What We're Reading ~ 3/21/18

Skin in the Game: Hidden Asymmetries in Daily Life [Nassim Taleb]

Tech's next big wave: big data meets biology [Fortune]

Looking at the Wyndham spinoff [Clark Street Value]

Comcast and the curse of diversified holdings companies [Yet Another Value Blog]

An IPO valuation of Spotify [Aswath Damodaran]

The death of many brands: the rise & risks of concierge brands [Intrinsic Investing]

Billionaire raises his bet on containerships [WSJ]

How Amazon became corporate America's nightmare [Bloomberg]

The 10 best and worst performing stocks since the financial crisis [Zen Investor]

What We're Reading ~ 11/4/15

Evaluating sustainable competitive advantages [Symantaka]

99% of long-term investing is doing nothing; it's the other 1% [Morgan Housel]

The third emotion of investing [Insecurity Analyst]

Daniel Kahneman on intuition and the outside view [Compounding My Interests]

Software is the new oil [AVC]

China's money exodus [Bloomberg]

The unbelievable power of Amazon Web Services [The Atlantic]

How to maximize value of using Finance Twitter [BarbarianCap]

Michael Wolf's predictions on tech and media [Business Insider]

Comcast's weapon to take on wireless giants: Wifi hotspots [Bloomberg]

Interview with Fox's James & Lachlan Murdoch [Hollywood Reporter]

Death rates rising for middle-aged white Americans [NYTimes]

Lone Pine Capital Almost Doubles Charter Communications Stake

Steve Mandel's hedge fund firm Lone Pine Capital has filed a 13G with the SEC regarding its position in Charter Communications (CHTR).  Per the filing, Lone Pine now owns 5.7% of the company with over 6.33 million shares.

This is a sizable increase from the around 3.3 million CHTR shares they owned at the end of Q1.  The filing was made due to activity on July 6th.

Charter has announced a takeover of Time Warner Cable (TWC) and Bright House.  They swooped in for the assets once it became clear that Comcast's (CMCSA) previous bid for TWC wasn't going to be approved by regulators and was called off.  Many investors seem to think, however, that CHTR's deal will go through.

As such, arbitrageurs have been going long TWC and shorting the corresponding amount of CHTR, driving down the price.  The deal spread on this was around 9% at one point but recently is closer to 6-7%.  Lone Pine saw this as an opportunity and almost doubled its stake. This stock been a consensus buy among hedge funds we track in our Hedge Fund Wisdom newsletter and has been flagged numerous times in past issues.

Per Google Finance, Charter Communications is "a provider of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers. The Company sells its video, Internet and voice services primarily on a subscription basis, often in a bundle of two or more services. The Company provides broadband communications solutions to business and carrier organizations, such as video entertainment services, Internet access, business telephone services, data networking and fiber connectivity to cellular towers and office buildings. Through its hybrid fiber and coaxial cable network, the Company offers its customers traditional cable video services, as well as advanced video services, Internet services and voice services. The Company’s voice services are primarily provided using voice over Internet protocol (VoIP) technology, to transmit digital voice signals over the Company’s systems."

What We're Reading ~ Analytical Links 2/25/15

An interview with The Outsiders author William Thorndike [Joe Magyer]

The extraordinary story of America's most successful industry [Morgan Housel]

Howard Marks: have an approach and hold it strongly [Reformed Broker]

Observations from a decade in the investment business [Wealth of Common Sense]

What is Yahoo worth after the Alibaba spinoff? [MicroFundy]

A look at CDK Global [Scuttlebutt Investor]

The problem with intuitive investing [Wealth of Common Sense]

Profile of SC Fundamental: old school investors [Barrons]

Calculating the odds of a Comcast / Time Warner Cable deal [NYTimes]

The high cost of falling prices [Economist]

Robert Shiller's CAPE ratio recently passed its 2007 high [Twitter]

Americans are borrowing more [WSJ]

Russia's Yandex takes on Google, Android [Barrons]

Millennials ditching their TV sets at a record rate [NYpost]

Capitalism's unlikely heroes: activist investors [Economist]

Profile of one of the most important people at Apple: Jonathan Ive [New Yorker]

Amazon bought this man's company, now he's coming for them [Bloomberg]

Netflix's long-term view [Netflix]

Jamie Dinan's Stock PIcks at Capitalize For Kids Sohn Canada Conference

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Jamie Dinan of York Capital who shared a myriad of investment ideas.


Jamie Dinan's Sohn Canada Presentation

Started off with some general comments. US growth is still quite healthy (although not considered by many people), Europe on the other hand is still not. With oil prices coming down, it will give a huge amount of money to the US consumer (essentially a $130B tax break for consumers – this of course assumes money is not relocated to other spending). Believes Europe will be a reactionary market to policies and this will create lots of distressed situations in Europe (and there is still plenty today).

Some merger-arb names which have ~90% probability of closing: Time Warner Cable/Comcast Corporation, Albemarle Corporation /Rockwood Holdings, and DIRECTV/AT&T Inc.

Next, pitched LONG Molson Coors Brewing (TAP), believes an event could happen with the recent news of Anheuser looking for a deal with SAB. Molson has a 42% stake in MillersCoors (The JV between Molson and SAB). This possible transaction will force SAB to divest their 58% interest from MillerCoors (STZ/BUD deal, divestment of Groupo Model JV), Molson seems like the only option. The deal will likely get done with debt and take Molson to 5x Net Debt-EBITDA. Believes Molson can realize great about of synergies (~$300M) from the US JV with their current Canadian operations. 

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.

What We're Reading ~ Analytical Links 8/27/14

Profile of Alibaba's Joseph Tsai [Bloomberg]

Carol Loomis' latest on BlackRock: the $4.3 trillion force [Fortune]

Profile of 108 year old investor Irving Kahn [Telegraph]

Lessons learned in 30 years of investing [What Works on Wall Street]

Share sleuth's investment checklist [Interactive Investor]

A look at Post Holdings [View From the Blue Ridge]

A look at WL Ross Holding Corp [Brooklyn Investor]

What makes Warren Buffett a great investor? [Farnam Street]

Amazon: not an e-commerce company [Stratechery]

The inside story of how Netflix came to pay Comcast for traffic [Quartz]

Morningstar: a force to be reckoned with [FT]

Nonprofit hospitals' earnings fall as costs outrun revenue [WSJ]

Interview with Burger King's CEO [Financial Post]

The company speeding a genetic revolution [Forbes]

Google's valuation: much cheaper now than 10 years ago [WSJ]

Family Dollar bidding war suggests 'peak dollar store' is here [Yahoo]

Match.com might not light IAC's fire [WSJ]

Peculiar habits of incredibly successful people [Morgan Housel]

Interview with venture capitalist Bill Gurley [Forbes]

What We're Reading ~ Analytical Links 5/7/14

Charlie Munger's essay on wisdom as it relates to investment management [Ycombinator]

A pitch on Altisource Portfolio Solutions [Value Venture]

Is Barnes & Noble the next Gamestop? [MicroFundy]

Notes on the Outsider CEOs [Student of Value]

Alibaba files to go public in the US [Yahoo Finance]

All the western companies you'd have to combine to get something like Alibaba [Quartz]

US home ownership rate falls to lowest since 1995 [Bloomberg]

The financial vulnerability of Americans [House of Debt]

Why has student debt increased so much? [Vox]

Tax avoidance: the Irish inversion [FT]

Pay TV field could shrink with AT&T interest in DirecTV [LA Times]

As Netflix resists, most firms try to befriend Comcast [NYTimes]

On online video ads [NYTimes]

On the world of peer to peer lending [NYTimes]

Warren Buffett didn't belch at Coke pay plan [Bloomberg]

What We're Reading ~ Analytical Links 4/9/14

On unsentimental investors [Ritholtz]

The best and worst thing about investing [Reformed Broker]

Wall Street's brightest minds reveal the most important charts in the world [BusinessInsider]

Dollar General (DG) annual valuation [ModernGraham]

In scrutiny of cable merger, internet choice will be crucial battlefield [NYTimes]

Report on the performance of controlled companies [IRRC Institute]

Bank of America (BAC) has more upside [Barrons]

What investors need to know about rising rates [BlackRock]

What We're Reading ~ Analytical Links 3/12/14

On UnionPay, China and smuggling money in Macau [Thomson Reuters]

Google's Eric Schmidt on the future of internet freedom [NYTimes]

IPOs: when stability creates instability [Pragmatic Capitalism]

Fannie Mae/Freddie Mac would be eliminated in Senate Bill [BusinessWeek]

The 'easy money' myth [Reformed Broker]

Media industry lists things that worry them about TWC/Comcast merger [WSJ]

Are malls over? [The New Yorker]

The future of TV is coming into focus and looks pretty great [Quartz]

Barely keeping up in TV's new golden age [NYTimes]

Mexico seeks telco and TV competition [Advanced Television]

Big batteries threaten big power stations and utilities' profits [Economist]

Kate Spade (KATE) faces uphill fight to be next Ralph Lauren [Bloomberg]

Smartphone payment system to be unveiled in UK [FT]

The gaming console market is in crisis [TechCrunch]

Google looking to keep its search engine relevant in age of apps [WSJ]

The future of wearable technology [SlideShare]

Alibaba to buy control of ChinaVision [Reuters]

Hedge Fund Viking Global Likes American Tower (AMT), Invesco (IVZ): Q2 Letter

Andreas Halvorsen's hedge fund firm Viking Global is out with its second quarter 2010 investor letter and courtesy of Dealbreaker we wanted to highlight some of their latest portfolio maneuvers. Here are Viking's latest top 10 positions:

1. Invesco (IVZ)
2. Unilever (UN)
3. American Tower (AMT)
4. Oracle (ORCL)
5. Comcast (CMCSA)
6. News Corp (NWSA)
7. Tyco International (TYC)
8. Sherwin-Williams (SHW)
9. Goodrich (GR)
10. Adobe Systems (ADBE)

Right off the bat there are several changes to highlight between Q1 and Q2. Back in the first quarter, Visa (V) was Viking's largest position. This time around, Visa is nowhere to be found in their top 10 positions. One might assume they reduced or exited this position, but there was no commentary on this stake to verify. If you read into their letter, you'll see that they are more focused on building concentrated positions and as a result ramped up stakes in various companies. Visa, apparently, was not one of them.

It's quite possible that the credit card processor is still a holding at Viking and other portfolio positions merely leapfrogged their V stake. The same could be said for their position in Express Scripts (ESRX) as it was their fourth largest holding in the first quarter and is nowhere to be found on their top 10 holdings for Q2. These positions will certainly be something to look for in their Q2 13F filing that we'll cover when it's released in a few weeks.

For the second quarter, Halvorsen's hedge fund maintains its long-held position in Invesco as it moves back up to their top holding. Halvorsen writes,

"Our largest loss in the quarter was Invesco which cost us 1.3% in VGE and 1.4% in VLF. Invesco has been in our top ten list since we initiated the position in the fourth quarter of 2007 and was our second most profitable investment in 2009. During the second quarter, Invesco sold off along with other asset managers despite reporting better than consensus first quarter earnings and higher synergy estimates from the Van Kampen acquisition. Encouraged by the fundamental strength of the company and financial and strategic benefits from the Van Kampen acquisition, our core thesis has not changed and we continue to believe that Invesco will outperform its competitors. Viking is currently net long 2.4% in the Asset Management and Custody Banks sub-industry group, which includes the Invesco long position and short positions in asset managers that we believe will experience deteriorating fundamentals and are more levered towards a declining market."

In terms of other Viking positions, Unilever also remains a high conviction pick for them. Moving down the top 10 positions list, News Corp and Tyco also retain their status as a top holding from Q1 to Q2. In terms of new additions, Viking has moved up the following positions: Adobe, American Tower, Comcast, Goodrich, Oracle, and Sherwin-Williams.

Of those stakes, Viking has increased conviction in their new American Tower (AMT) position. Viking likes the company due to its solid business model with high barriers of entry, pricing power, and strong secular growth. Additionally, the company has compelling operations overseas in numerous growth markets. Of this stake, Halvorsen writes,

"We have owned American Tower in the past and we re-initiated a position this quarter because we believe the market has taken many of these characteristics for granted and is underestimating future growth opportunities both domestically and internationally. Additionally, we believe that American Tower’s shareholder remuneration will accelerate over the next several quarters and that, in light of certain tax incentives, the company may convert to a REIT. We find American Tower to have a superior business model relative to most traditional REITs, yet it trades at a discount to the REIT-average. We believe the combination of predictable growth, accelerating shareholder returns, and pending REIT status will generate greater shareholder interest over the next several quarters causing the stock to trade closer to our price target over time. As of June 30, American Tower was our third largest long position at 4.3% of VGE capital and 4.9% of VLF capital."

We've touched on this industry as a compelling investment numerous times as hedge funds favor wireless tower stocks. Numerous high profile managers have moved in and around AMT. Additionally, we've highlighted how hedge funds are bullish on rival company Crown Castle International (CCI) as well. SBA Communications (SBAC) is the other player in the sector and some funds have moved in and out of stakes there as well.

In addition to these portfolio changes, it's obviously worth noting that Viking has struggled performance-wise this year as their Viking Global Equities portfolio was down 5% in the second quarter. As such, Halvorsen penned quite an explanation as to how Viking will strive to atone for these errors and the solution apparently circles around the idea of increased concentration in their highest conviction picks. As such, Viking has added to numerous positions, many of which we've detailed recently. It will be interesting to see if Viking's increased concentration (and possibly increased volatility) is a recipe for correcting their recent struggles.

We highly recommend reading Viking Global's entire letter on Dealbreaker here.

John Paulson Ramps Up Financials Exposure: 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is John Paulson's hedge fund firm Paulson & Co. Before rocketing to hedge fund fame, Paulson managed a seemingly mediocre merger arbitrage fund. All of that quickly changed when he shorted collateralized debt obligations and bought credit default swaps in 2005 for his new trade against subprime. At the end of 2007, the Opportunities fund was up 590% and his Opportunities II fund was up 353%.

Wall Street Journal columnist Gregory Zuckerman detailed the impressive wager in the book, The Greatest Trade Ever, one we highly recommend reading. Such amazing performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings (top 100).

For 2009, Paulson's Advantage fund was up 13.75%, his Advantage Plus up 21%, Credit Opportunities up 34%, and Recovery fund up 24.2%, all as noted in our hedge fund performance numbers post. Nowadays, Paulson has found his next big bet: a wager against the US dollar which he is executing via his new gold fund. Next we'll examine their holdings to see what other wagers they are making.

Below are Paulson & Co's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
Apollo Group (APOL)
Bank of America (BAC-S preferred)
Burlington Northern Santa Fe (BNI) ~ this was a merger arb play and is obviously no longer in the portfolio
CIT Group (CIT) ~ most likely a result of a debt to equity conversion
Chattem (CHTT)
Comcast (CMCSA)
Capital One (Warrants expiring 11/14/2018)
DirecTV (DTV) ~ as a result of the Liberty Media transaction
Encore Acquisition (EAC)
Hyatt Hotels (H)
IMS Health (RX)
JP Morgan Chase (Warrants)
Kraft (KFT)
Lear Corp (LEA)
Liberty Media (LSTZA) ~ again, part of the Liberty Media transaction
Macerich (MAC)
Mead Johnson (MJN)
New York Community Trust (NYB)
Northern Trust (NTRS)
Pfizer (PFE)
Sprint Nextel (S)
3 Com (COMS)
Vail Resorts (MTN)
Valley National Bancorp (VLY)
Wells Fargo (WFC)
XTO Energy (XTO)


Increased Positions
Suntrust Bank (STI): Increased by 1925.4% (not a typo, their previous position was small)
Conseco (CNO): Increased by 579.3%
Ashford Hospitality Trust (AHT): Increased by 283.4%
JPMorgan Chase (JPM): Increased by 250%
Felcor Lodging (FCH): Increased by 247.8%
Marshall & Ilsley (MI): Increased by 117.1%
Citigroup (C): Increased by 68.9%
Sunstone Hotels (SHO): Increased by 25.8%
Pepsi Bottling Group (PBG): Increased by 4%
Gold Fields (GFI): Increased by 2.4%
Starwood Hotels (HOT): Increased by 1.54%
First Horizon National (FHN): Increased by 1.5%


Reduced Positions
Regions Financial (RF): Reduced by 44.7%
Bank of America (BAC): Reduced by 5.5%


Removed Positions (Sold out completely):
CF Industries (CF)
Cemex (CX)
Liberty Media (LMDIA) ~ part of the transaction
Old National Bancorp (ONB)
People's United Financial (PBCT)
Ultrashort Financial (SKF)
Schering Plough (SGP) ~ merger transaction complete
Varian (VARI)
Wyeth (WYE) ~ merger transaction complete


Top 15 Holdings by percentage of assets reported on 13F filing

1. SPDR Gold Trust (GLD): 17.07%
   
2. Bank of America (BAC): 11.49%
   
3. Anglogold Ashanti (AU): 8.70%
   
4. Citigroup (C): 8.47%
   
5. Boston Scientific (BSX): 4.51%
   
6. Comcast (CMCSA): 3.75%
   
7. Sun Microsystems (JAVA): 3.50%
   
8. Capital One (COF): 3.30%
   
9. Suntrust (STI): 3.11%
   
10. Kinross Gold (KGC): 2.95%
    
11. Wells Fargo (WFC): 2.39%
    
12. XTO Energy (XTO): 2.35%
    
13. Philip Morris International (PM): 2.19%
    
14. Pepsi Bottling Group (PBG): 1.97%
    
15. IMS Health (IMS): 1.91%
    

First and foremost we want to address a lot of misinformation that has been floating around regarding Paulson & Co's stake in exchange traded fund GLD. This position is a HEDGE for them. Most hedge funds have share classes denominated in US dollars. While Paulson has this as well, they also have a hedge fund share class denominated in gold. As such, they've stated in the past that their position in GLD is a hedge for this share class.

Many people out there misinterpret this as outright bullishness on gold. After all, it is a truly massive position in GLD that shows up on filings. Paulson is expecting massive inflation and is focused on a bet against the US dollar. He's expressed this bet via his brand new gold fund that invests primarily in the equity of gold mining companies and then also some derivatives on the price of gold. Hopefully this clarifies things and if not, make sure to check out our in-depth examination of Paulson's gold fund.

Turning to Paulson & Co's latest 13F filing, we must remind everyone that a lot of these positions are a result of Paulson's merger arbitrage strategy. Before Paulson became famous with his bet against subprime that netted him billions, he was (and still is) focused on merger-arb. So, keep in mind that a large number of his long positions disclosed here are most likely hedged with paired short positions either in other companies or possibly even against the box.

Paulson & Co took new positions in financials via warrants of JPMorgan Chase and Capital One, as well as preferred unit shares of Bank of America and common stock in SunTrust, Citigroup, and JPMorgan. Some of Paulson's "new positions" are deceiving because they didn't actually buy shares, but instead received equity as a result of various corporate transactions. This explains their 'new' stakes in CIT Group, DirecTV, and Liberty Media. Also, since Warren Buffett's Berkshire Hathaway has purchased Burlington Northern, Paulson & Co obviously no longer hold that position.

However, Paulson's largest new addition was in Comcast (CMCSA) as they brought it up all the way to their sixth largest US equity holding. We also note that Paulson & Co still maintains a large Boston Scientific position and we highlight this because David Einhorn's Greenlight Capital recently assembled a huge BSX position as well. In the past, many investors have voiced concerns about this not being a good investment. But then again, those people aren't Einhorn or Paulson. Lastly, more recent filings indicate that Paulson has added to positions and we've detailed those transactions as well.

Paulson 'sold' his stakes in Wyeth, Schering Plough, and Liberty Media as a result of mergers and other corporate transactions. One notable sale Paulson did make though was relinquishing almost half of his Regions Financial position. To learn more about Paulson and his success, we highly recommend reading The Greatest Trade Ever.

Assets from the collective holdings reported to the SEC via 13F filing were $19.79 billion this quarter compared to $17.1 billion last quarter, so a noticeable increase of well over $2 billion. Remember that these filings are not representative of the hedge fund's entire base of assets under management.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, and Warren Buffett's portfolio. Check back daily for our new updates.