investments, and cash. The company was formerly known as Yahoo! Inc. and changed its name to Altaba Inc. in June 2017."

TCI Fund's Presentation on Safran / Zodiac

Sir Christopher Hohn's hedge fund firm TCI Fund Management has put together a campaign trying to block Safran's takeover of Zodiac.

TCI has owned Safran for 5 years and as of the date of the letter owned 3.87% of the company.  They also own a much smaller position in Zodiac.  Basically, they're looking for a shareholder vote on the merger in an attempt to stop it.

Hohn writes, "In our opinion the fair value of Zodiac is around €20, which is way below the offer of €29.5 and so Safran’s  shareholders will suffer massive value destruction. The deal represents a  terrible return on investment (ROI) for Safran. Even in a best - case scenario, with  Zodiac’s margins recov ering  from  5%  to  14%,  the  after - tax  ROI  would  be  only  6%,  a  long  way  below  Safran’s cost of capital. At Zodiac’s current level of profitability the ROI of the deal would be just 2%."

Embedded below is TCI Fund's presentation on Safran / Zodiac:


Also embedded below is Chris Hohn's letter to Safran:


You can view the rest of TCI's materials at the website they've established for their campaign: A Stronger Safran.

For more on this hedge fund, we've posted up Chris Hohn's presentation on Charter Communications from the Sohn London conference.

Sir Chris Hohn Long Charter Communications: Sohn London Conference

We're posting notes from the Sohn London investment conference 2016.  Next up is Sir Christopher Hohn of Children's Investment Fund (TCI) who pitched a long of Charter Communications (CHTR).


Sir Chris Hohn's Sohn London Conference Presentation

TCI have already been invested in Charter for 3 years, but Hohn sees it as a multi-year investment. Charter is a public leveraged buyout which makes it an interesting special situation. It bought Time Warner Cable, a much bigger company, using a large amount of debt. Charter can compound at about 25% per year.

Cable companies are interesting because they should no longer be labelled as television businesses but as broadband businesses. Broadband businesses are a toll road on the internet.

Four reasons to like the business:

-    Telephone companies are not competitors to broadband providers

-    Digitization and cloud technology will change the capital expenditure profile reducing the intensity while the top line is growing.

-    Donald Trump will deregulate the sector leading to more pricing power and take away the regulatory risks.

-    Cable will also be a disruptor to wireless in the future.

There is a lot of upside still to come for Charter which is underestimated by the investment community. Nearly everyone needs broadband. Charter has the potential to double its customer base over time. Charter is 4x leveraged and TCI wants it to stay that way. In 2012, half the profits were coming from the TV business. Today only 22% come from TV. Hohn thinks that about 90% of the real value of the business is in broadband.

John Malone is the largest shareholder with about 20% of the equity and 25% of the voting rights. TCI own about 5% of the company. Malone is one of the world’s great investors with compounded returns of about 30% per annum. He is shareholder friendly and is committed to share buybacks.

Hohn always tries to find businesses that are protected from competition.  TCI have returned 17% per annum net of fees for the last 13 years using this approach. It is hard to break into the fiber broadband market. Google tried recently but have now essentially given up. The industry has effectively become a duopoly between Charter and Comcast (CMCSA), even then because they do different things they are monopolistic within their sectors. Charter has pricing power. It has been raising its pricing by 5% per year. Charter has 30% margins but these could rise to 50% or even 55%.

Risks: the TV business could decline, unbundling will come, wireless could be a threat.  Cable will be a disruptive player in wireless. Both Comcast and Charter will probably enter the wireless sector. He thinks Verizon may try to buy Charter in the future.

Be sure to check out the rest of the Sohn London conference presentations here.

Children's Investment Fund Boosts Time Warner Cable Stake

Chris Hohn's hedge fund firm, Children's Investment Fund, has filed a 13G with the SEC regarding its stake in Time Warner Cable (TWC).  Per the filing, Children's now owns 5% of the company with over 14.1 million shares.

This means Hohn has increased his position size by over 4.23 million shares since the end of the first quarter.  The filing was made due to portfolio activity on March 6th.

TWC is set to be taken over by Comcast (CMCSA), pending regulatory review.  Hohn must be pretty confident that this deal goes through, though there's no way to know if/how he's hedged out this position.  Even if this deal does fall through, TWC shares likely have a 'floor' as it's been reported that Charter Communications (CHTR) would then be interested in acquiring TWC (something they tried to do previously).

US cable stocks in general also have rallied sharply over the past month on the news that while the FCC has imposed net neutrality, the operators won't be regulated on pricing.  One of the key tenets of the cable investment thesis is that these companies are oligopolies and could have pricing power for their broadband products.  Even if these companies lose video subscribers as customers shift to over-the-top (OTT)/streaming content products, people will still need a (fast) internet connection to receive this content.  

Per Google Finance, Time Warner Cable is "a provider of video, high-speed data and voice services in the United States with clustered cable systems located in five geographic areas including New York State, the Carolinas, the Midwest, Southern California and Texas."

Children's Investment Fund Trims Royal Mail Stake

Christopher Hohn's Children's Investment Fund has recently sized down its holdings of Royal Mail.  Previously, they owned 5.8% and now they own just under 4.6%.  They've sold around 12 million shares.

Royal Mail went public late last year and soared higher.  Children's Investment Fund was a big beneficiary as they were the largest shareholder. 

As such, it looks like Hohn's fund has locked in some profits.  According to fund documents, the firm returned well over 40% in 2013, with Royal Mail obviously contributing to those gains.

Children's Investment Fund on News Corp & Disney: Q4 Letter

Christopher Cooper-Hohn's Children's Investment Fund is out with its 2012  Q4 letter and we wanted to highlight some excerpts.  One of the main takeaways here is that Porsche SE is now Children's largest holding.  The fund had a great 2012 and was up 29.52% for the year.


Children's Top 5 Holdings At 2012 Year-End

1. Porsche SE: 20.6% of Fund NAV
2. Lloyds Bank Bonds: 17.6%
3. News Corp: 15.4%
4. Japan Tobacco: 14.7%
5. Aurizon (QR National): 13.7%

Porsche shares have appreciated considerably over the past few months, but Cooper-Hohn thinks there's more room to run, with an upside of 160%.  They see 4 ways they can profit from the investment: "strong underlying performance of the investment in VW, a successful and benign resolution of the legal cases, large and increasing dividends from VW flowing through to Porsche shareholders, and the longer-term potential for a merger between Porsche and VW."


News Corp: Publishing Assets Undervalued?

Cooper-Hohn has previously talked about his News Corp position, but his latest letter breaks down how the company's spin-off of the publishing assets could come as a surprise.

While Children's has a 'pessimistic' view on print, they do acknowledge that valuation could easily double to $10 billion based on the new publishing co's assets:

" •    $0.5bn of cash: This likely be higher as the group is still considering how much cash to allocate to PubCo, but any change should be a wash with the change in the market cap.
•    $3.0bn: 50% stake in Foxtel, Australia's main pay-TV provider in a third of all homes in Australia. 14x net operating profit after tax (nopat).
•    $1.5bn stake in RealEstate.com: the listed and dominant online property listings company in Australia.
•    $1.5bn: at 10x EBIT, 14x nopat the Australian Cable Network (Fox Sports Australia) assets which account for 27% of PubCo EBIT are clearly worth a higher multiple than the publishing assets.
•    $0.7bn: listed stake in Sky Network Television, a New Zealand pay-TV operator.
•    $0.5bn: Harper Collins book publishing on 8x nopat.
•    $3.2bn: Newspapers on 8x nopat: includes DowJones, New York Post, HarperCollins, News America Marketing, Australian Publishing and UK Publishing.
•    $0.5bn: The PubCo also has NOLs and capital loss carryforwards of $1.2bn. These probably need a huge discount, but should have some value.
•    $0bn: The Education business Amplify will generate $180m of losses in 2013. These losses are capitalized in many valuation approaches. First, we think this is a credible enough investment to be valued at zero rather than negative $1.2bn (10x $120m nopat losses); News Corp will clearly argue it’s worth a considerable premium to NAV, let alone zero. Second, the company guides to a sharp narrowing in these losses over the coming years which will actually contribute strongly on a starting base $535m PubCo EBIT in 2013."

Overall though, Children's sees NWSA as a story on affiliate/re-transmission re-pricing as they focus on the Fox Entertainment Group. 


Disney: Entering a 'Multiyear Growth & Re-rating Phase'


Sticking with media, Cooper-Hohn also shared thoughts on Walt Disney (DIS).  He writes,

"We believe we are in the midst of a very long-term transfer of economics from distributors to content providers which, as we argued at our investor conference, is still in an early phase ... For the last decade, this power shift has driven consistent 8-10% pricing growth, a unique and truly giant expression of pricing power. Disney has arguably the strongest bargaining leverage of its peers and we are entering an affiliate re-pricing cycle which we think delivers some acceleration in pricing, off this extremely high base for the next 3-4 years."

He also points out how the company is finishing its massive capex at its parks and will soon begin to see margin expansion.

For more from this hedge fund, we've posted up Cooper-Hohn's presentation from the Sohn London Conference where he talked about being long News Corp and Porsche and short Fiat.  Additionally, you can view excerpts from Children's Q3 letter on Porsche and Japan Tobacco.

Chris Cooper-Hohn: Long News Corp & Porsche, Short Fiat (Sohn London Conference)

Continuing our series of notes from the Sohn London Investment Conference, next up is Chris Cooper-Hohn of Children's Investment Fund.

He advocated buying unloved stocks at the moment as companies that are perceived to be great businesses are expensive.  He quoted Warren Buffett by saying, "you pay a high price for a cheery consensus."

Cooper-Hohn presented 2 longs: News Corp (NWSA / NWS) and Porsche (GER:PAH3) and 1 short: Fiat SpA (MIL: F).


Long News Corp 

- News corp is misunderstood.  It should not be seen as a newspaper business as 73% of operating profit comes from TV content
- The price is low due to the phone hacking scandal
- It's not a cyclical business dependent on advertising revenue
- The US network has massive pricing power
- He expects EBIT to grow from $6bn to $9bn by 2015
- Share buybacks will be large
- It's cheap trading on PE 2013 10x
- The new COO Chase Carey is more shareholder friendly than the Murdoch family

News Corp announced this year that it will be splitting up its business into two segments: entertainment and publishing.


Long Porsche

- Concerns about the impact of the litigation surrounding Porsche's Volkswagen (VW) short in 2008 have depressed the price
- Hohn thinks the market has overreacted and Porsche will settle for less than is expected
- Porsche trades at a 40% discount to NAV
- It's stock has traded sideways for many years
- Porsche owns 32% of VW
- VW is also cheap so there is a double discount
- VW is perceived as a budget brand but a substantial amount of its earnings come from the premium market where there is more pricing power: Audi and Porsche
- VW and Porsche have good emerging market exposure
- VW grew its volume even during the financial crisis
- It is steadily destroying other European carmakers

Hohn belives there's 4 big ways to win by investing in Porsche:

1. VW appreciates
2. The discount to NAV narrows as the litigation is resolved
3. The discount narrows due to a higher dividend
4. A merger of Porsche and VW

We've also posted up an excerpt from Children's Q3 letter on Porsche as well.


Short Fiat SpA

- Hohn argued that Fiat was a poor company, saying it will need a capital injection soon
- Chrysler (which has been bankrupt twice) is burning cash
- If the current economic conditions continue, the burn rate will increase


For the rest of the hedge fund presentations from this event, head to notes from Sohn London Investment Conference.

Children's Investment Fund on Porsche & Japan Tobacco: Q3 Letter Excerpt

Christopher Cooper-Hohn's Children's Investment Fund was up 1.6% for the third quarter and up 18.26% year to date as of the end of Q3.  TCI runs a concentrated portfolio and their Q3 letter to investors provides updates on their positions in Porsche SE as well as Japan Tobacco, which we've excerpted below:

Porsche SE

Back in July, Volkswagen (VW) announced they would purchase the other 50% of Porsche that they didn't own yet for 4.5 billion euros.  The deal's closure makes Porsche essentially a holding company that has 2.5 billion euros in cash and 50% of the common stock of VW.

As to their thesis, TCI writes:

"Porsche currently trades at a large discount to NAV due to uncertainty regarding the outcome of several legal cases that have been brought against the company in Germany and the US, regarding alleged market manipulation in its failed attempt to take over VW in 2008. Porsche holds the view that these allegations are unfounded and without merit, and during the quarter it won a significant victory when a German court dismissed two of the cases. While the amount of damages being sought in these cases was small, at under €5 million, we think they should provide a precedent for the much larger claims of €4 billion that are still pending at the same court. Our view is that the amount Porsche will eventually pay to settle these cases will be much less than the market is currently pricing in. And once the litigation is settled, there is a good chance that VW and Porsche will merge and the discount to NAV will close completely."

Children's essentially believes they can make money in four ways:

1. "Strong underlying performance from the investment in VW"
2. "A successful and benign resolution to the legal cases"
3. "Large and increasing dividends from VW flowing to Porsche shareholders"
4. "Long-term potential for a merger between Porsche & VW"


Japan Tobacco

Children's points to Japan Tobacco's strong recent earnings and notes that VAT in Japan is rising which should allow for price increases. 

The company is also changing the name of its largest selling brand from 'Mild Seven' to 'Mevius'.  While such a move might seem odd at first glance, the company is doing so because this will allow them to sell the product in other countries where the use of the word 'mild' in product names is essentially prohibited. 

Here's why TCI sees Japan Tobacco as compelling:

"Dividend guidance is ¥12,000 per share which implies a payout ratio of approximately 36%. JT is expected to return an estimated ¥370bn to shareholders this year of which ¥250bn is through a share buyback exceeding their estimated profits. This should be a strong catalyst for the stock to re-rate in line with its global peers. Valuations are very attractive post the recent sell-off, JT trades on 10.5x P/E for the year ending March 2014 at a 30% discount to the average of BAT and PMI. We expect the stock to re-rate post the share placement by the Japanese government toward parity with BAT and PMI."


Children's Top 10 Positions (as of Q3 end)

1. Lloyds Bank Bonds: 20.1% of NAV
2. News Corp: 18.8%
3. Japan Tobacco: 16.8%
4. Porsche SE: 15.5%
5. QR National: 13.3%
6. CESP: 12.8%
7. Red Electrica: 10.9%
8. Coal India: 9.4%
9. Safran: 8.7%
10. Enagas: 8.0%


For more on this fund, we've previously posted Children's thesis on News Corp, Union Pacific & Walt Disney.

Children's Investment Fund: Thesis on New Position in Safran

Yesterday we posted on commentary from Children Investment Fund's Q2 letter.  Today, we're highlighting a write-up from Christopher Cooper-Hohn on one of the fund's newer investments: aerospace equipment provider Safran.

Safran: Sum of the Parts Analysis

"70% of the company’s value is in their civil engine business, which is a 50:50 JV with GE, called CFMI.

The engines that they make power narrow-body aircraft (100-220 passengers). This is an attractive business as competition is limited. If you buy a Boeing 737 you have to buy an engine from CFMI and if you purchase an Airbus A320 you have a choice between CFMI or IAE (a company controlled by Pratt and Whitney).

Once an engine has been sold, Safran benefits from spare parts sales. Margins on engines are very low as they are sold close to cost price, but margins on parts are high (60%+) and engines consume roughly 3x their initial value in parts over their lifetime. This parts business is highly protected as the FAA (and other regulatory bodies) prevent the use of unauthorised parts in engines, so the supply of third party parts is low (about 3% of the total) and will likely decline as leasing companies are against their use (they reduce the resale value of the plane). Another attractive feature of this market is that many of the engine parts (so called LLPs, or Life Limited Parts) have to be changed after a certain number of flights as there are strict rules pertaining to aircraft maintenance.

There is a typical 8-10 years lag between when an engine is sold and when it first requires servicing (it is at service that spares are used). After the first service, engines require regular maintenance for the rest of their 25 year life. Safran have sold 10,300 engines over the last 10 years and of these, only 700 have generated spare parts revenues. The total installed base of engines is approximately 18,000 and fewer than half of these are generating spares revenues for Safran. As the age of the engine fleet matures, spares revenues will increase rapidly.

Although it is easy to see the long term spare parts revenue trend, short term forecasts (3-18 months) are difficult as airlines have some latitude as to what kind of servicing to do. For instance, they can minimally service an engine such that it will fly for another 12 months before coming in again or they can service it so that it will remain on the wing for another 4 years. Airlines can also cannibalise their own spare engines for parts and ground engines which require work rather than servicing them.

As the airline industry has been cash strapped for the last 2 years, spares revenues have not grown since 2009 despite the increasing maturity of the fleet. However, there is a limit as to how much maintenance can be deferred and the pent-up demand for the last two years will have to be addressed at some point.

The future also seems bright. The next generation of narrow-body aircraft is composed of the 737 MAX and the A320neo. The 737 MAX will 100% be powered by CFMI and the A320neo will be powered by CFMI and by Pratt and Whitney. It is important to note though that the engine orders that Safran is booking today will likely be delivered in 2018 and first generate profits for the company in 2028. The strong growth that we expect in profits over the next 12 years is predicated on engine sales which have already happened.

Safran’s valuation is very attractive. The company trades on 9x 2012 EV/EBIT and 13.6x earnings, falling to 11.4x 2013 earnings which is a low absolute valuation compared to peers (aerospace companies typically trade on an average of 15x 2012 earnings) and given the growth in spares revenues.

On a Sum of the parts basis, we value the company at €52 per share with 85% upside. The majority of this value is the engine business (€40 per share) and this values the business at €1.4m per engine which is less than the €2.1m per engine that Pratt and Whitney recently paid Rolls Royce for their stake in IAE (IAE engines are directly comparable to CFMI ones). This difference is probably due to our more conservative assumptions as we discount spares earnings back at 10% pa whereas Pratt and Rolls Royce may have used a lower rate. Using our numbers, there is compelling upside and it is more likely that we are under rather than over-estimating the embedded value of the flying fleet."


For more from this fund, be sure to head to excerpts from Children's Q2 letter.

Children's Investment Fund on News Corp, Union Pacific & Walt Disney: Q2 Letter

The Children's Investment Fund manages approximately $4.7 billion and has returned 15.7% annualized.  Year to date through the end of the second quarter, they were up 16.39%. 

Founded by Christopher Cooper-Hohn, Children's has assembled quite a concentrated portfolio and we wanted to highlight some excerpts from their second quarter letter.

Children's Top 10 Positions as of Q2 

1. CESP: 18.2% of fund NAV
2. News Corp: 18.1%
3. Lloyds Bank Bonds: 17.9%
4. Japan Tobacco: 16.8%
5. QR National: 13%
6. Red Electrica: 9.7%
7. Porsche SE: 9.6%
8. Coal India: 8.6%
9. Walt Disney: 8%
10. Enagas: 7.3%


Railroads: QR National & Union Pacific

Children's owns QR National where the thesis has been focused on a transition from government-run entity to private company.  Management is focused on improving operating performance and achieving growth through investment. 

Children's expects the balance sheet to re-leverage over time, anticipating aggressive share buybacks (inclusive of any selling the government might do with its remaining 34% stake).  Of the stake, Hohn writes,

"With 7-8% normalised unlevered free cash flow yield, considerable volume and legacy contract re- pricing, we believe QR should compound at above 20% pa medium term returns. QR’s significant hard asset backing and very conservative balance sheet limit the downside of the investment. We believe the fair value of the asset is approaching double the current share price."

They also own a stake in Union Pacific (UNP) and while they see coal headwinds continuing there, they believe the company can grow EPS at 13% for the next several years and generate an IRR of 15%. 


On News Corp

Given that News Corp is one of their largest positions and many other hedge funds own it, we wanted to highlight Children's commentary on the name.  They're fans of the company's impending split and write:

"At the end of the quarter, the stock is on 11x forward earnings on our numbers and 6.5x EBIT. Low double digit net income growth driven by affiliate fees and re-transmission consent, and supported by the expectation of continued buybacks drives 20%+ net income growth and a 30% midterm IRR without a re-rating. We believe that as the market grows increasingly comfortable with the improved corporate governance at News Corp, the stock can comfortably achieve a 13-14x earnings multiple which 2 years out would point to a $37-40 target price compared to $22 today."


On Walt Disney

Lastly, Children's likes that the Parks segment will see capex programs slow down and think the company will see margin leverage.  They write,

"In the near term, margin recovery in the Parks and share buybacks will drive EPS growth up to near 20% for the next few years. We forecast EPS of $3.6 in the upcoming year and $4.2 in the following year. On a 14-15x multiple, this should give a share price trading target of around $60."



For more hedge fund Q2 letter excerpts, we've posted up:

- Eminence Capital on Google

- Scout Capital on Anheuser-Busch InBev

- Bill Ackman on why he sold Citigroup

Hedge Funds Pile Into QR National IPO (ASX: QRN)

A recent Australian initial public offering (IPO) has caught the eye of many prominent hedge funds. QR National (ASX: QRN), Queensland Rail's primarily coal network in Australia, recently became public with the backing of various new hedge fund owners. Shares IPO'd at AUD $2.55 and are now trading around AUD $2.77. It priced at the low end of the range and the Queensland government is left with a 40% ownership stake after the IPO raised $4.5 billion.

Adam Weiss and James Crichton's Scout Capital has disclosed a 5.1% ownership stake in QRN with 124 million shares (around a $316 million stake). We also recently detailed how Scout boosted its stake in Coca-Cola Enterprises (CCE). The Children's Investment Fund has also disclosed a 6.1% ownership stake in QRN with a $316 million position. Overall, 46% of QRN's recently IPO'd shares went to overseas investors with the buzz being that numerous other hedge funds have smaller positions.

Interestingly enough, a lot of domestic Australian long-only fund managers avoided the IPO as many argued it was overpriced. Hedge funds have clearly disagreed. Although we haven't been able to verify it yet, it's been rumored that Richard Perry's hedge fund Perry Capital had also taken a stake in the IPO. QRN is Australia's largest IPO since Telstra (Australia's monopoly phone carrier).

The propensity for hedge funds and investment managers in general to gravitate toward railroad plays is interesting. Some see these companies as attractive due to the oligopolistic nature of the business. Others fancy rails as plays on commodities, energy, or an economic recovery. Hell, Warren Buffett's Berkshire Hathaway even acquired rail company Burlington Northern Santa Fe in its entirety. And in the just released new issue of our Hedge Fund Wisdom newsletter, we see that many managers own shares of rival rail Union Pacific (UNP). And in Australia, this theme continues as QR National seems to be a play on coal.

Taken from the company's website, QR National is "QR National is the largest rail freight haulage operator in Australia by tonnes hauled, operating in key freight sectors and supply chains across the country. We are focused primarily on large, heavy haul rail tasks such as the transportation of coal, iron ore, other minerals, agricultural products and general freight as well as containerised freight."